A brand new idea proposing the creation of a European Monetary Fund - a somewhat smaller International Monetary Fund just for Europeans - is likely to be trotted out today at Bremen at the semi-annual meeting of European heads of state.
But the session is not likely to issue more than a vague statement on the desirability of a wider zone of currency stability in Europe, according to knowledgeable sources.
Thus, despite the wishes of West German Chancellor Helmut Schmidt and pressure by Roy Jenkins, president of the Common Market Commission, the expectation is that the delicate matter of European enconomic "unity" will be put aside for further study and a report to the next European heads of state meeting in December.
The European IMF idea was first proposed by the French to both Schmidt and Jenkins. Under the plan, each country would deposit certain funds, on a quota basis, that then would be denominated in a common unit, comparable to the IMF's Special Drawing Right (SDR). It would be called a European Unit of Account (EUA). This would be expected to create some stability in trade and currency relationships in Europe, and, although this is a concededly unproved, result in more stability in European currencies compared to the dollar.
Among themselves, the European countries would settle their balance of payments account in these EUA units, instead of dollars. In effect - and this is an element not comparable to the IMF - the Europeans would be setting up a regime of fixed but adjustable exchange rates with obligations to intervene through the new fund.
In general, central bankers of most European countries are dubious about efforts to link their currencies because of the great disparities in rates of inflation in Europe.
In addition, although the British government is interested in tying its week currency to the stronger ones of Europe, Prime Minister James Callaghan may have an election coming up this fall, and European monetary union is not the sexiest issue nor a British public already somewhat suspicious of the European connection.
Originally, the idea of trying to establish closer currency links in Europe arose out of the difficulties caused by last year's plunge of the dollar. No one has ever made clear what the precise proposal might be.
At one time, it was thought that the French franc might rejoin stronger currencies in the European "snake" which then might float against the dollar.
But French President Valery Giscard d'Estaing indicated recently that France has no intention of joining the "snake."
U.S. Treasury officials have taken the position that they will be open minded to any European monetary union proposal, recognitizing that the talk has had its origins in the trauma of last year's dollar slide.