121. Memorandum of Conversation1
PARTICIPANTS
- Karl Schiller, Economic Minister, Germany
- W.W. Rostow
The following is designed to supplement the account in Bonn’s 12850 of the April 27, 1967,2 exchange between Schiller and myself on the Munich money agreement.
- 1.
- The reporting cable suggests accurately the line of Schiller’s justification. It was basically political. He had brought the French along some distance. He felt the non-repayability provision would not apply to the U.S. The transferability provision might not be wholly satisfactory, nor clear; but it was a move in the right direction. On the other points of interest to us, there was evidently more work for them to do. The Munich agreement was incomplete.
- 2.
- He suggested strongly that this was a negotiating position in
which we should bear in mind two factors:
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- —the substance of what emerged from Europe would depend on what could be negotiated for Europe by way of a larger voice in the IMF;
- —in the minutes of the meeting it was agreed that the Six would have to reconvene if no agreement with the Americans was reached.
He claimed they had set in motion a process of movement in Europe towards the U.S. position. The movement was incomplete. But he felt there was time in hand because the German agreement on gold provided the U.S. security and the state of the U.S. balance of payments provided the world liquidity. We could continue to run a balance of payments deficit for some time without fear of a U.S. crisis or a world liquidity crisis. He was strongly urging us, in effect, to negotiate a drawing-rights scheme which met our requirements (non-repayment, transferability, etc.) rather than make a rigid stance on a new medium of payment at this time.
My reply to him was that, while we respected the diplomatic achievement of bringing the French along and getting the beginnings of a European position that was not in total confrontation with our interests, we did not face a diplomatic problem but a technical problem; namely, that if we did not solve this question properly, we might have “a traumatic event” in the field of international money which could have grave consequences. I recalled the inter-war years. Whatever solution we reached had to meet certain technical criteria or the problem would not be solved, however elegant the diplomacy. He knew as well as I the difference between finding a supplement to gold as a reserve instrument and enlarging, on a conditional basis, IMF credit facilities.
Afterwards, on the lawn, when the President and Chancellor Kiesinger were briefing the press on their private exchanges, Schiller sought me out and said: “I know where we have to end up in this monetary matter. Please tell your people not to be too rigid: We must do this by stages. We know you are not going to change the price of gold. We are supporting the dollar with our commitment on gold in the tripartite negotiations. We can make much further progress beyond Munich on a drawing-rights basis.” Then he repeated his hope we would not be excessively rigid. I indicated no concessions whatever in our present proposal.
We exchanged sentiments of satisfaction at being able to discuss this matter so directly, as old friends, given our common work in 1962–64 on Berlin viability.