Foreign Relations of the United States, 1964–1968, Volume VIII, International Monetary and Trade Policy

217. Telegram From the Embassy in Germany to the White House¹

Bonn, undated.

Minister Witteveen (Netherlands) commented that Baron Snoy says we have made progress in the short run, but need more. He himself had doubts about the short-run solution. If the disequilibrium is structural, the German solution won’t work well. Despite Strauss’ comments it is obvious that there is a structural problem. If Germany has had more price stability than other countries, it should revalue. That is the policy to follow if Germany wants to preserve stability. This helps to do so and increases the welfare of Germans. It is not punishment but recompense. The tax measures may be technically nearly equivalent to revaluation but they are temporary. Schiller’s proposed general realignment underlines the temporary character of the tax measures. The Netherlands was in fundamental disequilibrium in 1961, but is not now. With a minor German move and a large French move, there is no reason for the Netherlands to move at all.

Minister Schiller agreed the measures are temporary. Most international economists are against large and hurried parity changes. A revaluation or tax of 7–1/2 percent would mean a certain reduction of DM 9–1/2 billion out of a trade surplus of DM 16 billion. Public and private capital exports amount to DM 8.6 billion. If trade is cut too much, Germany can’t export capital. For internal and external reasons Germany can’t do more.

Concerning credit arrangements of $2 billion, Schiller said Germany would participate. If others do so, why do we need the French change of 15 percent?

Secretary Fowler, referring to Minister Strauss’ statement, noted that the German trade surplus was comparable to a surplus of $25 billion in the United States. Everyone would consider this as too large, even allowing for the U.S. large external responsibilities. It wasn’t unreasonable to expect Germany to do more than it has suggested.

Chancellor Jenkins urged that we look at the progress of the meeting in perspective. After 3–1/2 hours we are a long way from even a short-term solution. If we do not find this solution, many of our basic assumptions will be swept away. The French 15 percent may prove disruptive to the system. Secretary Fowler’s credit proposals are constructive and can buttress, but cannot provide, a credible arrangement by themselves.

Governor Ansiaux raised pertinent questions on the German banking proposals. He proposed a short adjournment to try to come closer together on a credible package. Germany must do more and France must do less, and the Central Banks must meet on the credit package.

Minister Schiller then proposed three separate meetings

(1) The Governors to meet on the credit package,

(2) The Deputies to meet on the general situation,

(3) The Common Market Ministers to meet on the French parity.

Minister Ortoli said credit arrangements are not a toy and should not be toyed with but they will buttress a credible arrangement. Secondly, the credit package seems weak. If we do not arrive at some understanding, we shall have to reconsider the $1.2 billion plus IMF, which adds up to $2 billion.

1. Source: Johnson Library, National Security File, Subject File, Monetary Crisis, November 1968, Cables and Memos, Vol. 1 [2 of 2], Box 22. Confidential; Limdis. The source text, which bears no telecon number or information on the place, date, or time of transmission, appears to be a continuation of Bonn Telecon 24 (Document 216), although the classification is different.