NEW WAR IN SPAIN

Bay of Plenty Times, Volume LXV, Issue 12255, 19 February 1937, Page 3

NEW WAR IN SPAIN

CURRENCY STRUGGLE While the military struggle for Madrid is going on, an equally important financial war between the Government and the Nationalists is being waged behind the front, wrote Pembroke Stephens from Spain to the Daily Telegraph recently. At the beginning of the civil war the two sides were so engrossed in the military campaign that they paid little attention to finance. They have gradually realised, however, that gold is an even more useful weapon than bullets. The Government inflicted the first blow with this weapon. It began shipping gold from the Banic of Spain, and -1 understand that the last consignment has now arrived in France by aeroplane. It was in the form of sovereigns, dollars and bullion.

No more gold is now left in Madrid, it appears. More than £IOO,000,000 worth has been exported from Spain to France since the outbreak of the civil war. Nationalist bankers believe that the greater part of the gold is now in Russia, having been used for the purchase of armaments. Nationalists are not expected to recover the lost gold, nor any of the artistic treasures, of incalculable worth, which have been removed from Madrid.

General Franco, hitherto immersed in military tasks, has at last been forced to realise that military victory would be barren if the Spanish currency collapsed. Ho has issued orders that every bank note in territory occupied by his forces must be stamped officially. Any bank-n,ote found unstamped will automatically be declared worthless. This measure is aimed at Socialist exiles who left Spain with great quantities of paper pesetas which they will now be unable to cash. A second order prevents the export of silver. It is impossible to take out of Spain even a five-peseta piece, equivalent to a half-crown. Having lost gold, the Nationalists do hot wish to lose silver.

A third order forbids paper pesetas to be brought into Spain unless the bank-note numbers were registered when the notes were taken out of Spain. So strictly is this order being carried out that persons entering the country are stripped and searched at the frontier. Customs officials have been instructed to shoot at sight anyone suspected of trying to smuggle pesetas through the snow-covered passes of the Pyranees. In the event of victory. General Franco intends to follow closely the financial policy of Germany and Italy. Both these countries are also without a great deal of gold, and maintain a level currency by strict control and heavy penalties.

The difficulty of buying foreign raw materials when there is no gold with which to pay them may be overcome either by means of a loan or by the German system of exchanging commodities—oranges for cotton, for example. The present effect of the financial duel js that money has apparently ceased to have any value in territory occupied by the Government forces. Purchases are being carried out by a system of official permits, granted by Communist organisations. Purchasers present these permits in the shops.