1. SUMMARY. IN INTERVIEW PUBLISHED BY LE MONDE DATED MARCH 5,
ECONOMICS MINISTER GISCARD D' ESTAING CONVERED VARIOUS EXTERNAL
FINANCIAL QUESTIONS, INCLUDING OUTLOOK FOR EUROPEAN MONETARY
UNION, GOLD AND RECYCLING OF SURPLUSES ACCRUING TO OIL-PRODUCING
COUNTRIES. HE EXPANDED ON THOUGHT EXPRESSED PREVIOUSLY (PARA 4,
PARIS 3608) THAT EUROPEAN COOPERATION ON EXCHANGE RATE POLICY
DID NOT NECESSARILY HAVE TO INVOLVE PRESENT "SNAKE" TECHNIQUE, AND OUTLINED THREE ALTERNATIVES FRENCH WERE STUDYING. HE MADE
TRADITIONAL FRENCH PLUG FOR ARRANGEMENT TO REVALUE MONETARY
GOLD STOCKS, WHICH COULD THEN BE USED IN INTRA-EUROPEAN SETTLEMENTS
AND WHICH MIGHT ALSO RELEASE OFFICIAL EUROPEAN FOREIGN EXCHANGE
HOLDINGS FOR USE IN SETTLING EXTRA-EUROPEAN DEFICITS OF EUROPEAN
COUNTRIES. UNDER HEADING OF RECYCLING, HE SUGGESTED EUROPE
SHOULD MAKE AN EFFORT TO PERSUADE OIL-PRODUCING COUNTRIES TO
HOLD PART OF THEIR RESERVES IN EUROPEAN CURRENCIES. END SUMMARY.
2. MONTHLY EUROPEAN ECONOMIC SUPPLEMENT WHICH LE MONDE PUBLISHES
JOINTLY WITH LA STAMPA, THE TIMES AND DIE WELT, DATED MARCH 5,
CARRIES INTERVIEW WITH FRENCH ECONOMICS MINISTER GISCARD D'
ESTAING ON VARIOUS EXTERNAL FINANCIAL QUESTIONS. FOLLOWING IS
RESUME OF GISCARD' S PRINCIPAL COMMENTS.
3. EUROPEAN MONETARY UNION. -GISCARD AGAIN SAID FRANCE
WAS PREPARED TO EXAMINE WITH EC PARTNERS WHAT FORM EUROPEAN
MONETARY COOPERATION MIGHT TAKE FOLLOWING SIX-MONTH PERIOD WHICH
FRANCE HAS SET AS LIMIT FOR FRANC FLOAT. HE REITERATED THAT
EUROPEAN MONETARY "SNAKE" IN ITS PRESENT FORM WAS NOT THE ONLY
POSSIBILITY, AND PERHAPS NOT THE MOST APPROPRIATE, GIVEN PRESENT
WIDESPREAD CURRENCY FLOATING. FRENCH WERE STUDYING FOLLOWING
ALTERNATIVES:
(A) EACH EC COUNTRY MIGHT UNDERTAKE TO MAINTAIN SPECIFIED
MARGINS FOR ITS OWN CURRENCY, BUT THESE MARGINS MIGHT VARY
FROM COUNTRY TO COUNTRY IN FUNCTION OF DIFFERING ECONOMIC AND
BUSINESS CONDITIONS.
(B) 2.25 PERCENT MARGIN MIGHT BE KEPT AS GENERAL RULE, BUT
CENTRAL BANKS, WITHOUT ANY PUBLIC ANNOUNCEMENT, MIGHT SUSPEND
THE RULE FOR CERTAIN CURRENCIES DURING CERTAIN PERIODS.
(C) INSTEAD OF REQUIRING COUNTRIES TO INTERVENE ONLY WHEN
THEIR CURRENCIES WERE AT OUTSIDE LIMITS OF .../...STONE "SNAKE," INTERVENTION MIGHT BE DIRECTED TOWARDS THE
MIDPOINT OF THE "SNAKE." THUS, ALL PARTICIPATING
COUNTRIES WOULD BE CALLED UPON TO ACT IN DEFENSE OF
"SNAKE" AND NOT JUST THOSE WITH STRONGEST AND WEAKEST
CURRENCIES.
4. GOLD.
(A) ANOTHER DIFFICULTY IN PROPER FUNCTIONING OF
"SNAKE" HAS BEEN FACT THAT AT ITS PRESENT OFFICIAL
VALUE, GOLD IS NOT AVAILABLE FOR INTRA-EUROPEAN
SETTLEMENTS. THIS IS WHY SOME STEP TO REACTIVATE
MONETARY GOLD IS FUNDAMENTAL QUESTION FOR EUROPE.
