9. Telegram From the Embassy in France to the Department of State1

6157. From Secretary Dillon for Dillon, Ball, Heller, McGeorge Bundy, William McChesney Martin, Dale and Harley.

Subject: Group of Ten Ministerial meeting, morning session, June 15.2

1. Ministers and Governors of Group of Ten held full day meeting at French Finance Ministry June 15 under chairmanship Giscard d’Es-taing, to discuss report prepared by their Deputies on outlook for functioning of international monetary system and future liquidity needs.3 Secretary Dillon and Governor Daane represented US.

2. Speaking as Chairman of Deputies, Roosa presented Deputies’ report to Ministers. Underlined that experience of working closely together for extended period of months had enabled Deputies learn much about one another’s views and had developed spirit of cooperation. Pointed out that in effort sort out differences for Ministers, report may seem fail put adequate weight on satisfactory functioning of system. Reviewed briefly genesis major recommendations in report—study of adjustment process, multilateral surveillance, and study group on reserve assets—pointing out in particular that term “multilateral surveillance” decided upon because it could be used without change in virtually all of the languages into which report would be translated. On IMF, Deputies had in mind that after meeting for nearly whole year and representing substantial share Fund resources, group should appropriately try reach general view, but certainly not get into details properly left to IMF Executive Directors. Since Deputies had been unable arrive at agreed position, analysis in report on IMF quotas formulated in terms of alternatives, with choice left for Ministers. Finally Roosa flagged continuing need for secrecy until Ministerial statement ready for publication around the time of publication of IMF Annual Report in early August. Since no general comments on report, discussion moved to specific agenda topics.

Adjustment Process.

3. Roosa acknowledged important contribution of German delegation to work of Deputies under this heading. Stressed WP-3 would draw [Page 16] upon its examination of current problems as sort of case book for study, and in that way avoid being drawn away from problems of real world into purely theoretical exercise. Kristensen (OECD) said OECD felt WP–3 well qualified undertake this work and that Secretariat would cooperate fully. Schmuecker (Germany) expressed satisfaction of German Govt that its proposals had been recommended by Deputies and reserved right at appropriate time to suggest a final date for report by WP-3. Schweitzer (IMF) stated his understanding IMF would be associated with work of WP–3 in studying adjustment process. Giscard pointed out Group of Ten could not settle this question, which lay within province of OECD, although he personally hoped for satisfactory solution. Kristensen said he supported Schweitzer’s point, particularly since terms of reference of WP-3 provide for establishing necessary liaison with other international organizations. Said would present matter of IMF association with WP-3 work on adjustment process to upcoming meeting of EEC as parent body of WP-3. Group then adopted mandate on adjustment process, with Chairman noting German intention to request agreement on date for conclusion, at an appropriate time.

Multilateral Surveillance.

4. Roosa stressed evolutionary nature of concept of multilateral surveillance, which is intensification of process of cooperation and group appraisal that has already been taking place in bodies like Basle meetings of Central Bank Governors and WP-3. A second aspect of this concept is to complete and systematize exchange of information on means of financing B/P deficits and surpluses with appropriate safeguards to protect sensitive data. Since BIS has already been playing important role in this field, Deputies have recommended that it be requested act as center for collection of data and for transmission to WP-3, which will make appraisal. Ferras (BIS) and Holtrop (Netherlands), speaking in his capacity as chairman of BIS Board, confirmed BIS would accept this assignment. Holtrop added that he and fellow Central Bank Governors accepted with understanding it would in no way inhibit Central Banks from discharging their responsibilities for market conditions.

5. Dillon said US feels agreement on multilateral surveillance is point of substantial significance which we strongly support. Said we thought objective fine and were prepared go as far as necessary to achieve it. At same time, recognize that need for prompt action and for confidentiality in market operations will ordinarily preclude prior consultations at time when established bilateral and other assured credit facilities actually used. But do envisage full discussion of uses made of such facilities and of scope for altering or enlarging them. Must also keep constantly and fully in mind need to insure secrecy in order protect market. Feel this whole exercise will strengthen WP-3 and make its work [Page 17] more effective, particularly work on adjustment process. Cannot yet spell out exactly how all aspects of work should be conducted. Must allow it evolve with experience, in same way as US efforts in past three years.

