Britain free from WWII payments

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Britain free from WWII payments
By Al Webb
THE WASHINGTON TIMES
January 4, 2007

LONDON -- More than six decades after the fact, Britain has finally paid back the billions of dollars it had borrowed from the United States and Canada to help pay for rebuilding the country after World War II.

At the click of a few computer keys in London on the last business day of 2006, $83.25 million was sent electronically winging to Washington and $22.7 million to Ottawa, to free Britain from annual installments it occasionally has struggled to pay.

The original loan of $4.34 billion -- the equivalent of $27 billion in today's money -- was negotiated by a London team headed by economic mastermind John Maynard Keynes in 1945 to stave off the bankruptcy that posed a serious threat to Britain in the wake of the war's wreckage.

The Canadian share of the loan was $1.2 billion.

The loan was paid off in 50 installments, the last of which leaves Britain free of that debt for the first time since a devastated Nazi Germany surrendered to Allied forces more than 61 years ago.

British Economic Secretary Ed Balls hailed the dispatch of that last payment on Dec. 29, telling journalists, "We finally honor our commitments to the U.S. and Canada for the support they gave us 60 years ago."

"It was vital support which helped Britain defeat Nazi Germany and secure peace and prosperity in the postwar period," Mr. Balls said.

In fact, it was much more than that. World War II had left Britain an economic mess -- a "financial Dunkirk," as Mr. Keynes put it -- and with the abrupt termination in September 1945 of the lend-lease arrangement that had it afloat through the hostilities, the country was on the verge of collapse.

Under the Lend-Lease Act of 1941, signed by President Franklin Delano Roosevelt, Washington sent war supplies to allies. Britain received most of that assistance -- $31.4 billion out of the total $50.1 billion. Other major countries that benefited from the Lend-Lease Act were the Soviet Union ($11.3 billion), France ($3.2 billion) and China ($1.6 billion).

No payment was required for supplies sent under the program. The allies' compensation came in the form of services, rent and use of air bases.

However, Washington suddenly terminated the lend-lease shipments on Sept. 2, 1945, with goods still in transit, forcing Britain to negotiate new loans from the United States and Canada for reconstruction.

The large consignment of goods in transit or already in Britain were sold to Britain for about 10 cents on the dollar under the new 50-year loan agreement.

Mr. Keynes and his team won during their negotiations with the U.S. government what amounted to an economic lifeline that allowed Britain to pay for food, fuel and other essentials, while coping with massive bills for arms and munitions left over from the war as it began rebuilding its shattered economy.

"The Americans gave us an excellent deal in two senses," Tim Leunig, an economics history lecturer at the London School of Economics, told the Scotsman newspaper -- the 2 percent rate of interest on the loan, and the fact that the United States even agreed to such a loan.

"First of all," Mr. Leunig said, "2 percent has always been a very low rate of interest. Second, to lend to someone in wartime is very risky."

For his part, Mr. Keynes at the time was less than pleased, particularly about the 2 percent interest on the debt. He accused the United States of behaving badly, suggesting that Washington should write off the loan as a gift, or at least make it interest-free.

Still, it was viewed in economic circles as a bargain, which meant that by the time the last installment cleared the books, the original loan of $4.34 billion had totaled barely $7.1 billion including interest -- little more than small change to today's global economies and the multibillionaires they steadily churn out.

Even so, the repayment road has not always been an easy one for Britain. The installment payments that started in 1950 were deferred six times -- in 1956, 1957, 1964, 1965, 1968 and 1976 -- because of various economic crises, pressures on official reserves and adverse international exchange rates.

So that last payment was, in fact, six years late. Never mind, said a British Treasury spokesman, the important point is, "Britain always repays her debts."

Well, not quite. Britain borrowed money from the United States during World War I, but has never repaid the debt -- although they blame the Americans.

President Hoover declared a moratorium on World War I debts during the Great Depression and global financial crisis, and it was never rescinded.

You are welcome!

[Jack Cook]

Did they get a credit for the Spits, Beaufighter and Mosiquitoes?