261. Message From President Ford to British Prime Minister Callaghan1
Thank you for your thoughtful message of December 16. You can be assured that our negotiators are prepared to be constructive in seeking a solution to the problem of the sterling balances.
We approach these issues in full understanding of the political problems you are facing. On our side, we also have our own political necessities; particularly to be able to demonstrate that we are dealing with the problem in a comprehensive rather than a stop-gap manner. My negotiator, Ed Yeo, will be meeting next Wednesday in Paris with your representatives as well as officials of the German Finance Ministry and Bundesbank. He will negotiate with sympathy, understanding and flexibility. It is my hope that all participants will be prepared to discuss the subject in similar fashion and with the authority to move toward a solution.
Sincerely,
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Summary: Ford replied to Callaghan’s December 16 message on the UK economic situation.
Source: Ford Library, National Security Adviser, Scowcroft Daily Work Files, Box 14. Secret. In a December 16 message to Ford, Callaghan thanked him for the “agreed form of words on our arrangements for dealing with the sterling balances” and “the offer of the swap facility” arranged by Burns and Simon. Callaghan noted that the swap facility and a proposed FRG standby arrangement “will help to reinforce the confidence effect of the package.” (Ibid.) In a December 22 memorandum to Kissinger, Rogers reported “a breakthrough” on sterling: “They agree in principle, first to phase out sterling as a reserve currency, second to conditionality for the supplementary assistance we and the other countries provide, and third to self-funding of the balances. The details—essentially how much conditionality on their side and how many dollars on ours—will be negotiated over the next several weeks.” (National Archives, RG 59, Records of the Office of the Counselor, Helmut C. Sonnenfeldt, 1955–1977, Entry 5339, Box 10, POL 2 United Kingdom)
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