347. Telegram 2670 from Paris, November 181
Pass Treasury for Roosa and Daane from Leddy. Subject: Special Resources Through IMF.
After series bilateral talks earlier in week reps of following countries met afternoon Nov 17 to discuss US-French draft “statement relating to creation of special resources for use by participating countries through IMF”: Belgium (Janson), Netherlands (Liefrinck), Canada (Plumptre), France (Sadrin and Esteva), Germany (Emminger and Schleiminger), Italy (Oscola of Bank of Italy and Cardinali), Sweden (Wickman), UK (Rickett and Portsmore), US (Leddy and Willis). Sadrin chaired. Jacobsson and Staff (Gold and Polak) participated. Holtrop and Van Lennep had left Paris but Leddy discussed paper with them earlier in week.
US-French statement, copies of which being brought by Undersecretary Fowler, is based on discussion NAC staff meeting Nov 9.
Results of meeting:
1. General approach of statement appeared acceptable most countries although none in position commit.
[Facsimile Page 2]2. Agreed that French would call special meeting in Paris of proposed participating countries in advance NATO Ministerial in December, in order seek agreement on definitive text which could be approved by Ministers as document their govts prepared support in IMF Exec Board. Meeting would also consider any further understanding among PC’s themselves on procedure to be followed in their consultations.
3. Jacobsson asked prepare draft of IMF decision in light US-French statement and views expressed by various countries. This would be considered at special meeting in Paris referred to above. Jacobsson agreed he would “use ingenuity” in drafting text which would meet views expressed by continental Europeans (especially France), which he specifically accepted, that participating countries must control decision over lending from special resources for specific transaction envisaged. He cited desire to accommodate legal and technical problems of IMF and maintain basic framework of IMF. Noted problem of “handling” LDC’s. Sadrin emphasized problem of “handling” European industrial [Typeset Page 1519] countries, where parliaments not receptive to global use of funds, and stated French-US paper was “our Bible” as to major principles. Several countries, including UK, specifically asked that proposed Jacobsson draft be treated as working paper which would not be circulated to non-participating countries at this stage. We also consider this important. No clear commitment given by Jacobsson on this point.
(US in close consultation Jacobsson throughout week, prior to meeting. Following meeting he assured Leddy he would keep in close touch with US as drafting proceeded in Washington.)
4. Substantive points raised in discussion by other countries included following major questions:
A. Voting procedure. While most thought some weighted voting procedure possibly desirable none satisfied with US-French idea of 60 percent of non-borrowers and felt formula required much further clarification. Some tendency [Facsimile Page 3] toward voting procedure limited only to decision to activate resources, with amount of loan and allocation among lenders left to less formal decision by negotiation. UK considered essential make each country judge of its own financial ability contribute to specific lending operations although accepted idea no country should be allowed arbitrarily refuse lend, without showing cause.
B. Reversibility. Dutch, Italians and Germans consider reversibility procedure inadequate since it would not permit them treat loans as demand assets which could be counted as part of reserves. This problem important since in case these countries and perhaps others, funds will come from Central Banks rather than govts. German rep stated his govt had indicated unwillingness proceed by budgetary approach. Dutch proposed that problem be handled by giving lender additional gold tranche drawing rights under ordinary resources of Fund equal to amount of loan. Germans cited IMF paper and referred to rights “similar to gold tranche”. US inquired whether this meant larger claim on Fund’s gold. Neth disclaimed this as motive. (US did not specifically raise at meeting various difficulties in relating this suggestion to major principles of US-French paper, such as limitation of use of special resources and counterpart to PC’s, and problem of claim on Fund’s existing gold without contributing gold as under quota, but has noted these objections privately with French. Problem needs further consideration, to find acceptable solution.)
C. Counterpart. British have expressed to us the view counterpart should not be sterilized but should be usable for relending by Fund to non-participating countries. No support expressed by others for this view at meeting, and UK did not raise matter clearly at meeting. Rather took line that in general paper required further study.
D. Security of loans. Italians and probably some others would favor having ordinary resources of Fund stand behind repayment of loans [Typeset Page 1520] from special resources in event of default by borrower. Italians raised point, and Jacobsson took affirmative view. US has pointed out to French, [Facsimile Page 4] who agree, that such arrangement might prejudice basis for insisting that participating countries control specific lending decisions, as well as limitation of use of special resources to PC’s.
Use of special resources by small PC’s
Plumptre (Canada) indicated Canadian Ministers not yet decided whether to participate in lending arrangement, because of position as large importer of capital. Important consideration in decision is whether or not initial recourse to special resources limited to key currencies which alone could represent threat to impairment world payments situation. If so limited would rule out Canadians. Sadrin stated difficult to define clearly eligible transactions. Agreed give further consideration this point.
Summary of meeting by Sadrin (Chmn)
1. Jacobsson would prepare draft IMF decision emphasizing main points in US-French paper and discussions at meeting, and indicating points that might be more appropriate in separate understanding among participants, and which could include his supplementary comments.
2. A borrowing country will not ask help from special resources unless there is a serious situation, and potential lenders recognize that it would be a very serious matter to refuse help in such a situation.
3. French to take lead in calling Meeting of Experts before WP3 meeting in December (Emminger suggested Dec 4–5).
In separate US-French meeting prior to multilateral discussions reported above, Baumgartner said he confident successful negotiations could be completed by end of year. He will take lead at meeting of six Finance Ministers December 1 and 2 to develop full six support [Facsimile Page 5] for approach desired by France and US.
Leddy, Willis and Smith will spend Monday, Nov 20, in London for further talks with UK.
- U.S.-French draft re creation of IMF special resources fund. Official Use Only. 5 pp. Department of State, Central Files, 398.13/11–1861.↩