stamp of approval to carefully managed exchange control abolition in Bermuda.

"Exchange control abolition enables an economy to become wholly integrated with the international economy,'' he said at a press conference organised by the Bermuda Monetary Authority.

"I do, as a matter of general principle, rather than applying it specifically to Bermuda, think that the removal of exchange controls would be beneficial.'' He expected exchange control relaxation to lead to lower interest rates in Bermuda.

"It would mean that Bermuda interest rates would become more closely aligned with those of the US, because of the exchange rate link.'' Mr. George, who is participating in the Bermuda Monetary Authority's (BMA) 25th anniversary celebration, urged that the changeover be handled carefully, "step-by-step''.

Finance Minister the Hon. David Saul said on Budget Day that he intends to release the final barrier to exchange control abolition -- the $25,000 annual ceiling on foreign currency export -- within a year.

Mr. George said that if barriers are kept in place, and there is no preparation for movement, a "terrific pressure'' builds up behind that barrier.

"When you do then move, you have to take it away in one full swoop,'' he said. "This was the experience that we had with the Big Bang in the securities market in London. It is quite dangerous making a move when all the great pressures are released.

"I think, if you can and if circumstances permit, doing this step by step is helpful.'' Mr. George said it would be unnecessary for the BMA to intervene and control interest rates.

"In general, it would be undesirable,'' he said. "But, there could be emergency situations where it would make sense. The effect of putting controls on interest rates is simply to ration money.

"What you are doing then is having a centrally taken decision about how much money there should be, in relation to the state of the macro-economy, instead of allowing the market to decide that.

"I don't think it actually advantages the society to have quite arbitrary limits on the price of money, any more than I think it advantages society to have arbitrary limits on the price of anything else.

"I hope that situation would not arise. I wouldn't see it arising in the early future, given where US interest rates currently are.

"The thrust has been towards removal of that kind of direct control. The controls may address an immediate short term particular problem, but at the expense of creating much broader distortions in the economy.'' Mr. George said he would be surprised to see the Bermuda dollar disappear as a result of the recently announced deregulatory measures.

"In the Channel Islands, they have their own currencies. The Channel Island shares a somewhat similar relations with the UK, as Bermuda does with the US.

"I don't think it is a necessary consequence. Indeed I think it unlikely.'' Mr. George disputed the view that Bermuda's insurance market had gained at the expense of Lloyd's of London.

"I am not at all clear in any financial services activity that it is a zero sum gain that someone wins at the expense of others.

"I think Bermuda will benefit from having a strong Lloyd's, and Lloyd's will benefit from having a strong Bermuda.

"They are part of the whole market, and markets that interact generate more business between them than they do if totally separate.

He said many of Lloyd's problem related to the past and said 1993 will be an "extremely good year'' for the London insurance market, although 1994 is "not expected to be quite as good''. "The problems of Lloyds are looking backwards. They are quite serious. They have prevented new underwriting capacity coming into Lloyds to take advantage of the improvement in the insurance market as a whole,'' he said.

Mr. George gave a brief analysis of US interest rates.

"A fortnight ago, the US edged its interest rates up at the short end by a quarter of a percent, and long rates have been rising over a rather longer period.

"The rise in interest rates in the US has been presented as being necessary to sustain the recovery. That is tremendously important.

"At this stage in the cycle, central banks need to be very careful with the acceleration that you are seeing in the US, ensuring that it does not get out of hand.

"If it moves early, it will have to move less violently later. I don't know whether rates will have to go further, but I do know that if it were left, until inflationary pressures were visible, it would have to go further, and be more violent.

"You can't hope for total interest rate stability, but can hope to avoid violent fluctuations, when addressing inflationary problems early.'' The main lesson that had been learnt from the recession in the UK was to avoid the booms that precede recessions.

"The secret is to prevent the economy from getting out of hand in the first place,'' said Mr. George.

"Very severe action had to be taken to bring the economy back under control.

We are now aiming for sustainable growth.'' Mr. Eddie George.