CONFIDENTIAL
a European currency. In our view this would involve a greater
degree of political integration within the Community than now
existed, and was thus a distant prospect. Mr. Jordan-Moss
stressed that the British Government would only take a decision
on any suggestions advanced by the Community after consulting
holders of sterling. He quoted the Chancellor's speech in the
Commons Debate on May 9 in which he had said that there could be
no question of changing the character of the sterling balances
without the consent of the holders. On the shorter term balance
of payments prospects, Mr. Jordan-Moss said that the basic trend
in the British economy had by now been shown to be healthy. By
the time we entered the Community we should be perfectly capable
of taking on the strain of membership. Mr. Cowperthwaite asked
if the question of sterling was seen as a real difficulty by the
Six or was simply being used as a delaying tactic. Mr. Gallagher
said the reserve role of currency was a new question which had
not been raised in the last negotiations. This suggested that
it was being used more as a tactic. Mr. Cowperthwaite replied
that in 1961-63 sterling had not been under pressure as it was
now.
11. Sir A. Snelling said that the Community seemed to mis-
understand the position of the Commonwealth in relation to
sterling. Paragraph 88 of the Commission Report stated that
sterling had in the main passed out of the hands of trad-
itional holders into the hands of new holders including some
countries in the Far East. It was almost as if Britain was
being asked to prove that Hong Kong was not an unsafe holder of
sterling! Mr. Audland pointed out that there was a difference
between the extreme French view that the position of a reserve
currency was in some way incompatible with the Rome Treaty and
the more cautious view of the Commission which did no more than
cast doubt over the possibility of continuing the present role
of sterling. None of the Five had ever said that an alteration
in the role of sterling would be a necessary conditon to our
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