Word: callaghans
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...root cause of this nervousness is that international investors simply do not believe that the Labor government of Prime Minister James Callaghan can succeed in its economic game plan to save the pound-and the British economy. That plan calls for reducing the British inflation rate, currently 14.3% a year, by moderately cutting public spending and holding the nation's militant trade unions to a "social contract" under which they are supposed to limit wage increases to 4½% a year. The government's hope is to hang on through the winter. By spring, according to its script...
...such measures. In that case, Britain would be thrust into a bitter election campaign; though there has been talk of a national coalition government, both Tories and Laborites now seem set against it. The outcome could be a Tory government pledged to spending cuts that, according to Prime Minister Callaghan, would plunge the nation into social turmoil, or drastic cuts in British imports and the standard of living decreed by a government of whatever political complexion...
...head off those possibilities, the government is now engaged in what one Cabinet minister terms "a game of chicken." Callaghan opened the game by directly implying, in an interview on British television, that if the nation's allies insist on stern conditions for the IMF loan, then Britain will have to reduce its contributions to NATO. The country's primary contribution is the maintenance of 55,000 soldiers and airmen in Germany. The government seems to be thinking in terms of a cut of $795 million a year in defense spending, which would mean a reduction in that...
...poll out last week gives the Tories a 14.8% lead over the Laborites -more than double what it was a month ago. With that figure to encourage her, Tory Leader Margaret Thatcher is aiming at leading Britain's next government rather than playing second fiddle in a Callaghan-led coalition...
Meanwhile, Callaghan seems to be pinning his hopes on the West Germans. Schmidt recently met with Callaghan; he has agreed that West Germany will give full support for Britain's IMF loan application, much of which will in fact involve German funds. Bonn will also drop its demand for a revalued "green pound," the rate of exchange at which agricultural transactions are conducted within the European Community and that now amounts to a subsidy for British food prices. Thus, as in Italy, the economic clout of the West Germans may well be a decisive political factor in Britain...