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TFD/PC/188 Part II

there was a tendency to submit morę bills for rediscount.

After the mohetary reform the banlcs agreed to grant short-terrn credit which was used to finance invcstrnent. At present they were obliged to use medium-term deposits for this type of credit. The volume of sayinęs was increasing satisfactorily. Interest rates for mediun-tecra credit had been alterecl; fror.i about they had been reduced to 3/ for Government loans, 5*5 or 6>o for mortgages and 6.3 or 7,J for industrial credit. Nevertheless, the increase in the discount ratę in August checked this favourable trend. lir. von Mangoldt also pointed out that the tightening of the money market led the banlcs to sell their portfolio securitics before rediscounting with the Central Banie, and this had led to a decline on the capital market.

2• Wliat woulcl be the effect of reormament on the generał econcmlc situatj' Dld the^German Governmeir6 intend to place"' orders with o t: i er iieMbei^ c oimt r i es, wlrlch uould fnrtheyi.ⁿe(Uioc the baiance of payments surpluses

It v:as not yet possible to determine the extont of rearmament which the econony would have to bear in futurę# It seemed however that in 1936 no large orders were to be expected in this field. Some commitments would probably be taken in respect of infrastructure and this mighfc croate certain diffi-culties in the building industry. In ŁUiy case it seemed unlikely that rearmament would have any effect on the economic situation before 1957-38. It was probable that some orders would be placed with other Member countries, but it was not yet known at what datę and to what e::tent.

3. In order to mainbain prlce strbility, had not a reduction in custcms fcariffs been consldered ?

Keductions had been conteraplated, in particular for certain eąuipment and products intended for agriculture -(agricultural machinery and fertllisers) and building materiale, but such reductions related to specific iter.is. In addition, internal taxes on coffee, sugar and tea had been lowered -in order to increase the imports of such goods.

t• Pnragraph 12 of the Chapter on Germany in the 7th Report referred to open market ope- utjons. Wero these carried out by the Central lTaii: or ii;‘The Goyernment ?

The Central Bani: practised an open market policy but, before an arrangement was madę wLtli the Goyernment, it did not possess a sufficient volume of securities to carry out this policy. During the first six months the Central Bani. intervened freąuently on the market, but sińce the middle of the summor it had had madę little use of the open market policy.