In the intervals between the crisis of its internal convulsions Germany worries feebly about its finances, much as a merchant in mortal illness may worry about his bankruptcy. But, of course, nothing has been done or could be done because the business was still closed and the chief creditor had not yet filed his claim. Now we know what Paris expects Germany to pay, and we also know something of the financial position from the statements of the Finance Ministers, Schiffer, Dernburg, and Erzberger.
The German debt before the war was an annual charge of 230 million marks, the peace expenditure excluding the army 200 millions. The war debt in December, 1918, was 146 milliards, increased in January by 3.5 milliards, in February by 2.7 milliards, in March by 2 milliards and estimated to increase further by 1-½ milliards per month on an average for the coming financial year. To this must be added ½ milliard for cost of expropriations, 4-½ milliards for reconstruction of ravaged territories in Prussia, 1-½ milliards for compensation of German shipowners, separation allowance subsidies to the German States, etc., in all 185 milliards about, with an annual charge of 10 milliards. Reduction of this item by total or partial repudiation of this debt, though advocated by the Opposition, is impossible without causing economic ruin and political revolution. The new army is estimated to require 2 milliards; about the same as before the war, because of the enormously exaggerated expense of this small volunteer force compared with the old conscript army. If, to the great political advantage of Germany, a Swiss militia were substituted for the Frei-Corps, this item could be halved easily. The estimate of 4-½ milliards for pensions is the same as that of France and will probably be exceeded, though as yet less than half that is being paid. This makes up a total annual estimated expenditure of 17,429 million marks, the mark at pre-war exchange being equal to a shilling.
As Herr Erzberger's speech on the Budget showed, he is faced by a financial position unparalleled in the history of national bankruptcies. The interest which he has to find on the Imperial debt amounts by itself to Mk. 10 milliard; and his total annual requirements, exclusive of the Allies' demands under the Peace Treaty, are estimated at Mk. 25 milliard. Before the war the revenue from Imperial taxation was under Mk. 2 milliard. Additional taxation imposed during the war yields about Mk. 4 milliard. To-day therefore Germany is faced with an annual expenditure of Mk. 25 milliard and an annual revenue of Mk. 6 milliard--_i.e._, an annual deficit of Mk. 19 milliard, nearly ten times greater than the whole revenue of 1913. The new taxes actually proposed are estimated to bring in about Mk. 2 milliard. But the main sources upon which the Finance Minister is going to rely are two: a levy on capital and a tax on sales. The levy establishes a graded tax on all property, starting at 10 per cent. and reaching a maximum of 63.9 per cent. Payment may be made by instalments spread over 30 years, and it is estimated that the tax will bring in about Mk. 4 milliard annually. The tax on sales is still more drastic. It really consists of three different taxes: (1) a general tax of 1 per cent. on all sales, (2) a tax of 5 per cent. on retail trade, (3) a tax on the producer of luxuries of 10 per cent., and on retail trade in luxuries of 15 per cent. This tax is estimated to bring in about Mk. 3 milliard. But even after this raid on the owners of property and upon capital, the unfortunate Minister of Finance is faced with a deficit of Mk. 10 milliard. He proposes to get Mk. 2-½ milliard out of beer, petroleum, stamps, flour and meat, and the remainder, Mk. 7-½ milliard out of a uniform income tax for the whole country and an excess profits tax.