On August 3 the Council of OEEC approved the report of the working party which studied the financial condition of eighteen European areas (Austria, Belgium, Luxembourg, the Netherlands, Denmark, France, Western German Federal Republic, Greece, Ireland, Iceland, Italy, Norway, Portugal, Sweden, Switzerland, Trieste, Turkey and the United Kingdom) from March 3 to June 20. On the working party were experts from Belgium, France, Greece, Italy, the Netherlands, Norway, Portugal and the United Kingdom. The report found that some degree of confidence and internal financial stability had been restored in Austria and Greece, that price stability had been maintained through budget surplus and direct controls in Norway and the United Kingdom and that in consequence inflation was receding, and inflationary pressure had been largely reduced in the Netherlands and Denmark, where direct controls had been in effect. In both of these last named countries there had been some increase in unemployment in 1949 and a tendency toward an increase in private savings was noted. In the Netherlands the balance of payments deficit had been reduced, but Denmark's terms of trade had steadily become less favorable. Both Sweden and Switzerland attained a surplus in the balance of payments in 1949; Sweden reduced the amount of direct controls, while Switzerland had a moderate decline in prices and unemployment was low in both countries. In Belgium, Germany and Italy prices had tended to fall and unemployment had remained high. The working party advised in its report that the effects of devaluation on the internal situation of the participating countries had been slight in relation to the amount of devaluation. However, the trend of downward prices was reversed in many countries after devaluation and the subsequent increase in prices had brought pressure for increased wages. The report recommended that countries in thispredicament prevent this pressure from starting a renewed inflation. The report noted that with the tapering off of United States aid which had allowed an overall import surplus the countries were faced with a dollar shortage and that unless they borrowed from abroad, a reduction on over-all balance of payments deficits would be necessary. The report recognized that in such an instance there would be an internal problem of preventing domestic consumption and investment from increasing as fast as production, and that it would be necessary for such countries to economize on their imports from dollar sources.
Aggregate Price Shocks and Financial Stability: The United Kingdom 1796-1999
