135. Memorandum of Conversation1


  • European Economic Stabilization: Rambouillet II


  • Henry A. Kissinger, Secretary of State
  • Charles W. Robinson, Under Secretary of State for Economic Affairs
  • Alan Greenspan, Chairman, Council of Economic Advisers
  • Rutherford M. Poats, Office of the Under Secretary of State for Economic Affairs (Note-taker)

Kissinger: I like the idea of a second Rambouillet-type meeting, but I’m leery about a quick, emergency meeting. Britain has a new [Page 482] Prime Minister.2 Schmidt is likely to be negative about anything that costs money. His disdain for Italy is total. He has a right-wing problem, as we do here—concern that he’ll be accused of a give-away.

The only way I see to approach Schmidt is to have George Shultz explore the situation and our idea with Schmidt, confidentially. He is the one they all trust. Callaghan has no special affinity for Shultz, but I can take care of that. Shultz would have to see Schmidt, Giscard and Callaghan in that order.

If they respond positively, I’m for it.

We need to talk to Shultz.

Robinson: I did. He’ll do it, but he is concerned about the Bechtel anti-trust problem.3

Kissinger: That shouldn’t be an obstacle.

Greenspan: The economic problem of Britain and Italy was summed up well the other day by Callaghan: Britain has been spending more than it has been producing.

Kissinger: Because of the oil price increase?

Greenspan: Not altogether.

Kissinger: If so, this would be a matter of historical interest.

Greenspan: The Italian case is more pronounced: large budget deficits financed by the printing press; exchange rate declines mirroring rather specifically the domestic budget gap which is rather difficult to close. Italy has run out of private foreign sources of financing. Britain has not quite reached this point. If nothing is done, it would take an act of faith or luck to assume that Italy can avoid a collapse of wide ramifications.

The British have achieved lately semi-stability. Whether they can maintain it, I’m uncertain.

Kissinger: What’s your conclusion?

Greenspan: We should offer some aid with strong constraints, requiring these governments to start to put their domestic economic houses in order.

Kissinger: How?

Greenspan: Slow down their budgetary growth, reduce the pressure on exchange rates and prices.

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Kissinger: Would it cost France anything?

Greenspan: You mean money or political cost?

Kissinger: I must look at the politics of it. When Shultz goes to Schmidt and Giscard, will they turn it down completely?

(To Robinson): Did you discuss this aspect with Shultz?

Robinson: Only very broadly.

Kissinger: Have you talked with Sonnenfeldt?

Robinson: No.

Kissinger: Why don’t you do so …

If Schmidt thinks they can get something for nothing, he’ll be for it.

Greenspan: The French will be very interested in a solution to the Italian problem. France is very sensitive to the deterioration of the lira and pound.

Kissinger: Can we get Shultz down here tomorrow?

Robinson: I’ll try. He was to be in New York tomorrow. Perhaps late in the day. When can you see him?

Kissinger: I can be free after 5:00 p.m.

Robinson: The Financial Support Fund affords the mechanism to do the job. During my hearing at the Senate Foreign Relations Committee today, Senator Javits indicated the Senate would bring out the bill on the Support Fund right away. We should have authority to participate in a few weeks.

Greenspan: Can we set conditions on use of the Support Fund.

Robinson: That is precisely what it requires.

Greenspan: How would we enforce conditions?

Robinson: Release the money in tranches.

Kissinger: When can Shultz come?

Robinson: He has meetings in New York tomorrow. I’ll ask him to come here late tomorrow.

Kissinger: All right.

Greenspan: I plan to go to New York late tomorrow afternoon.

Robinson: Can you delay?

Greenspan: I’ll see what I can do.

(Pause while Secretary takes a phone call.)

Robinson: Alan and I were talking about the problem of George Shultz’s visibility when he goes to Europe.

Kissinger: He can just say he’s on a trip. He goes to Europe frequently.

Try to get him down here late in the day tomorrow, around 5:00 to 6:00 p.m.

  1. Source: Ford Library, National Security Adviser, NSC International Economic Affairs Staff Files, Box 3, Presidential Subject File, Economic Summits—Puerto Rico (1). Secret; Nodis. Drafted by Poats and approved on July 13 by the Secretary of State’s Special Assistant Haley Collums.
  2. James Callaghan replaced Harold Wilson as British Prime Minister on April 5.
  3. In January 1976, the Department of Justice launched an anti-trust investigation into whether the Bechtel Corporation was respecting the decades-old Arab League boycott of Israeli companies and third country companies doing business with Israel. Shultz was Bechtel’s president.