HE Financial Times has done a survey of the reactions of international finance to Mr. Callaghan’s Budget. The paper’s correspondents interviewed leading bankers in the main financial centres of the world. I have given a selection of their replies. In Zurich and Brussels the Budget was regarded as a serious attempt to meet Britain’s immediate problems, if no more than that. The most favourable reaction has certainly been that of the U.S. Bankers. They were pleased that the extra taxation was £50m. over that expected. In Washington—and even more in European centres like Paris, Bonn and The Hague—there was relief that the Chancellor had not handed out any more social security benefits. Among German bankers, the Budget was definitely seen as proof that the Labour Government will defend sterling, though there is no inclination to think that ‘the troubles of. sterling have been solved. High Common Market officials felt that Mr, Callafhan’s Budget had promised sufficient economic restraint to satisfy Britain’s foreign creditors and remove all possibility of
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Dave Windsor devaluation in the foreseeable future. They reserved a particularly warm welcome for his un ing to restrict capital export by £100 million a year. Dr. H. J. Abs, of Deutschebank, said in an interview that Mr. Callaghan had been tough and had shown his earnest determination to master Britain’s difficulties. He said he was optimistic about the future of sterling though the Labour Government still had to show it could bring about the necessary increase in productivity. Twenty-four hours after Mr. Callaghan’s Budget statement, informed opinion in Paris judges that the degree of austerity and deflation decided upon has probably been sufficient to satisfy Central bankers and Finance Ministers on the Continent, but only just. French officials still apparently believe that the U.K. Government should have taken sterner measures still to cut back demand in the economy, and in some quarters the line is being purveyed that Britain may yet be forced into devaluation of the pound, or at least into more stringent measures later. Mr. Callaghan has not been able to convince leading Dutch financial experts that he will manage to prevent a forced sterling devaluation some time later this year.