What really happened in Paris
MARC ULLMANN
Paris—M Couve de Murville and General de Gaulle should by rights be feeling like Cassandra after the roof fell in. But they are not. For months they have been saying that the British economy was in a parlous condition and reminding all who would listen of what France did in similar circumstances in 1958. Now they seem to have proved their case. But they are far from happy with the outcome.
For the striking feature of last weekend's denouement, as seen from Paris, was that the devaluation of the pound amounted to a demonstration of Atlantic solidarity. A new rate was chosen with the assurance that the Common Market countries would absorb it, and the Americans were thereby saved the agonising choice between attempting to main- tain a manifestly artificial rate for their own currency and admitting that it was unworthy to act as a reserve unit by following the pound down. It is of more than historical interest, therefore, to follow the course of last week's traumatic events in some detail.
Let us start with the confrontation in Basle on 12 November between Sir Leslie O'Brien and his French counterpart, M Jean Brunet. The Governor of the Bank of France swiftly disabused his British colleague of any idea that he could quickly obtain a new massive support package for the pound without strings attached. Central banks, he explained, could only offer short-term facilities: and short-term facilities do not solve long-term problems. He therefore suggested that the British government ought to turn to the no—and that of course would mean that it would have to put forward, according to the IMF rules, a strict programme of internal measures. The other central banks apparently supported half of M Brunet's arguments. They were ready to agree to a short-term loan, but not without knowing about 'structural action' the British government intended to take. From then on it was clear that devaluation of the pound was going to be virtually unavoidable: so much so that during the early part of last week the civil servants who represent the various governments of the Six both in the Monetary Committee of the Common Market and in the group of Ten (in the French case M Rene Larre, head of the Treasury Division of the Ministry of Finance) were constantly in touch with each other.
The first problem to decide was the degree of devaluation of the pound which could be con- sidered as bearable by the Six; i.e., which would not lead to a devaluation of other Euro- pean currencies. The diagnoses varied from 12 per cent to 15 per cent. Finally the most generous figure, 15 per cent, was informally agreed upon. Thereafter there was discussion about the advisability of letting Mr Wilson know about this understanding. The French view was against a specific communication to
the British. 'We should not,' M Larre is reported to have said, 'involve ourselves in a decision which is the responsibility of the British govern- ment.' To many authorities this sounded like an indication that the French authorities would not have been so sorry if, after all, Mr Wilson bad had to make a so-called 'savage devalua- tion'—let us say 30 per cent. In that case all the European countries would have been forced to adjust their own exchange rates and the position of the dollar would have become unbearable.
By Wednesday night, however, London was aware that the Germans, the Italians, the Dutch and the Belgians would accept a 15 per cent devaluation of the pound (on the Dutch side the channel of communication was Mr van Lennep, the top Dutch treasury official, who also happens to be chairman of the Monetary Committee of the Common Market). I have been unable to discover whether M Larre car- ried a similar message to his British colleagues. The point is only of psychological importance: for it was obvious that France could not be the only Common Market country to follow the pound downwards.
On Wednesday night there followed the curi- ous affair of the tux 'revelation from Paris' that a massive support operation for the pound was being mounted. Now there are various aspects of the French government's conduct last week which may not bear too close scrutiny. But about this 'revelation' the French are deeply— and genuinely—outraged. They have noted that this report has been widely used in London to sustain the charge the French government was hell-bent on feeding speculation against the pound. But, in fact, whatever the source for this story may have been, it was not the French government. Indeed, it is felt here that if it really originated in Paris at all it can only have come from the British Embassy.
Be that as it may, come Thursday morning it was made clear through civil servant channels that the British government was determined to avoid a massive devaluation. But it was also made clear that such a determination could be carried through only if Britain could count on a huge loan. On Friday morning, at a restricted meeting of the Group of Ten, in Paris, the British representative repeated this; and on Saturday morning Sir Patrick Reilly, the British Ambassador in Paris, called' on the French Foreign Minister, M Couve de Murville, and the Finance Minister, M Debra, to inform them of the devaluation and the new rate. (Sir Patrick's call on the Prime Minister, M Georges Pompidou, on Saturday afternoon was only to tell him that Britain's application for the Com- mon Market still stood.)
At 12.30 p.m. on Saturday, General de• Gaulle, M Pompidou, M Debra and M Couve de Murville met at the Elysae Palace. M Debra reported that following M Brunet's stand in Basle no British application for a short-term loan had been made to the French authorities. No one apparently suggested that the Bank of France should volunteer to help, but on the other hand no one suggested that France should not join in an eventual IMF loan.
So what happens next? The French govern- ment is in something of a quandary. It wants to tip the dollar into the sea without rocking the boat in which it happens to find itself : a deli- cate feat of navigation at the best of times. One detects a subtle shift of attitudes in the highest echelons. Whereas in the past there has been a clear contrast between the preference of General de Gaulle and M Couve de Murville for guerre
a outrance with the dollar and the anxieties of the Finance Ministry and above all the Bank of France about what this might entail, the belligerents are now winning the battle. The Bank still has some reservations; but they are little in evidence at the Finance Ministry. Which is not to say that there is any greater inclination to exacerbate an immediate crisis: on Friday, for instance, the Bank of France joined other central banks in mopping up surplus dollars. But it looks as though these will now be cashed back into gold at the earliest opportunity. And the other Common Market central banks will be lectured on the folly of persisting in their efforts to preserve the existing gold-exchange standard.
No one, of course, knows what the General will have to say at his press conference on Mon- day. But the best guess is that he will not refer to—or at any rate will not dwell upon--the tribulation of the pound. This, it is thought, he would regard as being in bad taste. He is likely instead to emphasise the advisability for the British government of now examining seriously the case for a period of association between Britain and the Common Market and forget- ting about the impracticable solution of full membership.
But the war between Paris and the 'Anglo- Saxons' continues : and all the indications are that it now enters a new and more frenetic phase.
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