Addressed External No. 144, repeated London No, 375, Washington No. 14, Brussels No. 6. (External please pass to Washington.)

After two days of negotiations between members of a small ministerial committee, an agreement was reached on the above subjects on Saturday evening and later ratified by the entire Council, subject to certain minor reservations. The main lines of the agreement, summarized in succeeding paragraphs, will be more easily followed if you will refer to document C-52130, containing original managing board proposals, which is already in Ottawa.

2. The Belgian surplus of 223 millions was settled in part by Belgian agreement to a quota increase of 86 millions (i.e. from 330 to 417). 43 millions of the quota increase are added to the normal Belgian loans to EPU with a consequent reduction of 43 millions from the 223 million Belgian surplus - leaving 180 millions. The remaining 43 million has already been settled to Belgian in gold outside the union. The EPU in turn will waive the rule requiring the repayment of gold received under post-quota settlements, should surpluses change to deficits, up to the total of special resources which EPU expects to receive by June 30.

3. For the remaining 180 millions,9 EPU will pay Belgium 80 millions in gold on July 1, 1952, leaving 100 millions still to be covered. Fifty millions of this will be consolidated and repaid by EPU in five equal annual instalments beginning June 1953. However, Belgium wished this obligation to be "mobilized" by using the OEEC promise to pay as collateral.

4. It is hoped that this 50 million may be mobilized by members for benefit of Belgium as follows: member governments including United States and Canada are asked to support a Belgian application at IMF to draw 50 million dollars before end of June and to ensure that this transaction will not endanger Belgium's remaining drawing rights in the fund.10 The Belgian repayments of this drawing are to coincide as to amounts and dates with the repayments by EPU mentioned in previous paragraph. If monetary fund aspect of this agreement is unworkable, or not agreeable to majority IMF, entire plan must be reviewed once more.

5. The remaining 50 million units of credit due to Belgium will be settled by the assumption of indebtedness by the U.K. (30 millions approximately) and France (20 millions) to Belgium, which debts are to be wiped out in two years as a result of Belgian orders for offshore procurement in U.K. and France, or by cash payments. This aspect of the deal will eliminate the present Belgian surplus with EPU. The United States undertakes to do everything possible to ensure that it, in turn, will spend a similar amount on¹¹ offshore purchases and infrastructure in Belgium during the two-year period.

6. Belgium agrees that future (June 1952-June 1953) post quota surpluses of Belgium will be settled on a 50 percent gold 50 percent credit basis up to total surplus of 250 millions.

7. Debtors will pay gold ratios on scale "B" referred to in managing board report despite groans from Norway and others, with probability of a special reprieve to Denmark alone. All members agree to subscribe if called upon to guarantee fund described in document 130.

8. Stikker said that this deal had to be accepted as a complete package or start negotiations all over again. If accepted, the Council would instruct the managing board to prepare formal agreements and papers for final ratification of official Council before the end of June. The Council accepted the total plan subject to a reservation by Portugal which, as a minor creditor, wanted the same treatment in some respects as Belgium, and subject to, remarks of United States and Canada who were without authority at the moment to agree to support the Belgian application to the monetary fund. The United States said that it would recommend to its government and fund directors that such support be given in view of satisfactory character of the agreement as a whole.

9. You will note that this agreement is much more favourable to Belgium than the terms proposed by the managing board in document 130, and supported by majority up to the moment the ministerial committee began to negotiate. We are reporting in a despatch sent to you in Tuesday's bag on the position of contending parties before final negotiations began yesterday. Completion of agreement proceeded faster than was expected.

10. It is clear that the success of an approach to the IMF mentioned in paragraph 4 stands or falls on the attitude of United States, which expects to give its answer in four or five days. Nevertheless managing board will be interested in Canadian intentions and we would appreciate your reactions at your earliest convenience.

Note: This message retransmitted to Washington as EX-1287.¹²