131. Memorandum of a Conversation, Department of State, Washington, October 21, 19571
SUBJECT
- Possible Visit to the United States by Dr. Ludwig Erhard, German Minister of Economics
PARTICIPANTS
- Mr. Robert Anderson, Secretary of the Treasury
- Mr. Frank Southard, Special Assistant to the Secretary of the Treasury The Secretary of State
- Mr. C. Douglas Dillon, Deputy Under Secretary for Economic Affairs
- Mr. Fred W. Jandrey, EUR
- Mr. J. J. Reinstein, GER
The Secretary referred to Ambassador Bruce’s recommendations that Dr. Erhard be invited to visit the United States to discuss his ideas regarding the European financial situation and what Germany could do to assist in achieving financial stability.2 He said he was aware of the fact that Mr. Burgess was opposed to the idea. However, he was inclined to feel that Mr. Bruce’s ideas should prevail in this particular matter.
Mr. Anderson said that he had originally been sympathetic to the idea, but in the light of considerations which had been brought to his attention by Mr. Southard, he had changed his mind. He said that Dr. Erhard had made a speech in August in which he had said that he thought the Deutschemark could be revalued upward if similar action were taken with regard to the dollar. This had caused great speculative activity, which had brought great pressure on the pound. A week later the German Government had issued a statement that it did not intend to revalue the Deutschemark. Mr. Anderson remarked that business interests in Germany did not agree with Dr. Erhard’s [Page 310] views. He thought there was also disagreement in the Government and Central Bank and suggested that Dr. Erhard was not in a position to speak for the German Government.
Mr. Anderson said that it would be impossible to have Dr. Erhard come to the United States without causing new speculation which would cause great difficulty for the British. Furthermore, it was difficult to see what could usefully be accomplished until there was a clearer idea of what the developments were likely to be in France. Mr. Southard laid great emphasis on the difficulty which the British were encountering in maintaining the position of the pound. He said that following the British and German statements at the recent meeting of the International Monetary Fund, an improvement had taken place in the British position. It is essential that nothing be done to disturb the atmosphere. Mr. Southard said that Dr. Erhard was incapable of remaining silent on the subject of exchange rates and apparently did not realize the damage which was done by his statements. He calculated that Dr. Erhard’s public statements had cost the British Government a half-billion dollars of their reserves, pointing out that this had in turn caused problems for the United States.
The Secretary said that Dr. Erhard is the second strongest man in the German Government, and may well be the next Chancellor of the Federal Republic. He said that Germany is the strongest country in Europe from an economic viewpoint and it is desirable that the Federal Republic share some of the financial burdens which are being carried by the United States. The Secretary mentioned in particular assistance to underdeveloped areas. He expressed concern over the idea that it was impossible to arrange a discussion with Dr. Erhard with a view to obtaining the assistance of the German Government. He asked whether it would not be possible to have Dr. Erhard reaffirm, before coming to the United States, the position of the Federal Government that no change should be made in the exchange value of the Mark. Mr. Anderson said that too frequent reaffirmations of the position would also be bad and that the best thing to do was to be silent.
The Secretary said that it would seem that for the indefinite future it would be impossible for us to talk to Dr. Erhard. He did not think this was feasible from a political viewpoint. He had no strong views as to the timing of a visit by Dr. Erhard, but he thought it should be possible to work out some arrangement under which Dr. Erhard could be brought to the United States without raising these difficulties. If Dr. Erhard had ideas which we did not like, it was all the more important that we should talk to him, since he might well become Chancellor of the Federal Republic in the not too distant future.
[Page 311]Mr. Anderson said that he would be willing to have Dr. Erhard come to the United States in the light of the considerations which the Secretary had mentioned, provided that some way could be found of dealing with the problem of speculation over exchange rates. He suggested that we should inform the British of our intentions in advance.
It was agreed that a message to Ambassador Bruce would be worked out on this basis.3