CRISIS EASED BUT NOT ENDED

THE third international monetary crisis in a year subsided last week more swiftly than it arose. As Charles de Gaulle imposed a severe economic squeeze on France and Britain tightened its belt another notch, the money speculators retreated. An uneasy quiet took hold in Europe's reopened currency markets. But the monetary problems that touched off the crisis remained largely unsolved, and financial policymakers were far from confident that tranquillity would endure.

Leaders of other nations were stunned or at least surprised by De Gaulle's gamble that confidence in the franc could be restored without devaluation. But they stifled the impulse to criticize. Public expressions of concern might tend to become self-fulfilling prophecies. In contrast with the acrimonious debate that preceded their decision to lend France $2 billion to fight speculative runs on its currency, the world's industrial powers last week chorused assurances of support. In a personal message to the President of France, Lyndon Johnson pledged that the U.S. would cooperate "in any way we can." Added Secretary of the Treasury Henry Fowler: "I applaud General de Gaulle's decision."

Such backing was understandable. France's hard choice spared other countries painful repercussions--at least for the moment. Devaluation of the franc very likely would have started speculation first against the British pound, then against the U.S. dollar. It might well have forced disorderly devaluations of those and other currencies.

A Look at Wallets. France began its save-the-franc austerity by imposing its tightest money controls since the early postwar years. The government decreed a $140 limit on the amount of French and foreign cash that tourists of any nationality may take out of the country. Foreign tourists were permitted to retain travelers' checks or money orders in their name only if they were acquired abroad.

Police reinforced customs officers along all French borders. So thoroughly did they search for francs and foreign money that mile-long queues of cars formed in some places. Frenchmen returning from abroad were forced to convert all foreign money to francs. At Paris' Orly airport, international flights were delayed while douaniers and police poked through every outgoing suitcase. To the humiliation of many a traveler, they counted money in every purse and wallet, and any excess was seized, to be held until the traveler's return. On the first day alone, the customs take totaled $3,000,000, spoiling the vacations of countless Frenchmen.

Since it was a massive flight of francs into other currencies--notably dollars and German marks--that set off the crisis, the Gaullist government considered its irksome restrictions crucial to the defense of the franc. But currency controls were only the first blow. Last week the Chamber of Deputies speedily adopted measures designed to curb domestic consumption and spur exports. French consumers will bear most of the burden. The legislation rescinds France's burdensome payroll taxes, which range from 4 1/2% on salaries below $6,000 a year to 16% on those above $16,000. To replace that revenue, the "added-value tax," which is France's equivalent of a sales tax, will rise on almost everything. On food staples, for example, the domestic levy will go up from 6% to 7%; it will jump from 20% to 25% on autos, whisky and other "luxuries." As a result, officials estimate that the cost of living will climb 2% next year. That should retard domestic consumption and stimulate French producers to scratch harder for export sales.

Cut in Prestige. For its part, the government plans to reduce its 1969 budget deficit by 42%, to $1.27 billion, partly by cutting back on such prestige projects as atomic testing and the Concorde supersonic jet transport. (Concorde officials insist that the cuts will not delay the plane's first test flight, which is scheduled for early next year.) To offset reduced subsidies to money-losing nationalized industries, railroad freight rates and the price of gas and electric power will rise. "This means pain, work, discipline," said Premier Maurice Couve de Murville. "This is the price of salvation. France has not yet won the war of the franc."

West Germany also strove for monetary stability. Although it refused to raise the value of the Deutsche Mark--as France, Britain and the U.S. had urged--Bonn last week kept its promise to take backdoor steps toward the same end. The federal legislature voted a 4% tax on German exports, and a 4% rebate on imports. Both measures are intended to shrink the country's mountainous trade surplus, which helped to convince speculators that the mark is underpriced.

In response to such maneuvers, the price of the franc and pound rose a bit last week, and hot money began to flow out of Germany as speculators realized that their chances for a quick killing had dimmed. But whether the patchwork remedies for the monetary crisis would prove adequate remained an unanswerable question. Few non-German businessmen felt that Bonn's tax mea sures would lower the country's trade surplus by as much as the $1.2 billion that the Germans expect. For one thing, many German exporters will try to absorb the 4% tax rather than raise their prices and lose markets abroad.

France faced trouble with both business and labor. The country's largest automaker, government-owned Renault, greeted Premier Couve de Murville's call to hold the price line by announcing a 7% price increase, not including the added-value tax. The Communist-led General Confederation of Labor, France's most powerful union group, denounced De Gaulle's austerity policy and demanded new wage negotiations with the government by early January. "The government gives to the rich and takes from the poor," complained Communist Deputy Robert Ballanger.

Increasing the Strains. For the longer run, it is also ominous that in the fight to defend their currencies, both France and Britain have turned toward protectionist trade measures. Britain, for example, has just imposed a requirement that importers of "nonessentials"--including almost all manufactured products--must deposit half the price of the goods with the government for six months. Despite such restrictions, world trade, which grew by only 5% in 1967, is expected to regain its more normal 8% annual expansion rate this year. Much of the gain will be due to the voracious U.S. appetite for foreign goods.

Trouble is, that appetite has led many U.S. businessmen to demand protection in turn. Justifiably or not, Congress this year has been deluged with bills to put import quotas or similar nontariff barriers on steel, textiles, footwear and dozens of other products. The temptation to erect trade barriers is seductive. For somehow, the U.S. must end or at least substantially reduce its persistent balance of payments deficit; otherwise the dollar may face the same pressures as the franc and the devalued pound.

Ironically, this year's growth in world trade, the underpinning of global prosperity, has increased the strains on the world's monetary system. Among the countries whose exports have risen fastest are Germany, Italy and Japan, which already have substantial balance of payments surpluses. If the major deficit countries, the U.S. and Britain, actually succeed in curtailing imports and expanding exports, the world's main source of reserves to finance trade will shrink. Under today's monetary system, with nations free to pursue conflicting policies, the world can only look forward to one crisis after another.

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