10-year Aid For Sterling

Press, Volume CVIII, Issue 31727, 10 July 1968, Page 13

10-year Aid For Sterling

(N.Z.P.A.-Reuter—Copyright) LONDON, July 9. The world’s richest nations have offered to back sterling with a credit of SUS2OOOm over the next 10 years, it was announced in London today. The news immediately sent the ailing currency up to 2.3895, its highest level for nearly two months, as buyers, led by the United States, took over the market. The support plan, agreed in principle by Central Bank governors from the United States, Canada, Japan and Western Europe at week-end talks in Basle, will not be final until September, and details have not been officially disclosed. Financial observers, however, were able tonight to build up a picture of the master plan from comments made by Sir Leslie O’Brien, Governor of the Bank of England, on his return from the Basle meeting, and from questions and answers in Parliament Stand-by Credit It will not be a direct physical transfer of cash, such as a loan, but will be a series of stand-by credit arrangements worth SUS2OOOm, and, as such, it will not increase Britain’s overseas debts. Since sterling first came un-

der serious pressure four years ago, several short-term international credit arrangements have been made to support it; but, because they were short-term, they denied the British Government sufficient time for them to work to sterling’s advantage. The new plan will last for about 10 years and will remove any possibility that sterling might have to go through another devaluation crisis.

It should give the Government ample time to prove to

doubters in the world that devaluation last November can be made to work to Britain’s advantage and should speed the day when the nation’s overseas balance of payments is in surplus, instead of in deficit. Immediate Talks The final plan is still dependent on agreement by the sterling area countries, and emissaries from the Bank of England will begin a round of discussions with them within a few days, hoping to have the whole package deal signed and sealed by September.

With official disclosure of the skeleton of the plan came comments which are seen in financial circles as implying that sterling’s standing in the world has been even worse than was thought by some at the time of devaluation. Sir Leslie O’Brien admitted at an airport press conference that, after what he called “the defeat and shock of devaluation,” many sterling area countries had lost a great deal of money and began diversifying into other currencies.

Some Middle East countries had, in a sense, withdrawn support from sterling, he said. Tough Task Sir Leslie O’Brien admitted it would be a tough task for Britain to solve her crisis and pay her way, but he was convinced that with this new help from industrialised nations, she could turn the corner and confidence would return. The only wealthy nation which has not so far given its actual support to the new plan is France, which, at the moment, has her own problems to solve. This was recognised by the other Central Bank governors, and in the Bank of England statement on the Basle meeting a reference was included to France, expressing her sympathy with the steps proposed, while, in the present circumstances, reserving her position.

This carefully-worded statement is seen in London as implying that France has no wish to block further aid for Britain and might even join in when she has solved her own difficulties.