Office of the Historian

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

Bonn, November 22, 1968.

For Walt Rostow. From: Fried.

Basic agreement reached 4:00 A.M. this morning on following package:

(1)
4 percent German border tax adjustment. In light of German program group publicly endorsed no change in DM parity.
(2)
Agreement about any franc devaluation will not exceed 11 percent. Figure not announced yet and may not be made public until weekend.
(3)
Standby Central Bank credit facility for franc of $2 billion. German share 600 million, U.S. share 500 million.
(4)
No other parity changes.

Germans to the end refused to budge. Only problem then was to nail down French move and show clearly that it was made and negotiated in multilateral setting. Ortoli held out for 15 percent until last minute.

We believe important precedent established on border tax adjustment principle and on thorough airing of parity changes within group.

Our judgment is that markets will be calmed down by fact that Group of Ten reached agreement on the whole set of issues. Arrangements made for concerted Central Bank intervention on spot and forward exchange markets and on Euro-dollar market on a massive scale.

Also clear that German performance in publicly announcing position before meeting and refusing to budge gave Kiesinger government an impressive domestic victory. If package fails to calm down situation however, the domestic pluses will vanish and Germans will be on the spot internationally.

Communique draft completed but not yet approved. Text will follow on approval.2

  1. Source: Johnson Library, National Security File, Subject File, Monetary Crisis, November 1968, Cables and Memos, Vol. 1 [1 of 2], Box 22. Secret. The source text, identified as “Bonn Telecon 27,” bears no additional information on the place, date, or time of transmission, but the telegram was received at the White House on November 22, 9:37 a.m., as identified in the Washington-Bonn Telecon Chronology of Events for November 22. (Ibid.) Attached to the source text is a memorandum from Rostow to President Johnson, November 22, 9:45 a.m., which notes that Rostow would be forwarding shortly “the stand-by credit package.” This package would “not require formal Presidential approval, but I am sure you will wish to see exactly what is being negotiated.”↩
  2. Transmitted in Bonn Telecon 29 to the White House, November 22. (Ibid.) Also printed in Department of State Bulletin, December 16, 1968, pp. 627–628.↩