Six Hope To Keep Sterling Strong

Press, Volume C, Issue 29682, 28 November 1961, Page 24

Six Hope To Keep Sterling Strong

(Special Correspondent N.Z.P.A.) LONDON, November 27. .In view of the possibility of further crises in the British balance of payments, the E.E.C. Commission is urgently studying proposals for common monetary measures to help sterling and thus rule out devaluation, says the Paris correspondent of the “Financial Times.”

The general agreement among the Six, he says, is that tiie devaluation of sterling when Britain joins the Common Market would be highly undesirable. The commission’s studies are expected to be mentioned at a meeting of the Finance Ministers of the Six at Paris in December at which the most important topic will be a preliminary examination of tite monetary and financial aspects of Britain’s entry into the Common Market The correspondent says there are a number of reasons why the Six oppose either the devaluation of sterling or an upward revaluation of their own currencies, among them being, first, that the dollar might be forced to follow suit and a chain reaction of competitive devaluation . of other currencies might ensue. Second, Continental industries would regard devaluation as unfair competition from British exports, whose prices are regarded as being generally in line with those in the Six, with some notable exceptions such as the chemical industry. Third, the devaluation of the sterling balances held by Commonwealth countries would be a hard blow, coming as it would on top of the virtual abolition of Commonwealth trade preferences. There is little sign that the Six want to add to their existing problems that of taking on the responsibility for the sterling area as a whole, the correspondent says. On the other hand, it is being angued in the Common Mar-

ket that when Britain joins, her balance of payments may have to get worse before it gets better. It is an open question whether Britain’s imports or her exports will expand faster as a result of the sweeping tariff cuts that immediately will be made when she joins. In addition, British food imports will cost more, the correspondent says. From the French viewpoint, a new balance of interests is likely to emerge. By accepting the common agricultural policy of the Six, Britain will be committed either to buying French farm surpluses or to paying on Commonwealth food imports, levies which will ultimately go to finance the disposal of French surpluses. In return, France may be prepared to help out the British balance of payments partly by means of her own ample reserves.