Paris Peace Conf. 184.01102/146

Lieutenant Hugo G. Campagnoli to Professor A. C. Coolidge53

Subject: Financial notes. (Interview with Dr. Preiss, head director of the Zivnostenska Bank, Prague, Czecho-Slovakia)

The following information was secured in an interview with Dr. Preiss, Head Director of the Zivnostenska Bank, Prague:

The present circulation of bank notes within the old dual monarchy is about 37,500,000,000 kronen. Practically from ten to twelve billions are in the hands of the people living within the borders of the new Czecho-Slovak Republic. In other words, Bohemia holds approximately one-third of the whole amount. The only specie securities are 282,000,000 kronen of gold. If we add to the bank notes in circulation the war loans, bank notes issued by different banking institutions and other small issues circulated by the government, the debt of the old dual monarchy would add up to practically 150,000,000,000 kronen. Before the war the state debt was 21,500,000,000 kronen so that it has tremendously increased during the last four and one-half years. Before 1914, although there were two and one-half billion kronen notes circulating in the dual monarchy, really only 1,600,000,000 were used and were found enough to answer the needs of industry, finance, commerce and the public in general. At present on account of the difference in prices 10,000,000,000 kronen should be used, but no more.

Dr. Preiss continued by saying that the main questions confronting the new state at the present time are, first, to regulate the circulation of the currency; second, the taxing of incomes in every way possible so that the government may be able to obtain figures as to the general financial condition of the country. Taxing money, taxing bills of exchange and lombard bills, taxing real and personal property. The first question is the most important and it seems that it cannot be solved by the financial men of the different states coming together to discuss it.

Jugo-Slavia began by taking matters in its own hands by stamping the old Austria-Hungarian bank notes, and making them valueless within their borders unless stamped. Czecho-Slovakia is placed in a much too delicate position, both financially and economically, to watch this change in Jugo-Slavia and not try to protect the currency circulating within its borders. Therefore, it was found advisable to stamp the bank notes in Bohemia so as to protect the country from an overflow of bank notes either from German-Austria, Germany, Poland, Ukraine or neutral countries.

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Dr. Preiss added that they have enough currency, in fact too much, and it will be found advisable to cut down by about one-half or perhaps more. He continued by saying that another great reason why they are taking the step is that the Czecho-Slovak Republic is now ready to export about one and one-half billion kronen’s worth of goods, and one can readily see that if the stamping was not done the country would lose immense amounts of money on the exchange. To prove this he mentioned that already in Zurich there is a difference between the Vienna kronen and the Prague kronen.

Further Dr. Preiss remarked: “Czecho-Slovakia had debts of its own, and we wish to pay off these debts to our allies as soon as possible. As you know we had regiments formed in France, United States and Italy. Our debt with the United States is approximately 20,000,000 dollars, with Italy it will reach 100,000,000 liras and with France 100,000,000 francs. Therefore, if we should not protect ourselves and try to raise the exchange of the kronen in our country, it would be more than a three-fold loss to us in paying these debts at today’s rate of exchange.

“I maintain that the United States is the only government that can really help Czecho-Slovakia financially, as both France and England are not at present in a position to do so. France must take care of her devastated districts and has lost considerable in her investments in Russia and South America. England’s problems are in the near future with her colonies, so that the United States is the only remaining country that can assist us in credits and raw material. I wish to give an example of how the United States can help us in building up the economic situation of Czecho-Slovakia. Every year before the war the dual monarchy imported from the United States 800,000 bales of cotton of which 640,000 were used in Bohemia. This country will soon be ready for the import of cotton. However, as the industrial conditions at present are not up to standard, 50% will do for the first year or so, say 300,000 bales, which can be imported into this country at the rate of 25,000 bales per month. The credits that the United States should extend to us would be for a period of six months. The extent of our markets is large, as we are able to sell not only to Bohemia, but also to the other states of the old dual monarchy, Russia, Turkey, Roumania, and Asia Minor. We are well acquainted with conditions in the above mentioned countries and have made a thorough study of them so that we are in a position to handle as intermediaries the American business with these countries.”

At my suggestion Dr. Preiss will shortly send me a résumé of the economic and financial conditions of the Czecho-Slovak Republic.

I believe that Dr. Preiss is the best authority on finance and economic matters in the Czecho-Slovak Republic, and the fact that his advice is frequently asked by the Ministry of Finance shows that he is [Page 344] considered one of the men who can be instrumental in forming the economic and financial policy of the new state.

He leans strongly toward help from the United States and, I believe it would not be to the loss of American financiers and industrialists to interest themselves, after a thorough study in Czecho-Slovakia, in investing reserves and surplus funds in the new republic, which, in my estimation, has a great future.

Hugo G. Campagnoli
  1. Transmitted to the Commission by Professor Coolidge under covering letter No. 109, February 24; received February 26.