Devaluation of the French franc is expected to result unfavorably as far as Israeli-French trade is concerned. Devaluation means that Israel will be able to buy less in the French market with the francs available to Israel under the terms of the trade agreement between the two countries.
Treasury circles predict that the new French loan to Israel will not be affected by the devaluation of the French franc, since that loan was negotiated in terms of dollars. However, an earlier $15,000,000 loan may be affected, since it was pegged to the French franc. If that earlier loan is affected, this will be the second time its purchasing power has gone down, its value having dropped due to a previous French devaluation in Aug., 1957.
It is too early to measure how the coming into existence of the Common European Market will influence trade between France and Israel. The very nature of the Common Market, however, automatically puts Israel in a less favorable position than member countries of the Common Market, when it comes to selling Israeli products to France.
The Tel Aviv Stock Exchange and Bourse were quiet today, and no reaction was felt here to the monetary changes in Western Europe. Small increases were registered yesterday afternoon in the dollar and gold prices before the Bourse closed.
Israeli export circles were puzzled by the fiscal changes in Europe, but there were no instructions from the Government Treasury or from the Bank of Israel. It is believed that reports to come in from Israeli economic attaches in various European capitals will enable Israeli exporters to consider the situation resulting from the fiscal changes in Europe.
Israeli exporters may face fiercer competition in European markets. They may have to cut prices and increase quality of production to meet competition.
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