Word: franc
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Three Reforms. Even so, Western diplomats may find temporary solace in the fact that for some time France will lack the economic strength to speculate against the pound and dollar. Despite its announcement of impending nuclear tests, France must also slow down the development of its force de frappe, whose creation runs directly counter to the present world trend of bringing nuclear weaponry under controls. Charles de Gaulle will now have to pay much more attention to domestic affairs. He has already moved fast in the area of greatest peril, the economic front. Despite France's huge foreign-reserve...
Fearing an invasion of lower-priced foreign goods, the government appealed to the Common Market Commission for protection against Italian home appliances and some types of building material. In an effort to halt the flight of the franc, it also ordered residents of France to take no more than $20 in French currency when they pop abroad for a day's visit. Whatever the ultimate outcome of the elections, a new government's first priority will not be to enact the reforms demanded by the revolt but to cope with its costly economic consequences...
Unqualified Confidence. Only the Swiss franc, which is 100% backed by gold, shares with today's Deutsche mark the unqualified confidence of international businessmen, financiers and speculators. Because investors now prefer bonds floated in German marks to those denominated in U.S. dollars, most mark issues are selling above par, while dollar bonds go at a discount in Europe. During the March gold crisis, there was such a rush to change other money into marks that foreign accounts in West German banks swelled by a net $285 million in a single week...
...itself. In financing the French and British drawings, the IMF had to sell off $582 million worth of its own gold reserves. Although the organization's total reserves still remain fixed at $21.1 billion, a growing share of that is held in dollars, pounds and francs-the very currencies that creditor countries have been shunning. It thus would have made little sense for the IMF to try to defend the franc by making its loan to Paris largely in dollars or sterling. Instead, it put together a potpourri of currencies ranging from Danish kroner and Irish pounds to South...
Chief among those difficulties are the balance of payments deficits plaguing key trading nations. As a result of France's crisis, a Common Market study indicated last week, Paris is likely to run payments deficits of some $1 billion through next year. Even so, France has reserves of about $5.6 billion, presumably enough to ride out a deficit for some time; moreover, at week's end, it further bolstered the franc with a request for an additional $140 million drawing from the IMF. Britain is headed for an expected deficit of at least $500 million...