Under immense pressure from the U.S. and West Germany, the British Labor government reluctantly agreed last week to adopt a punishing package of spending cuts and tax hikes in exchange for a critically needed $3.9 billion loan from the International Monetary Fund. The agreement in principle, which will be announced within a week, was reached after a month of tense, sometimes stormy behind-the-scenes negotiations. The talks became so heated that at one point they threatened to provoke a full-scale British Cabinet revolt.
Essentially, Prime Minister James Callaghan agreed to take the politically explosive step of carving $5.8 billion out of Britain's...
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