Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

239. Memorandum From Secretary of State Vance to President Carter¹

Washington, March 29, 1980

SUBJECT

• Possible French Proposal on Monetary Reform at the Venice Summit

Giscard announced in November and again in January that he would offer a major proposal on monetary reform at the Venice Summit.² Neither he nor other French officials have offered any details. Giscard gave drafting responsibilities, but few instructions, to Bernard Clappier, former head of the Bank of France.

We tend to discount earlier reports that the Giscard proposal would envisage major structural changes in the monetary system, including separate currency zones, a return to the gold standard, and forcing the U.S. to guarantee the value of dollars held by foreigners. While the French still dream of fixed exchange rates and a return to gold, they realize their isolation. The Germans, as well as the U.S., would be unalterably opposed.

Present indications are that the French may be backing off, after warnings from the FRG and us that any proposal should be thoroughly vetted in the Summit preparatory work, i.e., we will brook no surprises.³ If the French do make a proposal in the monetary area, it is likely they will lower their sights to two specific concerns: greater control of the Eurocurrency markets, and improving the process of recycling surplus OPEC funds to the oil importing LDCs. These issues are already under discussion in the IMF and among major central banks. We have indicated to the French, and also to the Germans, who had similar thoughts, that the former is too technical for the Summit. Recycling is now on the agenda, and we hope to produce a statement which will demonstrate major country concern about this question. This will be a major problem for the world economy in 1981–82, but we do not want to be too far in front of the developing countries in pushing for a solution soon.

In addition to the recycling question, we hope to use the Summit to move forward two issues in the monetary area: the Substitution Account, and more effective IMF Surveillance. We do not foresee detailed discussions on either issue. At present, we think it questionable that the French will have a major proposal on monetary reform for the Summit, and any specific proposals would likely fall into areas we already plan for discussion.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 23, France: 4–5/80. Confidential. Carter initialed “C” at the top of the page. The memorandum was sent to Carter under cover of an April 2 memorandum from Owen, who commented: “I agree with Cy’s conclusion: The French probably won’t have a proposal; and if they do it will probably be of a kind that will fit into our present plans. Art Hartman told me this morning that Clappier, who is supposed to be drafting this proposal, hasn’t even set pen to paper yet—and still doesn’t have any new ideas to put forward. Giscard could get a brain-storm that would change all this over-night, but it hasn’t happened yet.” (Ibid.)
2. During a televised interview on November 27, 1979, Giscard suggested that he would offer a proposal to encourage international monetary stability at the Venice G–7 Summit. (“France Preparing Currency Proposal,” The New York Times, November 30, 1979, p. D13) In January, Giscard promised a proposal on international development; his spokesman subsequently suggested that the proposal would also address international monetary stability. (Telegram 3591 from Paris, February 1; National Archives, RG 59, Central Foreign Policy File, D800060–0623)
3. In telegram 4593 from Paris, February 8, Hartman reported that he discussed U.S. “concerns about the timing and content of a possible initiative by President Giscard” with Clappier. (National Archives, RG 59, Central Foreign Policy File, P870111–1886, N800003–0156)