6. There then followed lengthy discussion of meaning and import of “multilateral surveillance,” provoked by question from Maudling (UK) as to how much freedom of action members of group would have under these arrangements both to utilize existing bilateral facilities in case of need, and to work out new or enlarged facilities. Roosa said Deputies had not felt it either feasible or wise to make precise formulation of process involved. Thought it better to have process evolve over time. Everyone recognized need for prompt and decisive action in face of payments emergency. Clear agreement that no obligation consultation prior to use of existing facilities. Only obligation would be let all participants know at least total volume of operation. Then there would follow process of mutual discussion and appraisal, from which all would try to benefit and others to be as helpful as possible to participant in difficulty. Colombo (Italy) and Witteveen (Netherlands) supported this line of agument. Giscard, speaking as French representative, recalled agreed formula for multilateral surveillance much less organized and much less concrete than French had originally proposed and would have liked to see adopted. Said France feels this is most important element to emerge from Deputies’ work. Said would like to see this process operate along same lines as formulation of incomes policy in domestic economy: look at consequences of individual actions and decisions on whole and try to reach consensus about general lines to follow. Moreover, felt need for role for Ministers in process, for it often involves decisions with political implications, for which Ministers must take responsibility.

7. Maudling said he was still confused; in the future, would there be any barrier to his entering into bilateral discussions with view to enlarging UK swap with US, for example? Roosa pointed out there would be no such barrier, but in spirit of multilateral surveillance, would be useful discuss with other members of group. Result might be participation of others, better overall arrangement meet problem. Holtrop recalled Central Banks would still be free act in crisis situation, but that multilateral surveillance called for exchange of views on proposed future arrangements, with honest attempt reach mutual understanding. Giscard, Van Lennep (Netherlands) and Colombo all echoed this theme. Blessing said Deputies’ report had been wise in leaving discretion to Central Bank Governors re sensitive areas, while at same time putting more discipline into system.

8. Dillon said that since neither WP-3 nor BIS Governors were in continuous session, any arrangement necessary to protect international monetary system could always be put into effect promptly and immediately [Page 18] and on bilateral basis. But in case of establishment new or enlarged arrangement and in absence of crisis, proposal should be discussed with other Governors in BIS framework. After listening to discussion, participant would be under neither legal nor moral obligation to be bound by discussion. Each party could do what he wanted. However, it was expected all would gain by discussion.

9. Maudling said that despite all of foregoing assurances he was still somewhat unhappy about this proposal, which went rather further than he had thought. Asked his colleagues for time to reflect somewhat further. Accordingly, final decision on multilateral surveillance temporarily passed over.

Study Group on Reserve Assets.4

10. Roosa, speaking as Chairman of Deputies, said under Deputies’ proposal, this study group would not be concerned with question of whether or not there is need for another kind of reserve asset, but only with detailed descriptions of various types that might be used if such need should develop. Deputies believed this work could proceed without endangering present system and casting doubts on existing reserve assets provided there was careful presentation to outside world. Could say this represented careful forward planning in financial sphere, just as in military sphere governments prepare for contingencies they hope will never materialize. Next spring suggested as target date for completion of work of study group. Group would not be expected reach conclusions, but rather assemble elements for appraisal prior to IMF annual meeting.

11. Dillon said that for the record, while supporting creation of study group, he wanted to outline strong US feelings in this matter. Draft mandate makes clear study should take full account of implications for present international monetary system of various proposals studied. To US this means any new type reserve asset, if found necessary, would be used to add to, supplement and strengthen present reserve assets and not to replace them. In other words, there should be nothing suggested that would in any way impair or inhibit use of present reserve assets and credit facilities. He felt there was clear understanding of this within [Page 19] group, but public presentation must leave no doubts on this score. No Minister challenged or commented on this statement.

12. After adopting draft mandate for study group, morning session concluded.

  1. Source: Department of State, Central Files, FN 10. Confidential; Exdis.
  2. The Group of Ten Ministers met in Paris June 15–16 to discuss the international monetary system.
  3. This report has not been further identified.
  4. The Study Group on the Creation of Reserve Assets was known as the Ossola Group after its Chairman, Rinaldo Ossola, Vice Chairman of the Bank of Italy. The May 31, 1965, Report of this Study Group to the Deputies of the G–10 and the July 1964 Report of the June 1964 G–10 Deputies Meeting that established the Study Group are in the Washington National Records Center, RG 56, OASIA Files: FRC 75 A 101, World/1/545, Study Group on Creation of Reserve Assets (Ossola Group), World/1/545, Report to the Deputies of the G–10. This Record Group also contains papers submitted to the Study Group by G–10 members and the IMF during 1964 and 1965; handwritten notes from Study Group meetings taken by George H. Willis, Deputy to the Assistant Secretary of the Treasury for International Affairs; minutes of Study Group meetings; earlier drafts of the May 31, 1965, Report; and a scattering of related items until early 1967.