IMMEDIATE
CYPHER/CAT A
4 F C 0 311835Z
SECRET
ORWELL
SECRET
PA.
(MF 9/548/1).
1973
TO IMMEDIATE GOVERNOR HONG KONG TELNO 742 OF 31 JULY AND TO
ROUTINE GOVERNOR BERMUDA AND BELIZE.
MI PT.
FOLLOWING IS TEXT OF CHANCELLOR'S MESSAGE.
1. WHEN I WROTE TO YOU IN OCTOBER LAST YEAR ABOUT THE STERLING AGREEMENTS I SUGGESTED A PAUSE IN D 1SCUSSION OF THE SUBJECT UNTIL NEARER THE TIME OF EXPIRY OF THE AGREEMENTS IN SEPTEMBER 1973. AS YOU KNOW, THIS SUGGESTION REFLECTED VIEWS EXPRESSED BY STERLING AGREEMENT HOLDERS NOT ONLY IN CONNECTION WITH PROGRESS
ON INTERNATIONAL MONETARY REFORM OR THE EFFECT OF THE UK'S ENTRY INTO THE EEC, BUT ALSO MORE GENERALLY BECAUSE THERE WAS AN EXPECTATION THAT THE FUTURE OF THE STERLING AGREEMENTS COULD BE SEEN MORE CLEARLY WHEN THE STERLING/DOLLAR EXCHANGE RATE HAD
BEEN FIXED. SINCE THAT TIME THE INTERNATIONAL MONETARY CRISES
OF FEBRUARY AND MARCH THIS YEAR, WHEN THE US DOLLAR WAS DEVALUED AND A GROUP OF EUROPEAN COUNTRIES DECIDED TO OPERATE THE CURRENCY
MARGINS SCHEME WITHOUT A FIXED RELATIONSHIP TO THE DOLLAR, HAVE
BROUGHT ABOUT A COMPLETE CHANGS IN THE SITUATION,
2. THE PRESENT UNCERTAINTIES POSE DIFFICULTIES FOR ALL OF US ALIKE.
VERY RECENTLY THERE HAVE BEEN FURTHER DISTURBANCES IN EXCHANGE MARKETS, AND MOVEMENTS WHICH BEAR NO RELATION TO UNDERLYING ECONOMIC REALITIES, LOOKING AHEAD, WE DO NOT YET KNOW WHAT WILL BE THE TIMESCALE ON INTERNATIONAL MONETARY REFORM OR ON UK PARTICIPATION IN THE EEC MARGINS SCHEME. AS TO THE FORMER, I AM HOPEFUL THAT WE SHALL BE ABLE TO RECORD PROGRESS AT NAIROBI IN SEP- TEMBER. AS TO THE LATTER, IT IS, AS YOU KNOW, OUR INTENTION THAT STERLING SHOULD JOIN THAT SCHEME AS SOON AS CONDITIONS
PERMIT.
3. IT IS AGAINST THIS BACKGROUND THAT I HAVE BEEN CONSIDERING THE ROLE OF THE STERLING AGREEMENTS AND HOW OUR INTERESTS MIGHT BEST BE SERVED IN THE FUTURE. I KNOW THAT YOU TOO HAVE BEEN
GIVING VERY SERIOUS THOUGHT TO THIS QUESTION.
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SECRET
/4. I THINK
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