European heads of state yesterday announced agreement to study a new monetary stabilization system for Europe but so far there is more cosmetics than substance to the scheme, popularly described here as a mini-imf."
The IMF is the 130-nation International Monetary Fund which manages the international monetary system and makes loans to nations in balance of payments trouble. What evolved here is a two-day session of the European Council is one more step in the Common Market's effort to free itself of the impact and influence of the U.S. dollar. The hope, of course, is that it will help stem the sharp decline of the dollar.
But even the agreement in principle was not unanimous. The details will not be worked out at least until the December meeting of the council - and perhaps not by then.
"There is an old Germany saying," an experienced hand here reminded, "that the devil is in the details."
The plan is sufficiently far from a reality so that it can be a dominant factor in discussions at the seven-nation economic summit at Bonn July 16-17. But it will demonstrate anew to President Carter the belief in Europe that chaotic exchange markets coated by the weakness of the dollar are one factor behind Europe's poor economic growth record.
Whether the Bremen understanding hammered out in the past 48 hours will have much effect on the relationship between the dollar and European currencies is still a debatable point. Its primary objective is to create "a zone of monetary stability in Europe."
West German Chancellor Helmut Schmidt and currently president of the European Council, said the new European Monetary System (EMS) would have a positive effect on the dollar, because speculators could not pick out a single currency to attack. Rather, they would have to deal with the whole European community.
But when reminded that he and other officials had always stressed "underlying economic conditions" as the main determinant of exchange rate relationships. Schmidt agreed that the pressure on the dollar coming from basic causes could be handled only by the U.S. government itself.
The underlying trends affecting the dollar," he said "cannot be changed outside of the United States. The underlying trends must be combatted by American policy." He cited in particular the need for a successful U.S. fight against inflation, and a U.S. effort to reduce energy consumption in keeping with (but not matching) a new European commitment to trim energy imports by 50 per cent by 1985.
Schmidt revealed that he and French President Valery Giscard D'Estaing had personally informed Carter of intentions to co-ordinate European monetary policy and had gained his "political" agreement, in principle.
Schmidt and Common Market President Roy Jenkins re-iterated and restated that no "commitment" to an actual monetary plan can happen before December's Council meeting in Brussels. But the European finance ministers have been directed to formulate unnecessary guidelines" by July 24, and to elaborate the details by October 30. Jenkins said that the results in Bremen far exceeded his expectations, and that the prospective scheme is "imaginative and realistic."
Neither the United Kingdom nor the Netherlands are pleased with the agreement.
The Labor Party faces an election this fall, and Prime Minister James Callaghan resists strengthening common market ties, not too popular with British voters.