Word: callaghans
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Dates: during 1970-1979
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Essentially, Prime Minister James Callaghan agreed to take the politically explosive step of carving $5.8 billion out of Britain's $18 billion budget deficit over the next two years, largely by slashing government outlays. The Cabinet is considering draconian spending cuts, like a moratorium on all government construction. Ministers are further thinking about removing automatic cost-of-living increases from social security payments and civil service pensions, despite an inflation rate now running at almost 15%. Defense expenditures will be cut too (see THE WORLD), but not as sharply as social spending. Some British taxes will have...
...satisfy his ministers, Callaghan agreed to speak personally with U.S. President Gerald Ford and West German Chancellor Helmut Schmidt, whose countries will have to put up most of the money for the IMF loan. He spoke on the transatlantic telephone to Ford, and cornered Schmidt face to face at a European Community meeting in The Netherlands last week. Both men refused to budge on the conditions sought by the IMF. Some British Cabinet ministers were dazed at the news that Schmidt, a social democrat like the British Laborites, had been every bit as tough as Republican Ford...
Financial Help. Callaghan did get one sweetener from Ford and Schmidt: they agreed to provide financial help in easing the problem of sterling balances, which weaken the pound's stability. Sterling balances are pound deposits held in British banks by foreigners that can be withdrawn on a moment's notice; they are often dumped on foreign-exchange markets at the first sign of economic trouble. Callaghan, like many other Prime Ministers before him, wants to convert these volatile short-term deposits to long-term debts; precisely how this will be done and what kind of financial help...
...maverick former Tory who has been widely denounced as a racist. It was an odd trio, but their support proved essential to Britain's beleaguered Labor government last week as Parliament narrowly passed a series of hotly debated bills. Had the measures been defeated, Prime Minister James Callaghan could have been forced to dissolve the Commons and call for new elections. The closeness of the votes was further proof that Callaghan's hold on No. 10 Downing Street has become as tenuous as the value of a pound note...
Those two losses were not serious enough to bring down the government, but Callaghan and his followers were clearly put on warning that their room to maneuver in Parliament had been drastically reduced. It was hardly a reassuring sign for the government, as it awaited the terms of a deal still being pieced together in London with representatives of the International Monetary Fund. The negotiations involve terms for a $3.9 billion loan that is to help tide over nearly bankrupt Britain until North Sea oil revenues relieve the current balance of payments crisis. Callaghan will probably have to promise further...