The Evening Star MONDAY, SEPTEMBER 28, 1936. THE FRANC DEVALUED.

Evening Star, Issue 22455, 28 September 1936, Page 8

The Evening Star MONDAY, SEPTEMBER 28, 1936. THE FRANC DEVALUED.

After a struggle that has lasted for years Franco has been compelled to devalue the franc. This action is being taken with the goodwill of the British and American Governments, in a desire to gee currency equilibrium, tho absence of which has had so disturbing an effect on world trade. The continued flight of gold created a crisis in Paris, which led the Blum Government to enter into discussions with the British and American Treasuries. As a result a three-Power monetary agreement has been arranged, the effect of which is a, long-delayed readjustment of the French currency. TJie crux of the arrangement is that there will be no change in British and American monetary policies; neither tho pound nor the dollar will be deliberately depreciated by way of reprisal for the monetary measures proposed by France. Professor Copland expresses the view that the agreement marks the final step in world currency disturbances, and with the rest of the gold bloc following France in due course, the last great single depressing influence on the world’s money markets will be removed. In this connection it will be noticed that Holland and Switzerland have already announced their intention to change their currency policies. The coming into office of the Blum Ministry hastened the development of the crisis. The weakness and uncertain outlook for the French franc have been a leading feature in the foreign exchange market for some months. In June the rapid spread of labour disputes in France led to much uneasiness in financial circles, accompanied by the selling of the franc to an alarming degree. These developments were followed by the announcement of the new Government’s policy. Tho proposals included a forty-hour working week, collective labour contracts, paid holidays, a scheme of public works, nationalisation of tho manufacture of arms, and the reform of the statutes of the Bank of France. During the course of the debate in the Chamber of Deputies the Prime Minister indicated that devaluation of the currency was not favoured by the Government. A vote of confidence on the new programme was passed by a substantial majority, for it was in accord with the Socialistic views of a preponderating block, in the Chamber. To facilitate the Cabinet’s monetary plans a new governor of tho Bank of France was appointed. The Government then proceeded to borrow from this institution and from the public, who were slow to respond, by means of short-term bonds (“ baby ” bonds) in small denominations. The combined effects of the new social legislation and the financing of Budget deficits by borrowing rapidly became visible. There was a sharp rise in foodstuffs and other commodities, which is as unpalatable to Hie thrifty French people as is the paying of taxes. The Government then passed a Bill the object of which was to control wholesale prices of goods of “ prime necessity,” a plan which other Governments beside that of Franco have found to be one of no little difficulty. The task which faced M. Blum was the maintenance of the gold franc against .credit inflation, Budget deficits, falling revenues, declining foreign trade, and costly social legislation. The pressure was too great, the Government has capitulated, and the devaluation of the franc follows. Ministers realised that the franc was too dear, and on occasion emphasised tho necessity of a revival of international business. M. Blum, however, maintained that there could be no question of an isolated devaluation, but only aii international alignment of currencies. By following up that idea a scheme has been arranged for linking the pound, the dollar, and The franc on a more stable basis. American Treasury officials believe that the arrangement that has been made will do more to promote peace in Europe than could be accomplished by any number of international conferences. It certainly is an encouraging development.