Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

190. Telegram From the Embassy in Germany to the Department of State¹

Bonn, November 5, 1971, 1716Z.

13810. Department pass Treasury for Under Secretary Volcker and State for Deputy Under Secretary Samuels. Ref: Bonn 13633.²

1. Summary: During the EEC Finance Ministers’ meeting³ Giscard gave an indication of the degree of a dollar devaluation France would be willing to accept on the basis of which Schiller believes a package can be put together at the November 22 G-10 meeting involving a 10 percent improvement in the US competitive position which he hopes the US can accept as a quid pro quo for the removal of the import surcharge.

2. Economics Ministry Deputy Assistant Secretary Tietmeyer gave the Financial Attache today the following information concerning the EEC Finance Ministers meeting in Paris. Tietmeyer said that he had discussed with State Secretary Schoellhorn the question of informing the Financial Attache and that Schoellhorn had agreed provided the information would be held very closely and “not reported through normal diplomatic channels.”

3. At the outset of the meeting Giscard reported on the Pompidou letter to Brandt.⁴ The Dutch, Belgian, Italian and Luxembourg Finance Ministers thereupon suggested that the EEC countries should suggest to Secretary Connally to cancel the November 22 G-10 meeting if no decision can be made until after the Brandt-Pompidou meeting.⁵ Giscard and Schiller felt the G-10 meeting should proceed as scheduled and this was agreed at the end of the Finance Ministers’ meeting. The Germans feel this correctly reflects the progress made by the Finance Ministers which now brings an agreement at the G-10 meeting into the realm of the possible.

4. At the restricted session of the Finance Ministers, Schiller took the position that in calling for a US contribution (i.e., devaluation) to the currency realignment, the EEC must be able to tell the US for how large a devaluation of the dollar in terms of gold its members would be willing to stand still (i.e., not also devalue their own currencies). In the ensuing discussion Giscard gave the other Ministers a clear idea how large a US devaluation France could accept. While Tietmeyer was not willing to give the Financial Attache the exact figure, the Financial Attache gained the impression that it is more than 5 percent (a change of the dollar parity to 37 or possible 37-1/2 ounces of gold). Giscard also indicated that France could accept a devaluation of this magnitude only if the following other conditions are met: (A) France’s competitive position vis-à-vis Italy and the UK is not impaired, i.e., Italy and the UK also do not devalue their currencies in terms of gold; (B) France’s competitive position vis-à-vis the Benelux countries is slightly improved, i.e., these countries revalue by at least 2 percent; (C) France’s competitive position vis-à-vis Germany is improved substantially—Tietmeyer did not specifically indicate by how much, but the Financial Attache gained the impression that the figure is in the 5-6 percent range.

5. Schiller feels that with a French position as outlined by Giscard an agreement might be possible at the November 22 meeting of the Group-of-Ten provided that (A) Giscard’s position at the EEC Finance Ministers meeting has or will receive the blessing of Pompidou and (B) the US would be willing to make the “contribution” of dollar devaluation of this magnitude and would be willing to remove the import surcharge in return for a package of revaluation and “standing still” by the other industrial countries which together with the US devaluation would improve the competitive position of the dollar by roughly 10 percent vis-à-vis the other major industrial countries as a group. On the basis of his conversations in Washington Schiller apparently has gained the impression that while the US would like to gain more, such a package or something close to it might be a minimum acceptable to the US.⁶

6. Schiller will be going to London on Monday in the hope of selling this position to the UK. There also is still some difficulty whether Italy would be able to “stand still” for a US devaluation of this magnitude. Finally, Germany could make its contribution only if Japan is willing to at the very least match the German revaluation and Canada revalues substantially. But Schiller is relatively hopeful that it will be possible to put together a package leading to agreement at the G-10 meeting. The EEC Finance Ministers are scheduled to meet in Rome at 11:00 a.m. on November 22 to review the situation just prior to the G-10 meeting.

Rush

1. Source: National Archives, RG 59, S/S Files: Lot 73 D 153, Morning Summaries. Secret; Immediate; Exdis.
2. Not printed.
3. The meeting was held in Paris on November 4.
4. Not further identified.
5. Brandt and Pompidou met in Paris on December 4. The G-10 Ministerial was held in Rome November 30-December 1.
6. Presumably a reference to Schiller’s meeting with Secretary Connally on September 25; see Document 181.