CURRENCY PACT

Dominion, Volume 28, Issue 92, 12 January 1935, Page 7

CURRENCY PACT

Stabilising Sterling, Franc and Dollar FRANCE MAY MOVE Britain and America Said to be »in Favour By Telegraph.—Press As.:u. —Copyright. London, January 10. The "Daily Herald’s” financial correspondent says that though the visit of M. Flandin, Premier of France, and M. Laval, French Foreign Minister, to London is ostensibly the sequel to the Rome negotiations, 11. Flandin will initiate discussions aiming at a currency exchange stabilisation agreement based on a sterling-franc-dollar pact. It is believed that both the British and United States Governments are more favourably disposed to stabilisation than heretofore.

M. Flandin wishes to force up the prices of Government bonds in order to facilitate borrowing to meet the Budget deficit, but a bond boom would lead to a flow to Paris of French speculative funds now deposited in London, causing a rise in the pound in relation to the franc to the detriment of French exporters. Britain is more favourably inclined to stabilisation, as it believes that the Home trade revival is nearing its peak and foreign trade is essential to decrease unemployment. The United States desires stabilisation owing to the necessity of large borrowing to finance the new £900,000,000 Roosevelt public works plans. The most -likely suggestion is the adoption of a provisional agreement to keep the three currencies in fixed relationship for a trial period by the operation of exchange equalisation funds.

BELGIUM AND GOLD

New Administration’s Policy

The Belgian franc will not be devalued. Its gold tether will not be severed —not yet, at any rate, states the "Christian Science Monitor,” This is described in Brussels as the keystone of the policy of Georges Theunis’s administration, which recently replaced that of the Count de Broqueville. At the end of July the de Broqueville Government embarked on a remarkable political experiment. With the full approval of the two chambers, it began to rule the country by special decroes, without parliament, for a period of six months. During this time it was to enact all kinds of economic and financial reforms. This was, it was felt then, the only way of dislodging tlie economic blizzard which was threatening to settle on Belgium.

A great many decrees were issued and tlie Government appeared to have the situation well in hand when differences within tlie Cabinet itself op budget cuts caused tile resignation of two of its members. Thereupon Count de Broqueville resigned, and after a week of strenuous negotiations by the various party leaders, M. Theunis finally emerged with a new administration. For a long time Belgium lias been torn between two schools as to what best should be done to fight tlie slump. One school believes Belgium should remain faithful to the gold standard, reduce State expenditure to the smaller State purse and through honest budget balancing win back its way to prosperity. This school does not believe in tampering with the franc. Tlie other school does. It believes that the only course open to Belgium is to devalue the currency, to take it off gold, just as Britain and America have done with tlie pound and the dollar. Then, they say, Belgian industries will be able to produce cheaper goods and export more.

So far the anti-devaluationists have won. They are frankly afraid that any devalution of the franc will swing too much the other way, will impoverish still more not only the depressed classes, the unemployed, the State’s pensioners, but also the “rentier” class, since in Belgium 50 per cent, of the public fortune is invested in the banks. ' M. Theunis’s Government is a coalition of the ttoman Catholic and Liberal parties, five Ministers from each, aided by two' Christian Democrats. The Prime Minister headed a similar combination from 1921-25, when, be retired from politics. Camille Gutt, the new Finance Minister, lias represented Belgian interests at most post-war international financial gatherings.

In 1927, his chief himself was called by the Council of the League of Nations to preside over the World Economic Conference. The return to office of Paul Hymans as Foreign Minister is also welcomed here. M. Hymans, it is recalled, lias been almost continuously at the helm of,Belgian foreign affairs since the Paris Peace Conference. The special powers granted by Parliament expire on January 31 Can M. Theunis complete the vast programme of financial and ecenomic reforms initiated by his predecessors? And can he do so without being pushed off gold? These are some of the problems which Belgians expect their new Government to solve.