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considered from a regional point of view. At the same time imports should be placed under stronger economic control and freed of bureau-cratic interventions. A significantly greater degree of liberalization of imports is necessary to equalize the conditions of economic activity in import-dependent production, and to make our exporters compet-itive on the world market. The convertible and clearing markets re-quire initially two different, but much morę harmonized as well as elaborated regimes than is the case today, When the entire elaboration is implemented in practice, it will be necessary to carry out a new devaluation which will be determined by the foreign exchange market, and only then will the intentions of the reform be carried out in this area.

8.    In recession phases of the cycle there occurs exhaustion of ac-cumulation which is spent on financing inventories and on financing personal incomes. The economy then becomes increasingly dependent on the banks. Credit conditions become increasingly difficult and thus repayments absorb an ever greater share of the economy’s accumula-tion for: (a) losses are covered in an irregular way and (b) monetary restrictions further reduce the available supply of money in relation to existing demand. In that way a vicious circle is created and every attempt to increase the reproductive capability of the economy ends in failure. This conclusion holds also for the current proposal that credits be transformed into constant working Capital. A possible escape from this situation is the following:

(a)    Levelling off of cyclical fluctuations.

(b)    Leave the interest on business Capital to enterprises as an ear-marked source for investment.

(c)    Stimulate allocations to business funds in the prosperity phases of enterprises’ business by fiscal measures.

(d)    Form a Capital market, by which the mobility of funds would be increased and the monopoly of banks reduced.

(e)    Achieve financial discipline of socio-political communities as well as honoring of procedures in sanitation of losses.

(f)    Supply the economy with enough quantities of money so that illiquidity with its well known chain reactions does not occur.

(g)    Supplement selective credit policy with fiscal measures in harm-onizing individual segments of supply and demand.

9.    The tax system requires generał revision which, however, we cannot analyze here exhaustively. We cite only two negative effects which should be eliminated:

(a) In building of prices there are so many rigid elements (normed amortization, normed interest on business Capital, fixed levies on personal incomes, fixed obligations in repayment of loans), that the pricc is practically completely absorbed by them (for personal incomes are not and cannot be flexible downward). Therefore in the case of re-

15 PRAXIS 553