Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

114. Memorandum of Conversation¹

Washington, March 9, 1978, 8:26–8:34 a.m.

SUBJECT

• Summary of the President’s Telephone Call to FRG Chancellor Helmut Schmidt

PARTICIPANTS

• President Jimmy Carter
• FRG Chancellor Helmut Schmidt

The President and the Chancellor exchanged greetings.

The President said that he had called to say he had read with care—and deeply appreciated—the Chancellor’s recent speech in Hamburg.² It reflected the President’s sentiments exactly, and would show that reports of disagreement between them are false. He just wanted the Chancellor to know that he cherishes the deep friendship between them and between our peoples.

Chancellor Schmidt replied that it was kind of the President to say this. This morning, he had given his annual “state of the union” speech, and in it there were two or three pages devoted to the deep-seated and deep-rooted relations between our two peoples, and the historical ties. He would like the President to have the full text, and would arrange for the U.S. Ambassador to get one.³

The President said he knew they were thinking alike on this; and he asked how things are going in Germany.

Chancellor Schmidt replied that, in terms of the domestic situation, there are two complexes of different factors. On the one hand, there is, stronger than before, the problem of labor disputes, since they have about 1 million people out of work. But on the other hand, the economic situation is going up. In the last quarter of 1977, they had a real increase in growth of 6%, calculated on the “Anglo-American” yardstick. This was an enormous upswing, though he could not say whether it would endure into the first quarter of 1978. But the domestic outlook is fine. The foreign outlook, however, is not as good, especially with exchange rates and currency. (The President agreed.) U.S. officials from Treasury, and German officials from the Finance Ministry, will be working together this weekend, on a common communique,⁴ which should show the market what we jointly would do. We should do all that we can to defend the dollar.

The President said he looked forward to seeing the communique, and was sure it would be very positive. On energy, we are moving forward here. On natural gas, we should have a result shortly. He is invoking the Taft–Hartley Act,⁵ with regard to the miners. Some coal production is going up—though the miners are certainly an independent lot. He cannot predict the outcome of the strike.

Chancellor Schmidt asked about a natural gas vote in the Senate.

The President replied that a compromise proposal had come out of the Senate conferences, and was going to the conferees of the House. Following that there would be a vote. This is the first breakthrough in months on energy.

Chancellor Schmidt returned to the subject of currency. Their chances would be great of convincing the market, if there were no limit on the instruments and the quantities that would be employed. The smaller the quantities available, the less convincing would be their effect. They need to make the market believe that enormous quantities of resources are available, and then they probably won’t have to use them.

The President said that he understood. Perhaps this could be reflected in the communique this weekend.

Chancellor Schmidt said that this was a consequence of his meeting with Mike Blumenthal, recently.

The President said that that was a productive talk. And he said that we were happy to have had the Finance Minister here. He is looking forward to having the Chancellor here in May for the NATO Summit.⁶ But if in the meantime there are any problems, at any time, the Chancellor should send a dispatch or phone him, and they would get it resolved.

Chancellor Schmidt said he would do so if necessary. He thinks that on currency questions, SALT, and the neutron bomb, we are having very close consultations, for which he is personally gratified. These are very deep consultations.

On the other hand, at the time of the NATO Summit, he would be going for two days beforehand to the UN Special Session on Disarmament to give a speech. There would be some time in between—perhaps Saturday the 27th, or Sunday the 28th, or Monday the 29th—if the President thinks it would be worthwhile to have a private chat, he would be happy to come by, perhaps just to slip into the White House for a talk.

The President said that this was very good, but they should see how things go. He does not have his schedule with him, but that they could work it out, if it seemed advisable.

[Omitted here is discussion unrelated to currency issues.]

1. Source: Carter Library, Plains File, President’s Personal Foreign Affairs File, Box 1, Germany, Federal Republic of, 9/77–1/80. Secret; Sensitive. Carter spoke to Schmidt from the Oval Office. Carter wrote at the top of the page: “ok. J.”
2. On March 8, Brzezinski sent Carter a copy of Schmidt’s remarks on U.S.–FRG relations during a March 3 speech in Hamburg. In his cover memorandum, Brzezinski noted that Schmidt, although recognizing that the United States and West Germany were bound to disagree sometimes, had emphasized the importance and overall strength of the relationship. Brzezinski also provided talking points for Carter’s telephone call to Schmidt. (Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 24, German Federal Republic: 4/77–3/78) In a March 8 memorandum to Carter, Owen suggested that Carter urge Schmidt to agree to a proposed U.S.–FRG statement on measures to support the dollar that would “create a strong public impression of the two countries’ determination to act forcefully.” (Ibid.)
3. In telegram 4556 from Bonn, March 13, the Embassy summarized and commented on Schmidt’s March 9 “Report on the State of the Nation” before the Bundestag. (National Archives, RG 59, Central Foreign Policy File, D780112–0064)
4. An unknown person underlined the phrase “will be working together this weekend.” On March 13, the United States and West Germany announced a joint dollar support program that included increasing the U.S.–FRG swap from $2 billion to $4 billion; U.S. acquisition of $740 million in marks through SDR sales, as well as the suggestion that the United States would seek up to $5 billion in IMF assistance if necessary; and a shared commitment to “continuing forceful action,” as well as “close cooperation,” to combat “disorderly” exchange market conditions. The joint U.S.–FRG statement also noted that exchange market stability hinged “on a climate of confidence and a high degree of stability in the world economy. Although progress has been made in some respects, these conditions have not yet been adequately met: growth rates in some countries are still lower than desirable; unemployment remains too high and inflationary pressures persist in many parts of the world, hampering more growth-oriented policies.” (Clyde H. Farnsworth, “Plan is Announced by U.S. and Germany to Stabilize Dollar,” The New York Times, March 14, 1978, p. 1)
5. The 1947 Taft–Hartley Act, officially the Labor-Management Relations Act, regulates the activities of labor unions.
6. A NATO Summit took place in Washington May 30–31.