Giscard backs Bretton Woods II

Press, 26 May 1983, Page 14

Giscard backs Bretton Woods II

From DEREK ROUND, NZPA correspondent, London

The former French President, Mr Valery Giscard d’Estaing, has given his backing to the idea of a new Bretton Woods conference to deal with the world monetary system. Calling for a “phased march” towards a new Bretton Woods, he says the two most pressing international monetary issues which need to be dealt with are the stability of exchange rates and the international debt problem. The former President’s views on world economic issues are set out in an article by him in the current issue of the “Economist.” Mr Giscard launched the economic summits of Western leaders eight years ago and his article puts forward proposals for next week-end’s summit at Williamsburg Virginia. The former President’s support for a new Bretton Woods follows the call for such a conference by President Francois Mitterrand, the man who defeated him for the presidency two years ago. President Mitterrand came out strongly for a new Bretton Woods when he addressed Ministers attending the recent Organisation for Economic Co-operation and Development (0.E.C.D.) meeting in Paris.

They included New Zealand’s Prime Minister, Mr Muldoon who had been advocating a new Bretton Woods for the last year.

Mr Giscard said in his article that there was no point in convening a conference if there was not prior agreement on a specific agenda and a common will to give a collective answer to the questions on the agenda. “When mentioning a new Bretton Woods we should not let procedures come before substance,” he said. “If there is no agreement on the substance, theprocedures will fail.

“The Western world has no need to expose its collective inability to reach an agreement on the rules on which a new international monetary system should be based.

“A new Bretton Woods conference should be the end of the

process, not the beginning.” The former President said; “We could lead the way towards a new Bretton Woods by addressing the two most pressing international monetary issues — the stability of exchange rates and the international debt problem.” Mr Giscard, who was France’s Finance Minister from 1969 to 1973, says the time has now come to re-examine the whole problem of exchange rates. “Everybody seems ready to speak in a vague way of the need to reduce excessive exchange rate fluctuations,” he said. This was not enough. “The ultimate goal should be stated explicitly,” he said. “Are we or are we not adopting the objective of a return, even in a distant future, to a system of fixed parities? “Or are we aiming at a system with permanent flexibility, regulated by market forces?” The first issue to be debated before speaking of a new Bretton Woods conference was to know if agreement existed to return td a system of fixed parities. “If not, then the question becomes one of how to improve the management of the existing system, which is quite another objective,” Mr Giscard said. He proposes that Western leaders should announce that there exists a mutually agreed objective of returning to a system of fixed parities. “This would restore mediumterm predictability in economic decisions and peg to an objective reference domestic monetary policies — which are at present based on excessively individualistic decisions, as in the countries which have an independent central bank like the United States or Germany or on short-term action, often disorderly as in other European countries,” Mr Giscard said. If the objective of returning to fixed parities was agreed at the summit, there should then be a solidifying of exchange rates over a period of three to five years. The former President suggests

that this should be followed by a conference of the seven Western summit participants, the President of the European Community, and representatives of the International Monetary Fund and Bank for International Settlements. The aim would be to define a system of monetary relations between North America, Japan, and the E.E.C. If this was successful, the debate would then be enlarged to take in other countries to agree on what Mr Giscard calls a World Monetary System. The new Bretton Woods would define permanent rules for the future. Mr Giscard, in his own draft of a Williamsburg communique, urges this action: ® A commitment by the United States and Canada to lower interest rates. • A commitment by Japan to open its economy. ® A commitment by European countries to a collective discipline through which countries with major imbalances will adjust “severely and rapidly” while others will stimulate their recovery. The former President says there should also be a solemn commitment not to introduce any new protectionist measure or new trade restriction in the next two years and to start dismantling existing ones.

He advocates a commitment to open a dialogue with oil-producing countries on energy developments, oil prices, and their effect on the world economy, and to reinvigorate the North-South dialogue with the aim of aiding the least developed countries, notably in Africa. A report from Paris this week said Mr Giscard had accepted an invitation from President Mitterrand to meet him at the Elysee Palace today before the President flies to Williamsburg. It would be his first visit to the presidential palace since his defeat two years ago, the report said. “His return appears designed to give greater weight to France’s controversial proposal for a new Bretton Woods conference to lay the basis for a more stable inter-

national monetary system,” a correspondent for the “Financial Times,” Paul Betts, said. Noting that until now Mr Giscard had flatly refused to accept invitations to his old home at the Elysee Palace, Betts comments: “The meeting this week in no way suggests a suddqn thawing of relations between the two men, but it seems to be more than a coincidence that, a week after President Mitterrand launched his controver-

sial call for a new world monetary conference, Mr Giscard has proposed a similar conference.” Mark Hosenball, reporting in the “Sunday Times” on the Williamsburg summit, said American contingency plans for “mollifying” President Mitterrand might include an agreement by the allies to set up a study group to examine his call for a new conference on the world monetary system.