Calling All Gold!

The new French Cabinet formed by firmly moderate M. Camille Chautemps, after waveringly radical M. Leon Blum had thrown up his hands and resigned (TIME, June 28), entrenched itself last week by securing votes of confidence in both Chamber and Senate, but only after some of the wildest scenes in French parliamentary history.

Sergeants-at-arms in the Chamber of Deputies had to keep separating members who loudly threatened to thrash each other. On three occasions the Speaker, portly M. Edouard Herriot, was unable to get order by ringing his bell, had to suspend the session by the classic French gesture of clapping on his silk hat and waddling out. Twenty Communist Deputies rushed in a fist-shaking, hoarse-shouting phalanx toward the centre of the Chamber, and only concerted efforts by all the sergeants-at-arms checked their assault. In the Senate it was the duty of former Premier Blum, since he is now Vice-Premier, to read the declaration of policy of the Chautemps Cabinet, but this temperamental M. Blum refused to do. He had resigned after an adverse Senate vote fortnight ago as Premier (though not obliged to do so) and sulked last week in wounded pride.

The Senate meanwhile hammered the squint-eyed Frenchman who as Finance Minister under Premier Blum officially was responsible for bogging down the State's finances in such a morass that the Blum Cabinet chose with relief to resign, namely Vincent Auriol. Today he is Minister of Justice in the new Chautemps Cabinet. Last week the Senate Finance Committee's rapporteur, Abel Gardey, flayed him in a long speech which the Senate liked so well it ordered his words posted up on public billboards all over France. Senator Gardey charged that Vincent Auriol when he was Finance Minister had been such a promise-breaker that the point was finally reached at which Government "loans, both long and short term, are no longer placeable!" Gardey roared that investors, burned on ''Auriol Bonds,"* have now gone completely sour.

Minister of Justice Auriol, when he found such jibes were to be posted all over France, went purple with fury on the Government bench, threatened to resign and made such a scene that finally Senator Gardey himself persuaded the Senate to cancel its order for posting up his speech.

Meanwhile Georges Bonnet, hastily recalled from his post as French Ambassador at Washington to become Finance Minister under Premier Chautemps, had arrived. Bonnet expressed strong opposition last year to Blum's financial policies, and the state of affairs he discovered on striding into the Finance Ministry was not one he cared to conceal. "Inflation, devaluation and new taxes!" snorted the new Finance Minister at his first meeting with the Senate Finance Committee. "Such, messieurs, are the logical conclusions I cannot avoid!"

The Senate seemed more than ready to vote to moderates like Chautemps & Bonnet full powers to deal-with the French crisis which they had been unwilling to give to radicals like Blum & Auriol, but it was an exciting question last week whether the Chamber, which had twice supported Blum & Auriol on this issue, would now support Chautemps & Bonnet.

The last French election gave a strong Chamber majority to the three parties of the Popular Front. Of these three the misnamed Radical Socialist Party of new Premier Camille Chautemps is actually moderate; the Socialist Party of M. Leon Blum is waveringly radical; and last week it was up to the Communist Party to decide whether to continue shoulder to shoulder with the other two or withdraw and thus break the Popular Front.

In complex intrigue behind the scenes, while sergeants-at-arms were struggling on the Chamber stage with irate but inconsequential legislators, the efforts of the Communists to get something Moscow really wanted in return for their support penetrated via new French Premier Chau-temps even as far as London. His Majesty's Government were extremely near the point of extending "belligerent rights" to the Spanish Rightists last week (see p. 24), when Downing Street received frantic word from the Quai d'Orsay that Premier Chautemps, in order to get his Cabinet over its first rocks in the Chamber, must be able to tell French Communists that he was successfully staving off this British gesture toward Franco. In this appeal Chautemps & Bonnet--who was on the telephone to London almost hourly seeking support for the franc-- succeeded for the duration of the week, and French Communist Leader Jean Duclos announced in the Chamber that his followers would vote for the new Popular Front Government. It won its decree measure 167 to 82 in the Senate and 380 to 228 in the Chamber--but in circumstances of excruciating monetary emergency.

"Deserters of the Franc." There were 3,636 tons of gold in the Bank of France when the Popular Front took office last year, and of these only 2,504 tons remained last week, dramatically revealed new Finance Minister Georges Bonnet.

Moreover, there were only 20,000,000 paper francs left in the Treasury, said M. Bonnet, and if 400,000,000 francs had not immediately been forthcoming from savings banks. "Treasury payments would have ceased." As to the profits realized by M. Auriol from his devaluation of the franc last year and used by the Treasury to defend its currency, these are exhausted, and M. Bonnet tersely declared: "It is impossible to hold the franc at its present rate!"

As precaution against panic, French exchanges had already been closed. In Paris frightened French who wanted to exchange francs for foreign currency were refused, and banks halted exchange operations in francs altogether, except that foreign tourists were sold what they needed. Declared the emergency bill promptly introduced by M. Bonnet and promptly enacted: "Such a situation cannot be prolonged without compromising our financial independence, our military security, our social gains and the economic recovery of France.

