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

13352. For Under Secretary Rostow. Ref: State’s 89416.2 Subject: German support for US position in international monetary reform.

1.
I fully recognize the great importance that the administration places on the successful completion of negotiations on the basic framework of an acceptable plan for reform of the international monetary system in time for presentation to the IMF Governors at their meeting in Rio de Janeiro in September. At the same time, my considered judgment is that the approach suggested in the reftel is the wrong way to try to advance our interests in this field, and, in fact, would be counter-productive.
2.
The main point, I believe, is that if the battery of expert opinion and argumentation which was obviously marshalled in Washington for the April 24–26 meetings could not carry the day, there is little chance of our making any contribution to swinging the balance by organizing approaches of the kind suggested in the reftel. I believe that the discussions have now progressed to a point where it would no longer be effective simply to have influential people urge Chancellor Kiesinger to support the US view generally against that of France. This is the one confrontation that Kiesinger and the German Cabinet will seek to avoid at all costs. A break in the EEC on this issue would be considered by the Germans only as a last resort, it could be accepted by them only on a showing that the French persisted in positions which threatened solutions that the Germans, in the light of their own interests, considered reasonable and desirable.
3.
Kiesinger has little personal interest in this issue and no technical financial background on which to base an independent judgment. He has, to the best of our knowledge, no American confidants in such matters and relies on his government advisers:EconMin Schiller and Econ State Sec Schoellhorn. If he has an outside adviser on such matters he is likely to be Prof Dr. Otto Pfleiderer, President of the State Central Bank of Baden-Wuerttemberg. We have a report on Dr. Pfleiderer’s general financial views which indicates that he is very conservative and a strong supporter of Pres Blessing in the Bundesbank Council. He would not be likely to counsel the Chancellor to take any action not favored by Blessing and possibly Emminger. Neither, in my judgment, would any other influential German financial leader. We know, for example, that Erhard opposes our position strongly.
4.
There would, moreover, be a high probability that the approach suggested in the reftel would become known to Kiesinger and probably to Schiller as well. This would, in my opinion, be certain to arouse their resentment and that of their Cabinet colleagues. I have the distinct impression that there has already been some little annoyance at the totality of our actions mounted before the meeting of the EEC Finance Ministers in Munich. It will be recalled that I directed a strong letter to the Chancellor, enclosing copies of Sec Fowler’s two letters to Schiller, on the eve of the meeting. I have never received a reply or any comment. The strong emphasis given to this subject by the Vice President before the Munich meeting, and by the President after, will have left no doubt as to where the US Government stands on this matter. Unless we have some persuasive new element to inject in support of our point of view, I can see no further advantage to be derived from additional general political type pressures.
5.
To add the type of campaign now being suggested to what has already been done could, in my judgment, even arouse suspicion as to [Page 542] our real purpose in seeking reform. When we originally proposed the reforms now under consideration, it was on the basis that additional reserves would be required because of our intent to balance our payments. Since it is now well known that we cannot attain a balance in the immediate future, it will be generally concluded that the urgency of the situation should have been diminished rather than increased. During the parallel discussions conducted with Schiller during the President’s recent visit, the amount of new liquidity required annually was stated by the US side as being roughly comparable to that currently being injected by the US. For us now to press with what will be considered an unwarranted degree of urgency, may lead others to the conclusion that our real purpose is to facilitate our financing of a continuing large payments imbalance. The possible benefits which might accrue to us through such a campaign are not in my opinion worth this risk.
6.
My own feeling is that the best way for us to advance the negotiations in the direction we desire is through our regular contacts at all appropriate levels. I and my staff will take advantage of our contacts with German Government officials, and German and American businessmen, to sell the US point of view on these matters. In order to be effective in this effort, we will need to be kept up to date on the progress of the negotiations and the evolution of the US viewpoint on the issues of the day.
McGhee
  1. Source: Johnson Library, National Security File, Country File, Germany, vol. 13. Secret; Priority; Nodis.
  2. Not found. The telegram number appears to be incorrect.