Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

121. Memorandum From Norman Bailey of the National Security Council Staff to the President’s Assistant for National Security Affairs (Allen)¹

Washington, November 9, 1981

SUBJECT

• Conversation with Camdessus (U)

On November 5, 1981 I had a conversation of approximately one hour with Michel Camdessus, Chief of the International Department of the French Ministry of Finance. The subject of the meeting was the international debt problem. Camdessus divided the problem into three parts: (1) the poorest countries, lining up for rescheduling but in the ensemble not a significant amount, (2) the intermediary countries (Brazil, Mexico, Argentina, Philippines, etc.), a more serious problem but probably still manageable and (3) “the sword of Damocles,” the countries of the Soviet Bloc. According to Camdessus, the European banks are “on the verge of disaster” because their outstanding dollar obligations to the Soviet Bloc countries are uncovered and uncoverable by their respective central banks.² He claimed that besides Poland and Romania, East Germany and Czechoslovakia are in serious trouble. He pled for constant consultations among governments involved, among governments and banks and among banks themselves, as well as greatly increased prudence on the part of the private banks. (C)

Camdessus agreed that the Siberian pipeline project was most unfortunate from the standpoint of greatly increased debt exposure to the Soviet Bloc and that the Soviet Union itself may have debt service problems later in the decade. He claimed that the Soviets themselves do not realize the enormity of the problem or they would not be trying to raise a large loan currently to pass on to Poland.³ (C)

Camdessus told me his department was completing a study of the debt problem and he would send me a copy. Also present at the meeting were Camdessus’ aide and Mr. Gelbard of the American Embassy, Paris.⁴ (U)

1. Source: Reagan Library, National Security Affairs, Office of the Assistant to the President Files, Chron File, [Case file unavailable]; NLR–812–51–15–3–4. Confidential. Sent for information. Copies were sent to Rashish, Poats, Nau, Weiss, Pipes, Stearman, Dobriansky, Rentschler, Blair, Leland, and Wallich. Lenz also initialed the memorandum.
2. Allen highlighted this sentence in the right-hand margin.
3. Allen highlighted this sentence and placed a checkmark in the right-hand margin.
4. Allen wrote in the margin below this paragraph: “Sounds like a productive mtg. Have you informed Leland? Send a copy of this to Martin Anderson.”