"The Government has decided immediately to apply a plan of restoration, including defense of the Bank of France's reserves without recourse to exchange control, implacable war against speculation, a strictly balanced budget for 1937, to be obtained through appropriate fiscal measures and an important reduction in the Treasury's burden.

"We ask the necessary powers . . . until Aug. 31, 1937. to take by decree adopted in Ministerial Council all measures tending to assure repression of injuries to the credit of the State . . . and . . . the reserves of the Bank of France."

With vigorous speeches defending his program, long-nosed little Georges Bonnet drew applause from every section of the Chamber, though as debate wore on. the Left applauded with less vigor, the Right louder and louder. In winning this hand-clap victory, the Finance Minister was aided by pledges of goodwill flashed by U. S. Secretary of the Treasury Morgenthau and Chancellor of the Exchequer Sir John Simon. There was every reason to think they were working last week to cushion the inevitable fall of the franc. When exchanges reopened, the franc was quoted at just over 26 to the dollar, hav-ing fallen from somewhat over 22 to the dollar--thus bringing beaming smiles to thousands of foreign tourists now attending the Paris Exposition, for the more the franc falls the more their money will buy in France.*

Paradoxically the fact that the franc had fallen, in itself an unwelcome fact to nearly all Frenchmen, gave their new Finance Minister reason to expect that huge sums of gold and money will come flooding back into France in short order. These sums were sent abroad in recent months by Frenchmen who exchanged their francs into foreign currency or gold and waited. Their position was the same last week as that of the delighted tourists. In terms of francs, the foreign money or gold they hold abroad has sharply increased in value; they can bring it home and "take their profit"; and with moderates like Chautemps & Bonnet in the saddle they may feel safe in doing so. No less than 17,000,000,000 francs came flooding back into France in similar circumstances some years ago, and this week M. Bonnet expressed confidence that the same thing would happen again. He, of course, screamed imprecations at "speculators" and "deserters of the franc" while bidding for the confidence of these same individuals after they have virtuously "rejoined the franc." In effect the new French Cabinet was calling all gold and foreign currency in honeyed accents.

What Next? This week Premier Chautemps & Finance Minister Bonnet had not yet said what specific use they will make of their powers to act by decree. They were expected to up sharply the income tax, raise taxes on matches and cigarets, increase fares on the State railways, and struggle to effect such economies as France can while her very life still depends on "keeping up with the Germans." Meanwhile M. Bonnet will have recourse to fresh advances from the Bank of France, and the State must pay off or refund three big French bond issues which fall due in the closing months of 1937. Inevitably the continued Popular Front of this week is going to have only slightly less worries than the Popular Front had under Leon Blum. Most of all it must worry about money, and the relatively wealthy British expected this week to go on calling most of the more important French tunes.

Tourists, already pleased about the franc, were further relieved when French hotelkeepers, who had announced a one-day lockout in protest against the 40-hr. week introduced under Premier Blum, came to a last-minute compromise last week with their staffs, who will work a trifle overtime for a trifle higher pay. Meanwhile the big Paris travel agencies had cleaned up by selling to the more nervous tourists short round-trip tours which took them outside France for the one day of the scheduled lockout which never came.

"Not Beaten." Last week Vice Premier Blum, conscious that most of his Socialist followers are bitterly disappointed by his failure to fight to retain his Premiership, sought passionately to justify himself in a speech at Bordeaux. Although the Blum Cabinet in an official statement explained their resignation as due to the Senate's refusal to grant Premier Blum full fiscal powers, Orator Blum this week declared, to everyone's surprise, that he had upset his own Cabinet to ease the international situation. Specifically he claimed that "certain foreign powers" (Germany and Italy) were counting on turmoil in France as a result of a Blum struggle to retain the Premiership. He implied that by re-signing he had fooled II Duce and the Fuehrer and claimed that had not his foxiness avoided French turmoil the Fascist powers would now be striking even heavier blows for the Spanish Rightists. This apologia convinced few Frenchmen, but confidently Socialist Blum bid for a return to the Premiership, described himself as ''not a beaten man but one full of confidence and hope."

*On first coming to power, Socialists Blum & Auriol brought out a baby bond issue geared to attract the savings of French workers, sold it with much proletarian ballyhoo in which the most telling argument was that the Blum Cabinet would not devalue the franc, as it proceeded to do three months afterward (TIME, Oct. 12). Next Blum & Auriol brought out a much larger bond issue aimed at the savings of the French middle class, with assurances that, since the franc had just been devalued, it was now safe against further devaluation. Three months later fresh devaluation was seen to be inevitable and the Blum Cabinet "resigned voluntarily" while it still had a majority in the Chamber, did not choose to ask a vote of confidence in the Senate.

*Expressed in milligrams of gold, the franc equaled 65.5 mg. when it was stabilized in 1928 by the late, great Premier Raymond Poincare at 25.52 francs to the dollar which then equaled 1,672 mg. of gold.

President Roosevelt devalued the dollar to 987.5 mg. and Premier Blum devalued the franc to 43 mg. At last week's price of 3.84'-c- the franc would buy 37.9 mg. of gold.

This file is automatically generated by a robot program, so reader's discretion is required.