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6. WHY HAVE GUARANTEES BEEN ABANDONED?
GUARANTEES HAVE BEEN ABANDONED BECAUSE THEY HAVE BECOME LARGELY
IRRELEVANT. THIS IS SO FOR THE FOLOWING REASONS:
!
(A) THE UPPER LIMITS ON AMOUNTS GUARANTEED WHICH WERE SET IN
SEPTEMBER 1973 AND IN MARCH 1974 WHICH HAVE MEANT THAT INCREASES
IN THE STERLING HOLDINGS OF PARTICIPANTS ABOVE THEIR LEVEL ON
24 SEPTEMBER 1973 HAVE NOT BEEN COVERED:
(B) THE SUBSTANTIAL RISE IN STERLING HOLDINGS OF COUNTRIES THAT ARE
NOT PARTICIPANTS: AND
(C) THE INCREASED NEED OF NON-OIL PRODUCING COUNTRIES TO USE THEIR RESERVES TO MEET PAYMENTS NEEDS.
MOREOVER, THE INTERNATIONAL DIMENSION OF THE PROBLEM OF CHANNELLING | THE SURPLUS REVENUES OF THE OIL PRODUCERS HAS MADE A CONTINUATION
OF GUARANTEES INAPPROPRIATE.
7. DID AUSTRALIA'S WITHDRAWAL MEAN THE END OF THE GUARANTEE?
NO, BUT AUSTRALIA'S WITHDRAWAL WAS INDICATIVE OF THE SHARTPLY
DIMINISHED RELEVANCE WHICH THE GUARANTEE HAD GIVEN THE MASSIVE
SHIFT IN THE PATTERN OF RESERVE HOLDINGS.
8. HAVE GUARANTEES BEEN SUCCESSFUL?
YES. THEY HAVE MADE AN IMPORTANT CONTRIBUTION TO INTERNATIONAL
FINANCIAL STABILITY. BUT THE ROLE AND RELEVANCE OF GUARANTEES
HAS DIMINISHED VERY SHARPLY THIS YEAR WITH THE MASSIVE SHIFTS IP THE PATTERN OF RESERVE HOLDINGS. THESE SHIFTS, COUPLED WITH THI UPPER LIMIT SET ON GUARANTEED BALANCES AT THEIR LEVEL ON 24 SEPTED 1973, HAVE LED TO A SHARP REDUCTION IN THE GUARANTED PROPORTION
OF OFFICIAL HOLDINGS OF STERLING.
9. IS THE ENDING OF GUARANTEES CONSISTENT WITH THE UK OBLIGATION
TO THE EEC?
ALTHOUGH THE DECISION IS CONSISTENT WITH THE 1972 UNDERTAKING IT WOULD BE QUITE MISTAKEN TO DWELL ON THIS IN THE PRESENT CONTEXT, THE FACT IS THAT WE ARE NOW IN AN ENTIRELY NEW INTERNATIONAL SITUATION, AS OUR EEC PARTNERS FULLY RECOGNISE AND APPRECIATE. 1%. WHAT GUARANTEES NOW REMAIN?
THERE ARE NO SIMILAR GUARANTEES IN OPERATION APPLYING EITHER TO
EXISTING BALANCES OR TO NEW ACCRUALS.
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./ STERLING
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