The French government yesterday unveiled a proposal for international monetary reform, built around "reference zones" for exchange rates to introduce greater stability into the system.
In Paris, the department of treasury released the text of an article by its director, Daniel Lebegue, which will be the basis of a more formal proposal at a meeting here in April of the International Monetary Fund's policy board, known as the Interim Committee.
The reference zones -- which would be calculated by the IMF -- would establish a set of central exchange rates for major currencies, with an allowable fluctuation of from 5 to 10 percent. Governments would undertake to keep their currencies within these zones, with the understanding that they could be changed if necessary.
The new French plan is much the same as a system of "target zones" put forward recently by economist John Williamson of the Institute for International Economics in Washington. But French officials said, "We don't like the phrase. And people in your Treasury don't like the word 'target' -- it sounds like something military."
In his paper -- written last December for a French think tank, but not released until yesterday -- Lebegue stressed that "the aim here is not to create an over-rigid system: Obviously, it would always be possible to modify the set." A French official in Washington elaborated: "We don't want a system defined once and for all. What we need is something between the existing 'dirty' floating system and fixed exchange rates."
In a floating, or flexible, rate system, exchange rates shift relative to each other according to demand in the private foreign exchange markets. Under the discarded Bretton Woods system, rate relationships were fixed, or pegged to gold, originally priced at $35 an ounce.
French officials described the new initiative as "more pragmatic, less simplistic and less ambitious" than reform suggestions made two years ago by French President Francois Mitterrand, which involved a new Bretton Woods-style conference to consider a return to fixed exchange rates.
Publication of the Lebegue paper follows closely on President Reagan's announcement in last week's State of the Union message that Treasury Secretary James A. Baker III would study the feasibility of international monetary coordination beyond the recent rejuvenation of the consultation process by the Group of Five industrial nations.
French officials welcomed Reagan's proposal, and its commitment to the G-5, as signals of a new American willingness to consider the kind of reform of the international monetary system that had been rejected by the United States government as recently as a year ago. "After many years as a lone voice on this subject, France notes with pleasure that its views and proposals are now coming to be better understood and more widely shared," Lebegue said.
At the same time, French officials go out of their way to insist that they have no dogmatic views, only "some ideas" that they are willing to see introduced gradually. "We know there is no going back to fixed rates," an official said. "But we know the mood has changed all around the world, and almost everybody now agrees that something has to be done to change the floating-rate system." They acknowledge, however, that there will be strong resistance in West Germany and, to some extent, in Japan.
The French profess a willingness to be open to others' ideas, and to broaden the process of discussion beyond a small "in" group of countries. "Remember," said one official, "you can't have a monetary system without the south [Third World]. You can't have a north system imposed on the rest of the world."
Lebegue said that "the prime aim" of the French proposal is to restore an approved set of exchange rates to "its rightful eminence in economic policy decision-making." He said the problem with floating rates is that they encourage indifference to exchange rates and trends.
There no longer is an indifference to exchange-rate volatility, he said, noting recent actions by Britain and Japan to counter wild swings in their currencies, and especially the decisions taken by the Group of Five in New York on Sept. 22 to push the dollar down in an effort to "return to a less lopsided balance of payments."
The logical extension of the Group of Five decisions might be the "zones of reference" for major currencies, "accompanied by a range of uncertainty around each value," Lebegue said. Initially, the reference zones would not be published, but used as a spur for private discussions among the authorities when actual rates moved out of the zones.
"In effect, the IMF would construct a 'grid' of exchange rates relating to the broad relationships between countries," a French official said. Over time, the reference zones, or grid, would be made public, along with a range of proposed "restrictive mechanisms".
Here Lebegue was deliberately vague, noting that domestic authorities would be pressed to relinquish "at least some of the autonomy that national monetary authorities enjoy -- or think they enjoy."