Freer Payments
Among the many perversities which have complicated European trade, and made its very existence something of a miracle, the tangle of bilateral payments arrangements has been one of the worst. The agreement reached in Paris last week to set up a European Payments Union should do a great deal to straighten it out. It is obviously more sensible that there should be a central clearing-house for payments between all European countries than that each pair should attempt to settle their debts separately. If, for example, when the monthly balance is struck, Britain owes money to Belgium and is owed money by France then clearly the quickest way to settle the matter is to transfer the balance direct from France to Belgium. The risk that some European currencies will be too plentiful and some too scarce—or in the usual jargon some will be soft and some hard—remains. But it is evidently felt that this risk is not sufficiently serious to rule out the device of a central clearing, and in any case the arrangements for borrow- ing from or lending to the central fund are so designed as to penalise, or at least to discourage, the countries whose international balances are persistently lopsided. The direct effect of the new arrangement; once it comes into force, will be to leave the countries of Western Europe, and certain others closely associated with them, free to buy and sell internationally in the market which is most advantageous on price grounds, without constant complications about hard and soft currencies. But the indirect effects will be important too. The countries joining the union have agreed to free 60 per cent. of their overseas trade from quantitative restric-
tions, and the whole move is evidence of a progress towards freer European trade which will be welcome in America, besides being reasonable in itself.
Previous page
