Talks Set on Readjusting Europe Currency Values : France Seeks Devaluation of Franc Against Mark and Other Units in Bid to Improve French Exports

Finance ministers of eight West European nations, responding to a French government request, open negotiations today on a readjustment of currency values.

The talks were sparked by France’s desire to devalue the franc in relation to the West German mark and some other West European currencies, officials said.

Currency trading in Europe ground to a virtual halt Friday morning after France announced that European central banks had suspended their usual foreign exchange transactions and it was disclosed that realignment talks would be held today.

Preliminary discussions by lower-level officials got under way late Friday night in Ootmarsum, a rural Dutch village.

A devaluation of the franc, if approved by the other nations, would improve the competitive position in Europe of French exporters. It also might allow the new French government of Jacques Chirac to move faster in pushing down domestic interest rates, thereby boosting business activity.

Limits Set in Currency Movements

A realignment of the eight national currencies in the European Monetary System would have no direct bearing on the currencies’ value against the U.S. dollar, which has been losing ground in Europe for most of the past year.

All 12 European Economic Community member nations except Britain, Greece, Portugal and Spain are participants in the European Monetary System’s exchange-rate mechanism, which sets limits on how much the value of the eight currencies can move up or down in relation to each other. The idea is to avoid wide swings in exchange rates that can disrupt national and Common Market economic planning efforts.

The last European Monetary System realignment was in July, 1985, although it was limited to about an 8% devaluation of the Italian lira in relation to the seven other currencies. The last time the values of all European Monetary System currencies were adjusted was in March, 1983.

Since the 1983 realignment, French manufacturers have lost competitive ground against their West German rivals, partly because Bonn has maintained a lower level of inflation.

In Paris, sources in the financial community said Friday that the new French finance minister, Edouard Balladur, would tell his European Economic System counterparts in Ootmarsum that his government was ready to make a series of important economic moves. They would include a tightening of the 1986 budget and a loosening of rules limiting exchange and capital transactions by French residents.

The sources, speaking on condition that they not be identified, said the economic measures would be presented as a counterweight to the proposed devaluation of the franc.

The European Monetary System realignment talks were taking place in Ootmarsum because the finance ministers already had been scheduled to gather there for the first of their twice-a-year informal conferences. The ministers were to discuss a wide range of other issues once they completed the currency negotiations.

Near the top of their original agenda was a discussion of the financial implications for Europe of the recent collapse of the oil market. They also were to talk about trade relations with Japan and ways of managing the Third World debt crisis.

The working portion of the meeting was to be completed today, followed on Sunday by an informal breakfast and a tour of Ootmarsum-area landmarks.

In foreign exchange trading Friday in the United States, the dollar traded at 7.5325 French francs, up from 7.4475 on Thursday. Earlier in London, the dollar was quoted at 7.5650 French francs, up from 7.3300 francs late Thursday, and at 1,665.00 Italian lire, up from 1,619.50 lire.

Dollar Higher Against Pound

Other rates in the United States, compared to Thursday’s levels, were: 2.3935 West German marks, up from 2.3920; 1.9940 Swiss francs, up from 1.9900, and 1.3854 Canadian dollars, down from 1.3917.

The dollar rose in relation to the British pound. In the United States, a pound cost $1.4510, less expensive than $1.4617 on Thursday. In London, it was quoted at $1.44825, less expensive than Thursday’s $1.4605.

The dollar closed in Tokyo at 180.10 Japanese yen, up from 179.90 yen. Later in London, the U.S. currency was quoted at 180.475 yen, and in New York, at 180.45, up from 179.75 on Thursday.

Gold bullion was bid at $335.75 an ounce in London, up from $333.50 late Thursday. It was quoted at $335.00 in Zurich, up from $333.00.

Republic National Bank in New York quoted a bid for gold at $335.50, unchanged from Thursday. On the New York Commodities Exchange, gold sold for $335.40, up 20 cents from Thursday’s close.