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United States Department of State / Foreign relations of the United States, 1947. The British Commonwealth; Europe

The British Commonwealth of Nations,   pp. 1-195 PDF (70.7 MB)

Page 7

in the U.K. or elsewhere) would either be deposited in a separate, fully
blocked account, or funded. It appears that it is the present intention
of the British Government not to set up separate accounts for sterling
not available for current expenditure, but rather to work out with
each creditor country the over-all rate of use of the global balance held
by such country. If the balances are not funded or segregated it will
be of great importance that this Government be reguarly informed
as to the rate and manner of release.
  (3) The possibility that temporary rather than permanent settle-
ments will be reached.
  Section 10(i) obligates the United Kingdom to "make every en-
deavor to secure the early completion" of settlements of the sterling
balances. Section 10 (ii) obligates the British Government in effect
to grant full convertibility to 'all sums made available for current
transactions out of the'accumulated balances. It has been learned that
British officials are considering 4 or 5-year settlements with the under-
standing that the agreements will be renegotiated at the end of that
period. While the plan. for temporary settlements raises the question
as to whether the United Kingdom has carried out its obligations, it
would seem that we could not object if we are assured the British
have made every endeavor to secure complete settlements and were
unable to do so. This Government, however, would be concerned that
the temporary settlements do not result in the use of sterling in a dis-
criminatory manner. In any event the British are required by the
Agreement to make every endeavor to secure the early completion of
final settlements.
  The recommendations of 'the Staff Committee with respect to these
several points were contained in NAC Document No. 399.2
  Mr. Acheson3 stated that he agreed with the recommendations.
Mr. Eccles 4 also agreed but commented upon the impressions he had
gained during the course of the negotiations. The United States had
expected so far as possible that the British would obtain permanent
settlements and that temporary settlements would be a very secondary
choice. We could not obligate the British to make permanent settle-
ments but it was the impression that they intended to try to do so.
There would be great advantage to the British if they could make
permanent settlements and in turn there would be an advantage to
us so far as the British loan was concerned. In view of their present
straitened circumstances, the British as a great debtor nation are in a
position to dictate terms. Within five years the British could be
expected to be in a stronger financial position and hence less likely
to obtain favorable terms. The United States would be very desirous
of having settlements favorable to the British because many of the
obligations were created on the basis of inflated prices and in a sense
the obligations were comparable to those under lend-lease. However,
  2Not printed.
  Under Secretary of State Dean G. Acheson.
  Mar riner S. Elecies, Board of Governors, Federal Reserve System.

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