Fresh attempt to create new world money system

Press, Volume CXI, Issue 32777, 30 November 1971, Page 15

Fresh attempt to create new world money system

(N.Z.P.A.-Reuter—Copyright)

ROME, November 29. Ministers of Finance and other monetary experts from the 10 most industrialised nations will make another attempt to create a new world monetary system in Rome this week.

The talks will be held by Mr Aggradi, will try to against a af foreign exchange market ve( j.

and business nervousness, and of fears of a resurgence of protectionist trading sentiment unless a solution io the complex problems is

soon found. The crucial stage of the negotiations, aimed at agreeing new fixed parities for the world’s principal currencies, will come on Tuesday and Wednesday, under the chairmanship of the United States Secretary of the Treasury (Mr John Connally) who arrived in Rome yesterday and had preliminary talks today with the Italian Minister of Finance (Mr Mario Aggradi). A high-powered technical group, under the chairmanship of- the • Italian central banker, Mr Rinaldo Ossola, has also been meeting.

Before the Group of Ten session tomorrow; the European Common Market Ministers of Finance, presided over

The British Chancellor of the Exchequer (Mr Anthony Barber) is expected to take part in these talks. The Group of Ten Ministers, meeting in the Renaissance Palazzo Corsini, near

the edge of the Tiber, will try to resolve the world monetary crisis that began on August 15, when President Nixon suspended the convertibility of dollars into gold and imposed a 10 per cent import surcharge. Mr Nixon then described the unilateral measures as temporary and aimed at stemming the United States balance of payments deficit, calculated at between SUSBOOO million and SUSI3,OOO million a year. He made it quite clear, however, that the measures would remain in force until other countries revalued their cur-

rencies and took other steps which would effectively lead to a reduction in the American deficit.

The United States package led to the temporary closure of foreign exchange markets and to the abandonment of the fixed exchange rate system set up at the Bretton Woods monetary conference in 1944.

The subsequent floating of all principal currencies has added a new uncertainty to business and financial dealings. Huge multi-national corporations with funds and subsidiaries all over the world, as well as exporters in countries with strongly-revalued currencies, such as Germany and Japan, have begun to show increased nervousness and reluctance to invest. World stockmarkets are depressed, unemployment is rising and apprehension is growing in business circles that failure to work out a new monetary system will reverse the post-war trend to freer international trade. Most of the delegates to the forthcoming conference are believed to agree that a firm commitment by the United States to drop the import surcharge will be a precondition for progress towards working out a new set of monetary parities. The fixed exchange rate principle is expected to be maintained, but a much greater degree of flexibility will probably be built into any new system which does emerge. It is on this point that tne monetary experts led by Mr Ossola are expected to make a substantial contribution with the pivotal rate concept, under which a new parity base would be fixed for the principal currencies, while allowing a much grea-

ter margin of movement in both directions from this fixed point.

In principle, most countries want to revalue their own currencies as little as possible. so as not to damage their foreign trading position and domestic growth rates. France in particular, with her double-tier capital market and tight foreign exchange controls, has virtually refused to revalue at all. However, statements by Common Market and other Finance Ministers involved leave no doubt that they will be expecting the United States to agree to at least a small devaluation of the dollar, either in terms of gold or in Special Drawing Rights (paper gold), as part of the American contribution to an over-all solution.