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Washington.

Government officials, particularly those in the State Department, and members of the foreign diplomatic corps here, are sitting on the “anxious seat” these days. Fast-moving events in Europe have muddled international thinking to an extent that officialdom in Washington is no longer surprised at any of the moves of European strategists.

The United States is on the sidelines, taking the part of a keen and extremely interested observer. Nothing is being said as yet. It is just a case of watchful waiting until all the recent moves of some of the foreign powers become clarified.

Among the foreign events holding Washington’s immediate attention are:

1. France’s increased budget for national defense.

2. Japan’s demand for increased naval strength.

3. Yugoslavia’s charge that Hungary is responsible for the assassination of King Alexandria at Marseilles.

4. The situation surrounding the coming Saar plebiscite.

Most of the trouble brewing in Europe has some tie-up with what has happened and what is happening in Germany. The United States has quite frequently expressed formal disapproval of Hitler’s policies on Germany’s international relationships and obligations. The sore spot with government officials in Washington is Germany’s outright discrimination against American holders of German financial paper.

When Congress convenes in January, it is expected that much time will be devoted to sounding off on the foreign situation. Armaments and international trade are expected to be the two main topics for debate.

The French budget for national defense, exceeding $800,000,000, which was approved by the Chamber of Deputies, has resulted in considerable comment. The fact that this large budget was approved without debate is significant. In ordinary times proposal of such a large budget would have been sufficient reason not only for fiery oratory but even for personal encounters.

One of the outstanding incidents in connection with approval of the budget was that Edouard Herriot, Socialist leader and champion of pacifism in France, denounced Laval’s pacifism and urged the Chamber to vote for the budget, not only because he is a member of the cabinet but because he realizes that France must be stronger. The determining factor which prevented any opposition to the new national defense budget was Herriot’s changed position favoring great military strength.

Washington is awaiting with much interest the Hitler government’s reply to Secretary Hull’s most recent note on Germany’s discrimination against American bond holders. Although the usual plea of unability to pay is expected, observers are interested in seeing if Germany will give any indication as to what she actually intends to do concerning these obligations.

Germany has taken the position that unless she sells more goods to the United States this country cannot expect payments on her obligations to American citizens. Increased trade with the United States would make it possible for Germany to get dollar exchange with which to make payments. Also, such trade would enable Germany to buy much needed raw materials, particularly cotton. Secretary of State Hull, however, holds the payment of debts as one thing and the sale of goods another.

The possibility that the Hitler government eventually would repudiate her debts, much of which is owed to American investors, has been indicated by the Foreign Policy Association, the organization which sponsored Secretary Wallace’s “America Must Choose.” This body points out that Germany’s economic relations with foreign countries now are in a critical stage as the result of Hitler’s measures to regiment imports and rigid control over exchange.

If Germany continues her present policy of achieving the greatest possible self-sufficiency the Foreign Policy Association foresees a serious economic crisis ahead. It is pointed out that such a policy would involve indefinite extension of the present debt transfer moratorium, perhaps ending in tacit or open repudiation.

Germany’s alternative course would be gradual expansion of foreign trade through reciprocal agreements with foreign countries. This would entail gradual resumption of the debt service.

Although there are many indications that Germany is making a decided drive toward self-sufficiency the evidence is seen to be confused and contradictory. One thing is certain. The Reich is not likely to relax or abandon existing import restrictions unless foreign governments agree in return to create a definitely larger market for German goods.

Germany has made several efforts to conclude a trade agreement with the United States, but without success. The last note on debt discriminations sent by Secretary Hull further doomed the immediate possibility of a pact. Other factors against a trade agreement with Germany include a growing lack of confidence in the quality of German products the tightening boycott against German goods which is being developed at London, and continued monetary exchange complications.

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