FISCAL: Hungarian Debt

Only the Allies borrowed money from the U. S. during the War. But in 1920 onetime enemy Hungary, on the brink of famine, bought on credit 13,890 tons of flour from the U. S. Grain Corp. at a price of $1,685,000. Increased by the time it was funded in 1924 to $1,939,000 (including interest), Hungary’s debt went into default with the War debts during the world crisis that provoked the Hoover Moratorium in 1931.

Last year Hungary caused a mild flurry at the State Department by making a token payment of $9,826.16 (TIME, Sept. 27). Last week Hungary produced a more general Washington flurry when her Minister John Pelenyi made public the terms of a new proposal he had submitted to the State and Treasury Departments, proposal was that Hungary reduce the original $1,685,000 debt by subtracting the $478,000 it has already paid, pay the remaining $1,207,000 in $39,000 non-interest bearing annual installments over a period of 30 years.

Although Minister Pelenyi vigorously denied that Hungary was making its proposal as a “feeler” for other governments and recalled a similar arrangement the U. S. made with Austria in 1930, his otter touched off a brisk reaction In the Capital.

Since the existing War debts of $12,779,000,000 would be scaled down to $7,284,000,000 under the principle advocated by Hungary, both the State Department and the Treasury cautiously shied away from endorsing it. Neither Republican nor Democratic leaders were yet ready to risk saying that a dollar in hand was worth two in the bush. Rumbled Idaho’s William Edgar Borah: “I am utterly opposed to any further compromise. If Hungary stood absolutely alone, my feeling would be entirely different.”