1952?

In Paris everybody knows the Chateau de la Muette as a mansion of the De Rothschilds. Last week the men who now govern Europe's finances sat in the same gilt & cream chamber where the De Rothschilds once practiced their financial wizardry.* Delegates from 19 OEEC areas had come to La Muette to work out a new Intra-European Payments plan. After hours of futile argument, Belgium's Paul-Henri Spaak suggested that the meeting adjourn. Britain's Sir Stafford Cripps cut him short with a crisp insistence. "Gentlemen, I have to go back to England tomorrow," he said, "but my plane does not leave until 6 in the morning. I am at your disposal until then."

More Austerity? Sir Stafford's system of planned austerity and bilateral deals, under attack at La Muette, had met still graver difficulties in London. A near-panic on London's exchange had sent government bonds plummeting to new lows for the year; in a single week the value of gilt-edged consols (government bonds) dropped by close to -L-250 million. Said the London Economist: "The truth is that the crisis which the British did not expect until 1952--and hoped to be prepared for by then--is already upon them."

High prices, the world's shift from a sellers' to a buyers' market and the reluctance of foreign traders to buy British as long as rumors persisted that Britain would devalue the pound, had cut deeply into Britain's dollar and gold reserves. The danger point, many Britons had long thought, would be reached if the reserves fell below -L-500 million. Last week they stood at closer to -L-400 million. To Cripps's many critics it looked as if the crisis was the final proof that his policies should be scrapped. They renewed their demands that Britain abandon bilateral deals and compete freely in a world market.

Cripps had no such intention. His remedy for the crisis was still the same: more austerity and more import cuts. This week he will meet with Dominion Finance Ministers who have been invited to London to discuss ways & means of conserving the sterling area's dollars.

Small Inducement. At Paris, his colleagues in the OEEC (Organization for European Economic Cooperation) proposed nothing so drastic as a complete revamping of the Cripps policy. All they wanted was a little greater--but carefully circumscribed--freedom of currency exchange.

In the first year of Marshall Plan grants the U.S. had tried to spice its aid with a small inducement to encourage intra-European trade. Some $800 million of the U.S. grants were conditional. To get them, the receiving country had to surrender an equal amount of its own currency to a third nation. Thus Britain, in order to receive ECA dollars, made sterling available to France, enabling France to buy British machinery. Such secondary grants were known as drawing rights.

ECA's W. Averell Harriman, Belgium's Spaak and some other continental delegates have been seeking to liberalize the arrangement on drawing rights so it would become a greater stimulus to intra-European trade. At one point French Finance Minister Maurice Petsche proposed a compromise, known in OEECese as "40% transferability of drawing rights." Under the Petsche plan, a typical triangular trade situation would have worked out like this:

Britain would give France -L-40 million of drawing rights to cover the expected French deficit in trade with Britain. France by efficient production or persuasive salesmanship or by cutting purchases from Britain, might succeed in reducing its expected deficit from -L-40 million to -L-25 million. Under the old plan this reduction would give France no advantage within the OEEC system. Under the Petsche plan, however, France could transfer 40% of its British drawing rights to another OEEC country, for instance, Belgium. That way, the Belgians would wind up with part of the U.S. dollars originally allocated to Britain. In other words, U.S. "conditional aid" would follow the drawing rights and act as an incentive to trade.

Cripps, horrified as a Scottish housewife would be at an invitation to gamble with the grocery money, feared that Britain could not budget through bilateral deals if transferability destroyed its certainty about how many dollars it would have.

As the clock in the Chateau de la Muette struck 12, Cripps was still droning on, and the old payments scheme had expired. No new agreement had been reached.

His Bed of Nails. In the hall, weary newsmen despaired when Claude, the beer and sandwich man, went home muttering "No one pays me to stay after 12." Even an OEEC official said: "The West can never agree without Russia. When Russia is present we have no trouble agreeing to stand together, but when Russia is away," he shrugged his shoulders, "look at this."

He spoke too soon. At 2 a.m. the delegates emerged. They had agreed on a new program.

Cripps had agreed to transferability, although the amount of drawing rights that could be transferred was cut from 40% to 25%. Since this would cost Britain only $50 million a year at most, Cripps had won a victory in terms of cash. ECA and the Belgians were content in having established the principle that ECA was working toward multilateral trade, not bilateral budgeting and bartering.

As Cripps walked down the stairs, an OEEC man cracked: "There he goes to his nice bed of nails."

* For other news of the De Rothschild family, see MILESTONES.

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