101. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter 1

SUBJECT

  • Germany and the Summit

1. In the wake of German Economics Minister Lambsdorff’s visit last week, we are developing what may be a promising strategy to get a higher rate of German growth. This strategy is similar to the one we adopted in dealing with Japan. That strategy had two key elements:

a. Offering the Japanese something they wanted: an across-the-board agreement that would relieve both the tension in US-Japanese relations and upward pressure on the yen.

b. Making clear to the Japanese that they could only get this outcome by making specified concessions—particularly a higher (7%) growth target.

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2. Our German strategy also offers the FRG something it wants: a mid-July Summit in Bonn, with a Presidential visit to Germany thrown in. And it makes clear that they are most likely to get this outcome by adopting policies that will create better growth prospects in Germany. You made this point implicitly in your last letter to Chancellor Schmidt;2 the Vice President and I indicated to Lambsdorff that it would not make sense for any of our countries to go into a mid-July Summit unless the spring review of the Summit Preparatory Group indicated a good growth outlook in key countries. He got the point and did not take offense.3

3. State (Dick Cooper), Treasury (Tony Solomon), and CEA (Charlie Schultze) agree with this strategy. I believe the French will favor it. The British may too. I will be in touch with my opposite members in these countries to that end.

4. This strategy needs to be pursued quietly and with tact. If Schmidt were made to feel that he was being overtly or publicly threatened, he could well over-react. We should avoid public or private lecturing of the Germans on economic policy. It’s unnecessary; it makes them resistant to change; and it worsens US-German relations. You may want to speak in this sense at an early Cabinet meeting.4

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 24, German Federal Republic: 4/77–3/78. Confidential. Sent for information. An attached note from Brzezinski to Owen reads: “The P[resident] & Mike spoke at the last Cabinet meeting in this general vein.” At the bottom of the same note, Brzezinski wrote: “OBE or call me.” (Ibid.)
  2. Apparently a reference to Document 93.
  3. In a February 13 letter to Stoessel, Owen noted that Lambsdorff responded to this approach by saying “that although the German Government was taking the public position that there would be no further German governmental stimulus measures, in fact there would be an internal review of German economic prospects in the spring and a decision then as to whether further stimulus measures were needed. I urged him to ensure that this internal German review was completed in time for its results to be reflected in the Preparatory Group’s report to heads of government, and in the heads of governments’ decision about Summit timing.” (Carter Library, National Security Affairs, Staff Material, Special Projects, Henry Owen, Box 24, Summit: Bonn: 5/77–2/78) In a January 27 memorandum to Carter, Blumenthal suggested that the United States “indicate that the next Economic Summit, in Bonn, should not be held until all governments have shown substantial progress toward the Downing Street commitments.” (Carter Library, Records of the Office of the Staff Secretary, Presidential File, Box 70, 1/30/78)
  4. Telegram 29128 to Bonn, February 3, transmitted a letter to Schmidt in which Carter agreed “that we should plan for another Summit in mid-July. The final decision should await a review of our personal representatives’ preparatory work—including their assessment of economic policy and prospects in the Summit countries, since we want to be sure that another Summit can be followed by useful results.” (National Archives, RG 59, Central Foreign Policy File, D780052–0212)