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The Germans refused to budge on the mark. During a three-hour adjournment the last evening, the delegates consulted with their governments about new positions, searching for a compromise solution. The forms of such an accommodation gradually began to emerge. It included devaluation of the franc and a loan of $2 billion to France as a support for its currency. The French still stalled. They insisted that unless the Germans backed down, they would undertake a massive devaluation that would wreck the international monetary system.
Finally the French delegation began to strike a more reasonable note. They gave the impression that they would devalue, and in a range that would not pull other currencies, notably the pound, into an involuntary downward spin. Obviously, the French delegation at Bonn had no authority to make a final decision. Even so, the participants flew home sure that France would devalue. The next move was up to the proud and tough man in the Elysée, who immediately called for a Cabinet session and began to prepare the dramatic events of the weekend.
Inventive and Aggressive
If the crisis amply illustrated the weakness of the franc and pound, it underscored just as strongly West Germany's powerful trade position. Unlike France, which was forced to absorb costly wage settlements following the spring disorders, Bonn has succeeded in keeping domestic inflation pretty much under control, an accomplishment that has restrained domestic demand for imports at the same time that it has kept prices on exports relatively low.
Having recovered from a 1966 recession, the Germans rank once more as the economic stalwarts of Europe, and their Deutsche Mark stands supreme among world currencies. There is virtually no unemployment, prices are more stable than ever, productivity is up by 7%, and the gross national product will grow 5.5% this year. A good deal of this success is undoubtedly due to the inventive and aggressive economic prescriptions of Economics Minister Karl Schiller (TIME, Oct. 25). They include as much free-market competition as possible, as much planning as necessary. Part of the Schiller scheme, however, reflects the adaptability of both management and labor. The Germans knew all the while how much they stood to lose by a recession. As a result, they were more than happy to cooperate with a government that offered a promise of economic robustness.
In an effort to halt the downhill slide, Schiller formulated a plan for extensive pump priming that eventually put $2 billion into public works. He also encouraged long-range fiscal planning, and helped balance the budget. Perhaps even more important, he instituted regular meetings between federal and local government officials, management and labor representatives, presenting them with detailed statistics and encouraging them to discuss economic requirements. Schiller is reluctant to attribute the astonishing orderliness and restraint of German management-labor relations to the Germans' somewhat stereotyped trait of discipline. Organization is at its heart, he maintains, explaining that after the war German unions were organized along modern lines, "meaning more centralized than, say, in Britain."