CAB129-36 — Page 467

Page 467 were a joint Anglo-American approach, holders might find it difficult to resist, even if it meant a considerable revision of existing sterling release agreements. It could indeed be argued, and with much force, that a plan of this kind is to their long-term advantage. If it calls a halt to the squandering of foreign assets, it also substitutes two debtors one of which provides otherwise unattainable dollars, while the other is materially helped back to a solvency which can only be threatened and perhaps destroyed, by the continuance of unrequited exports on anything like the present scale.

Conclusions

1.

The sterling balances question will be raised at the Washington talks. We are somewhat vulnerable.

2.

But a positive approach might be really beneficial, and might enlist United States support.

3.

We must recognise that the contributions to the kind of returns suggested come wholly from the Americans and the holders of the sterling balances.

4.

Our contribution could not be either in cash or in the acceptance of new obligations.

But we can

5.

(a)

(b)

(c)

use all our influence with the holders of sterling;

consider whether we are willing to reopen existing

agreements;

use any other means open to us of bringing pressure

to bear, including the threat of very harsh financial terms in future.

If the above is accepted, we should endeavour to enlist the sympathy of the Canadians, whose interests run with those of the United States and ourselves, and who should there- fore help us both in the Washington talks and in any subsequent talks with the Commonwealth balance holders.

asury Chambers, S. W. 1.

23RD AUGUST, 1949.

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