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3. MORE GENERALLY, THE NEW SITUATION OF MASSIVE REVENUE SURPLUSI
IN OIL-PRODUCING COUNTRIES AND CORRESPONDING DEFICITS IN A LARGE
NUMBER OF CONSUMING COUNTRIES HAS INTRODUCED A MAJOR NEW
INTERNATIONAL DIMENSION TO THIS AREA OF POLICY, IN PARTICULAR AS REGARDS THE TERMS ON WHICH THESE FUNDS ARE CHANNELLED.
4. AGAINST THIS BACKGROUND, I HAVE CONCLUDED THAT THE GUARANTEES
HAVE NOW OUTLIVED THEIR USEFULNESS AND THAT IT WOULD BE
INAPPROPRIATE TO EXTEND THEM AFTER THE PRESENT ARRANGEMENT
LAPSES AT THE END OF THE YEAR. I PLAN TO ANNOUNCE THIS DECISION
IN MY BUDGET SPEECH ON 12 NOVEMBER AND I AM NOW SENDING THIS
MESSAGE TO YOU AND SIMILARLY TO OTHER PARTICIPANTS IN THE PRESENT
ARRANGEMENT SO THAT YOU HAVE ADVANCE NOTICE OF THIS.
5. IN CONSIDERING WHAT SHOULD BE DONE, I HAVE HAD MUCH IN MIND
THE CLOSE MUTUAL CONCERN OF HMG AND THE HOLDERS OF STERLING THAT
THE ENDING OF THE GUARANTEE ARRANGEMENTS SHOULD NOT DISTURB THE
FOREIGN EXCHANGE MARKETS. BUT I JUDGE THAT THE COMBINATION OF THE
EARLY ANNOUNCEMENT WELL BEFORE THE END OF THE YEAR AND THE FACT
THAT THE BUDGET SPEECH WILL ENABLE ME TO PUT THIS DECISION IN A
PROPER PERSPECTIVE SHOULD PROVIDE AN ADEQUATE SAFEGUARD FROM THIS
STANDPOINT.
6. I WOULD LIKE TO EMPHASISE THAT IN DECIDING TO DISCONTINUE THE
GUARANTEE, I HAVE NOT IN ANY WAY CHANGED MY APPRECIATION OF THE
MUTUALLY BENEFICIAL FINANCIAL AND ECONOMIC RELATIONSHIP THAT HAS
BEEN BUILT UP BETWEEN OUR TWO COUNTRIES, AND I HOPE TO SEE THIS
RELATIONSHIP FLOURISH IN THE PERIOD AHEAD.
ENDS.
CALLAGHAN
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~To
PS/CHANCELLOR OF EXCHEQUE MR FJ BARRATT
MRSHEDLEY - MILLER MR D WALKER
MR F JONES
STREASURY
BANK OF ENGLAND