*
SECRET
-2-
Banks into holding on to sterling if they were to be presented
in September with an unacceptable proposition some two weeks
before the agreement lapsed, and about two weeks after it had
ceased to be effective (because of the 30-day rule).
11. The Treasury side repeated that it was not possible to
give any indication of what their proposals might be. Mr Haddon-
Cave asked whether it was not going to be impossible to devise
an effective guarantee in a floating situation; if an attempt
to do so were made would it not involve very long negotiations?
Mr Nott, after hesitation by officials, said that in his view
it would not be impossible and it need not involve long
negotiations. Later in the meeting when Sir Hurray again
complained that he had had no guidance, Mr Nott said that he
had himself been indiscreet. In subsequent discussion Sir Muroy
and I concluded that Mr Nott must have referred to this remark
and that a possible conclusion is that the Treasury are thinking
in terms of some form of quarentce, on a take it or leave it
basis.
5. Mr Haddon-Cave also asked whether, when the proposition
came in September, the Hong Kong Government would have a choice
of accepting it, rejecting it, or negotiating about it. This
question was very obviously avoided by the Treasury side.
6. Sir hurray understandably found this meeting unsatisfactory.
I am pretty certain that Mr Nott's "indiscretion" must have been
his remark about a guarantee arrangement and I thought there
was an implication of a pretty tough attitude in what he said.
(I had a hint a few days ago from Hr Barratt of the Treasury
/that
SECRET
1