EVERYBODY, INCLUDING FRANCE, PREFERS WORLD-WIDE SETTLEMENT OF THIS QUESTION IN AGREEMENT WITH U.S. IF THAT IS
NOT POSSIBLE, HOWEVER, SOMETHING MUST BE DONE ON
EUROPEAN BASIS.
(B) ON SUBSTANCE OF QUESTION, FRANCE DOES NOT
FAVOR RETURN TO GOLD STANDARD. OBJECTIVE IS RATIONAL
MONETARY SYSTEM IN WHICH GOLD WILL HAVE A ROLE
SO LONG AS THAT RATIONALITY IS NOT COMPLETE. BEST
PROOF THAT GOLD STILL HAS A ROLE TO PALY IS FACT THAT
ITS MOST DETERMINED OPPONENTS, SUCH AS U.S.; GERMANY AND
ITALY, ARE NOT WILLING TO LET LOOSE OF ANY OF THEIR
GOLD. FRENCH POSITION IS NOT THAT A NEW CONVENTIONAL
PRICE SHOULD BE FIXED FOR GOLD AND THAT THIS NEW
CONVENTIONAL PRICE SHOULD BE FUTURE STANDARD FOR MONETARY
SYSTEM. RATHER, IT IS THAT THERE SHOULD BE A
POSSIBILITY FOR GOLD SETTLEMENTS AMONG CENTRAL BANKS,
WHICH WOULD EXCHANGE GOLD AMONG THEMSELVES "LIKE A
MONETARY RAW MATERIAL."
(C) COUNTRIES WOULD BE LESS CONCERNED ABOUT LOSING
A PART OF THEIR FOREIGN EXCHANGE RESERVES IF THEIR
GOLD RESERVES WERE REVALUED. THUS, GERMANY COULD
ACQUIRE GOLD FROM ITS EUROPEAN PARTNERS AGAINST FOREIGN
EXCHANGE, AND EUROPE WOULD SETTLE ITS 1974 EXTERNAL DEFICIT
IN FOREIGN EXCHANGE WITHOUT DECREASING ITS TOTAL GOLD
STOCK
5. RECYCLING.
- IT IS NORMAL THAT PART OF SURPLUSES ACCRUING
TO OIL-EXPORTING COUNTRIES SHOULD BE CHANNELED
TO IMF AND IBRD FOR USE IN HELPING COUNTRIES WITH PAYMENTS
DIFFICULTIES. IT IS ALSO NORMAL THAT PART
OF THESE SURPLUSES SHOULD BE CHANNELED THROUGH EURO-
DOLLAR MARKET. HOWEVER, FRANCE WANTS EC TO ADDRESS
THIS MATTER IN COORDINATED FASHION, AND OTHER MEMBER
COUNTRIES SEEM TO BE COMING ROUND TO THAT VIEWPOINT.
"FOR OIL-PRODUCING COUNTRIES, IDEA OF HAVING PART OF
THEIR RESERVES INVESTED IN FORM OF CLAIM ON EUROPE,
CARRYING CORRESPONDING GUARANTEES AND YIELD, MIGHT
WELL BE ATTRACTIVE TO THEM. AS DISEQUILIBRIUM IN OUR
BALANCE OF PAYMENTS IS TEMPORARY, AND AS VERY LARGE SURPLUSES OF OIL-PRODUCING COUNTRIES ARE ALSO TEMPORARY,
THE IDEA FOR THEM TO BUILD UP RESERVE HOLDINGS IN
EUROPEAN CURRENCIES IS SOMETHING WHICH PRESENTS GREAT
DEAL OF INTEREST. THERE ARE TECHNICAL PROBLEMS WHICH
HAVE NOT YET BEEN WORKED OUT: THERE MIGHT BE ARRANGEMENTS
FOR MULTIPLE CURRENCY OPTION. BUT IDEA THAT
EVERY YEAR EITHER THE GROUP OF EUROPEAN CENTRAL BANKS
OR MONETARY COOPERATION FUND WOULD FLOAT A LOAN OF
MIDDLE SIZED DIMENSIONS, THAT IS, A FEW BILLION DOLLARS,
OPEN NOT TO PRIVATE PARTIES, BUT TO CENTRAL BANKS OF
OIL-PRODUCING COUNTRIES, APPEARS TO ME TO BE POSITIVE
IDEA. WE ARE GOING TO TRY TO ADVANCE IT."
STONE
Source: https://www.wikileaks.org/plusd/cables/1974PARIS05438_b.html
Summary: Timeline overview
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