France Restored: Cold War Diplomacy and the Quest for Leadership in Europe, 1944-1954 (16 page)

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Authors: William I. Hitchcock

Tags: #History, #Europe, #France, #Western, #Modern, #20th Century, #Political Science, #Security (National & International), #test

BOOK: France Restored: Cold War Diplomacy and the Quest for Leadership in Europe, 1944-1954

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Source:
Institut National de la Statistique et des Etudes Economiques,
La balance des paiements
(Paris, 1957), 22627, 22829.

1948 risen to 35 percent. Nearly all (80 percent) of this investment was publicly financed because of the absence of any private long-term capital market. This in turn led to persistent budget deficits, covered largely by advances from the Bank of France, which was yet another contributing factor to inflation. On the whole, the goals set by the modernization plan were considered sufficiently important to justify some degree of inflation, and indeed, production levels did recover impressively. By the spring of 1947, industrial production had reached the 1938 level, and by February of 1949 superseded it by 25 percent. Still, this recovery was bought at a heavy price: the continued rise in prices of consumer goods and the aggravation of the trade deficit.
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Even in the interwar years France had run a deficit on its merchandise account, but throughout the 1920s, this was more than covered by returns on invisibles, like foreign investments and shipping. But under the impact of postwar inflation and reconstruction costs, the French trade position deteriorated drastically (see Table 1). Reconstruction required a heavy volume of imports, which because of production and trade-route disruptions could not be compensated for by exports. Most of these imports were purchased in the dollar area, France's deficit with which constituted about two-thirds of the total current account deficit (see Table 2). Unlike in the prewar years, France's growing trade deficit could not be offset by invisibles because of the large-scale liquidation of many of these assets during the war. Thus, France covered its trade deficit from gold and currency reserves, which began to dwindle. De-

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Table 2.
Franc Zone Deficits with Dollar Zone, 19451949 (in millions of current dollars)

1945

1946

1947

1948

1949

French exports to dollar zone