226. Editorial Note

On March 11, 1972, Ambassador Watson sent a telegram to the Department of State on the subject of “French Reaction to International Monetary Developments Causing Growing Strain on Franco-American Relations.” Following a summary the opening paragraph read: “With [Page 614]increasing frequency and virulence, media here have been criticizing US for A) ‘benign neglect’ re international position of dollar; B) failure support dollar devaluation with appropriate monetary and fiscal policies, as evidenced by our large budget deficits and low interest rates; C) unwillingness to commit ourselves to even partial return to convertibility; and D) indifference to problems caused for Europeans by their role in defending new exchange rate structure.” Ambassador Watson thought none of these criticisms well-founded but emphasized they were not limited to the press and had been made by a number of official and non-official contacts in Paris. He recounted steps the Embassy had taken to counter the arguments, but concluded with the recommendation that the time had come “for more intensive high-level US effort to counter European charges that US is indifferent to fate of dollar.” He also recommended making clear that the United States was “fully committed to continued cooperation with them in interest of restoring stability to the system and indeed improving it.” (Telegram 4718 from Paris; National Archives, RG 59, Central Files 1970-73, FN 10)

In a March 14 memorandum Sonnenfeldt and Hormats summarized Ambassador Watson’s message for Kissinger and called his attention to the general weakening of the dollar abroad and the interventions required by European and Japanese authorities to keep exchange rates within the agreed Smithsonian margins. Sonnenfeldt and Hormats noted that “the public atmosphere in Europe to which the Ambassador refers has become unpleasant enough to warrant your talking with Secretary Connally about it as soon as possible, if you have not already done so.” They recommended that Kissinger speak to Connally prior to his Council on Foreign Relations speech on March 15 and suggest Connally make positive remarks on “our dedication to cooperative restoration of stability to the international monetary system.” A typed notation on a note attached to the memorandum reads: “Action Requested Is Phone Call Today.” Kissinger wrote on the note: “Time is not yet ripe.” (Ibid., Nixon Presidential Materials, NSC Files, Subject Files, Box 356, Monetary)

On March 24 Hormats sent an information memorandum to Kissinger informing him of a marked improvement in the international monetary situation, with the dollar having strengthened against all major currencies except the yen. Hormats attributed the improvement to Burns’ assurances at the Bank for International Settlements on March 11-12 that the United States was not “neglecting” the situation, Connally’s “more cooperative posture” in his March 15 speech, and President Pompidou’s “more optimistic” stance in a March 16 speech. (Ibid.) Burns’ intervention at the BIS has not been identified. Connally addressed the Council on Foreign Relations on March 15; the text of his remarks is in Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1972, pages 411-416.