Office of the Historian

207. Telegram From the White House to the Embassy in Italy1

Washington, November 17, 1968, 2258Z.

CAP 82761. For Secretary Henry Fowler via Ed Fried, literally eyes only, Rome, from Walt Rostow.

A. According to Bill Dale, the Fund representative at the BIS meeting this weekend in Basle reports that:

1.
Governor Brunet of the Bank of France has concluded that in any likely set of circumstances France will not be able to hold its present exchange rate.
2.
Governor Blessing of the Bundesbank continues to be opposed to any change in the DM rate.
3.
A bilateral meeting takes place tomorrow between French and German Government and central bank officials.
4.
An EEC meeting is set for Tuesday afternoon.2
5.
IMF senior staff officials are going to Paris.
6.
German IMF Executive Director Schleiminger3 has informed the Fund management most recent figures show the maximum DM revaluation which could be considered as 6–2/3 percent (DM 3.75 per $1).
7.
Southard, the Acting IMF Managing Director, has informed Schleiminger that the IMF management is taking the position that there is a strong case for revaluing the DM and that the management would be concerned about the implications for the international monetary structure of any other exchange rate change (French devaluation) without a DM revaluation.

B. In light of Brunet’s alleged comment, call your attention to Paris 24001 (repeated to Rome)4 with this passage:

“Larre said he understands U.S. has agreed not to put pressure on Germans to revalue ‘for the time being.’ However, U.S. ‘needs to decide’ in event of general European rate changes whether it wishes to adjust its rate accordingly, i.e., agree to raise gold price, or demonetize gold; Larre repeated oft-heard French thesis that France does not ‘favor’ increase in price of gold except in case that this only alternative to demonetization.”

C. Herewith our substantive thoughts as of Sunday afternoon.

1.
Would hope for revaluation by the Germans of not less than 10 percent. In absence of German move of that size, possibility of lira and guilder move negligible, and, therefore, likelihood a larger French move increased.
2.
Presume that if this not feasible, you will explore with Germans what constructive move they intend to make through new credit and other measures to help maintain status quo.
3.
If discussions between Germans and French and IMF on Monday and in the EEC on Tuesday are unsatisfactory, we feel you should seriously consider preparing for and taking leadership in convening G-Ten in Europe to arrive at a multilateral conclusion. Even if this effort should fail, we feel record of U.S. leadership and of maximum effort will be required in face of unpleasant eventualities that could arise.
  1. Source: Johnson Library, National Security File, Subject File, Monetary Crisis, November 1968, Cables and Memos, Vol. 1 [2 of 2], Box 22. Secret; Eyes Only; Via [text not declassified] Channels. A typed text of this telegram is attached to a memorandum from Walt Rostow to the President, November 17, 6 p.m.; ibid. Rostow’s memorandum indicates that following a conference call with Fowler, Martin, Barr, Eugene Rostow, and Tony Solomon, it was agreed to send this message to Fowler.↩
  2. November 19.↩
  3. Guenther Schleiminger, German Executive Director of the IMF.↩
  4. Dated November 16. (Department of State, Central Files, FN 17 FR)↩