Foreign News: Worse to Come

The first public reckoning of the economic cost of Eden's Suez policy hit Parliament like a splash of cold water, thrown by Chancellor of the Exchequer Harold Macmillan, whose sober demeanor seemed to say: in aqua frigida veritas. The jeers and roars that had greeted Selwyn Lloyd gave way to somber attentiveness when Macmillan gravely declared: "The customary monthly announcement on the gold and dollar reserves is being issued to the press today ... It shows a fall of $279 million in the reserves."

Low, involuntary whistles of dismay broke the silence. The drop Macmillan reported was the biggest for any single month in the past five years, and it brought Britain's dollar reserves to their lowest level ($1.9 billion) since December 1952. The cause of this fiscal hemorrhage was self-evident: the disastrous attack on Egypt had weakened international confidence in the future of the British economy, led traders all over the world to exchange sterling for dollars in anticipation of devaluation of the pound.

Humiliating but Necessary. The only way the British government could keep the value of the pound from plummeting would be to buy up at the present rate of exchange (about $2.80) all the sterling offered. To demonstrate Britain's determination and ability to do so, Macmillan soberly outlined a series of measures by which he could almost double the nation's liquid dollar reserves. In case of urgent necessity, Britain could withdraw as much as $561 million of the $1.3 billion she had subscribed to the International Monetary Fund, and permission to make such withdrawals had already been requested. "Secondly," said the chancellor, "Her Majesty's Government own U.S. dollar securities to the value of between $750 million and $1 billion ... I am assured that, if requested, support in the form of a loan against these holdings will be promptly available . . . from the appropriate agency in the U.S."

As a final drastic step, Macmillan had asked the U.S. and Canada to forgo this year's interest on their postwar loans to Britain ($81.6 million to the U.S., $22.2 million to Canada), and had been informed by the U.S. Treasury that Congress would almost certainly consent. In Britain's current anti-American mood this was a humiliating and unpopular move, but it was one that would keep a precious $104 million available for the defense of the pound.

Massive Effort. Thanks to Macmillan's Draconian measures, Britain stood a good chance of staving off fiscal disaster, but for the British economy in general, the worst effects are still to come. Even with U.S. help. Britain will have to learn to live with no more than three-quarters of her normal oil supply. Ordinary motorists will get only enough gas to carry them 200 miles a month. Gasoline rationing is already hurting new-car sales. One thousand auto workers have been laid off, and another 56,000 have had their working hours cut. Macmillan also raised the tax on oil and gasoline to an alltime high of 49¢ a gallon. This increase, together with a simultaneous price hike by the oil companies, drove the retail price of gasoline as high as 92¢ an imperial gallon.