A Stabilization and Development Dilemma: The United States, Transatlantic Relations, and Southern Europe in the 1960s

During the 1960s Italy and Greece were undergoing rapid economic and social changes that were significant in both their economic and political ramifications. US policy was able to influence the course of events either bilaterally or multilaterally in the context of the Bretton Woods nexus of institutions and procedures. The central argument of this essay is that Washington's policy was formulated under various contradictory considerations. Cardinal among them was the necessity of preserving the basic requirements of the Bretton Woods regime. The stability of currency parities, particularly the safeguarding of the preeminent position of the dollar as an international reserve currency and its credibility against gold, dictated the continuation of orthodox monetary and fiscal policies. Political stability in Italy and Greece as a prop against political radicalization was a strategic consideration that militated against a strict application of a deflationary policy. The development of transatlantic relations with Charles de Gaulle's France posed a problem from an Allied perspective and was a factor that also militated against the strict application of a policy of monetary stability.