The Mark's Golden Mean

For months, international bankers have considered an upward revaluation of the German mark to be inevitable (TIME, Dec. 20). Last week Chancellor Willy Brandt's new government announced that the muscular mark henceforth will be worth 27.3 cents--or 3.66 marks to the dollar instead of the old four-mark rate.

This rise of 8.5%* is more than the 6.25% proposed by Economics Minister Karl Schiller last spring. It is also more than the 7.25% revaluation carried out by market forces in the four weeks since the mark was cut loose from its old peg. Schiller called the new rate "the golden mean--courageous but not foolhardy." It was clearly a compromise. Schiller wanted a change large enough to anticipate a continuing higher inflation rate outside Germany, but German industrialists argued for a lower figure. By making German exports more expensive and foreign countries' exports more competitive, the change should reduce Germany's huge export surplus. That will help currencies like the French franc and the British pound, as well as the dollar. In London a Treasury official expressed satisfaction with the size of the revaluation saying, "The rate seems intended to be helpful to other countries." Significant changes in the parities of other currencies are not expected.

Until recently, European monetary markets were constantly unsettled by the 15% to 20% gap between the French franc, which had been overvalued, and the mark, which had been undervalued. Taking into consideration the removal of the year-old 4% "quasi-revaluation" tax on German exports, Germany's actions last week, combined with France's devaluation in August, closed this gap and added a new stability to the world of money. England's Financial Times commented: "There is a better chance now than for many months past that the exchange markets will settle down to a quieter way of life."

*The revaluation can be viewed in two ways. The 8 1/2% change measures the difference between 4 and 3.66 marks per dollar. The increase in the mark's value from 250 to 27.30 is 9.3%.

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