Monetary remodelling

Press, Volume CXII, Issue 33035, 30 September 1972, Page 1

Monetary remodelling

(N Z.P.A.-Reuter —Copyright) WASHINGTON, September 29. Financial experts were taking their first tentative steps in Washington today towards remodelling the Western world’s entire international monetary system. Deputies of the newly formed Committee of 20 have the task of working out the vital technical details of the reform. They were meeting under the chairmanship of the British central banker, Mr Jeremy Morse,- who was elected to the position yesterday after a split vote with Mr Rinaldo Ossola, of Italy. Conference sources said that Mr Morse, who is aged 44, and an executive director of the Bank of England, won the chairmanship after a change of mind by two developing countries—one of which was Indonesia. Mr Morse was approved by the full committee by a vote of 12 to eight, after balloting had been 10-10. The New Zealand Minister

of Finance (Mr Muldoon) is happy over the position New Zealand has established. “We now have a voice in the deliberations of the Committee of 20,” he said. He was referring to the success of New Zealand negotiators in winning a front "table” position for New Zealand when the committee discusses issues of particular interest to them. Under the arrangements a o .eed for meeting of the Committee of 20, Australia will have a permanent seat, but New Zealand and South Africa will share a second seat according to the matter under discussion. This arrangement applies to the regular meetings of the “deputy” representatives of nations when the hard technical bargaining on monetary reform will be done.

The Morse-Ossola issue apparently centred on a feeling among some members of the full Committee of 20 that Mr Ossola, of the Bank of Italy, was more sympathetic to United States views on reform than they would have wished. Mr Ossola is already chairman of the narrower Group of 10 deputies, whose influence will be overshadowed by the gigantic task of the Committee of 20. The full committee, which asked the deputies to prepare a work-programme by the end of the year, will use the groundwork laid out by the deputies to take the vital political decisions for monetary reform. The present monetary system has been operating on a makeshift basis since August, 1971, when President Nixon, faced with a huge United States baiance-of-pay-ments deficit, cut the convertibility of the dollar into gold. This left some of the major foreign Powers with millions of dollars which could not be encashed. “PAPER GOLD”

Conference speeches made clear that the major Powers were generally agreed on the need for urgent reform, that the artificaliy created “paper

gold” (or special drawing rights) should be given a pivotal role in international finance, and that a fixed ex-change-rate system was still needed, although parities should be able to move more flexibily in response to supply and demand.

But the experts still face disagreements over the degree to which nations should surrender their monetary sovereignty, the best ways of enforcing the new arrangements, and other technical but important details.