57. Memorandum From the Under Secretary of the Treasury for Monetary Affairs (Solomon) to Secretary of the Treasury Blumenthal 1
- German Desire to Conform Views on National Economic Programs
German Finance Minister Apel has sent a message to you, Healey, Boulin, and Boh outlining the new German stimulus package,2 and ex[Page 203]pressing a desire to meet during the IMF Annual Meeting for “an intensive exchange of opinions and information” (message attached),3 in order to achieve agreement on a statement of goals and a coordination of national economic policies. Apel’s message is also addressed to Witteveen, which suggests he will approach Witteveen directly over the weekend to discuss this.
There is considerable potential for disagreement on this issue. The German Government, which is a coalition that has a very narrow margin in the lower house and is a minority in the upper house, will take the position it has done all it can politically in the way of stimulus at this time. The Japanese will point to their recent actions as fully adequate.
The British, on the other hand, are poised for a major assault on the failure of the major surplus countries to do more to reflate their economies, and reduce their surpluses, so as to provide for a greater expansion of world trade. This may be a major topic at the Five meetings, and also has important implications for Summit follow-up and the upcoming OECD targeting exercise.
Apel’s message is clearly intended to encourage high-level agreement to stop further public criticism of national economic policies as being counterproductive to the point of being politically harmful from a domestic point of view. There is merit in Apel’s view. We can’t convince our people that cooperation is working if public slanging matches a la Callaghan continue.4
Suggested U.S. Position
—Favor reaching understanding among ourselves (Five) on public posture that policies in effect and recently taken are broadly appropriate—even though some of us may privately be urging that more be done if possible.
—Ask how we can help each other get the public support needed to implement stronger measures.
—Acknowledge that some of our anticipations at time of London Summit have not been fulfilled.
—Recognize that economic policy initiatives are not uniformly capable of fulfillment at same pace in differing economies.[Page 204]
—Explore new ideas as to initiatives that might be suitable to the changed circumstances we face.
- Source: Carter Library, Anthony Solomon Collection, 1977–1980, Chronological File, Box 2, 9/21/77–9/30/77. Confidential. Drafted by Mackour and reviewed by Widman and Hessler.↩
- On September 14, the West German Government approved a multi-billion dollar economic stimulus package. (Paul Lewis, “West Germany Is Planning Modest Boost for Economy,” The New York Times, September 15, 1977, p. 95)↩
- Attached but not printed is a September 15 letter from Apel to Boulin, Healey, Blumenthal, Bo, and Witteveen.↩
- On September 2, Callaghan suggested that the London G–7 Summit had “not succeeded”; later that day, he said that some G–7 countries, “such as the Federal Republic of Germany and the United States, have not been able to get the degree of expansion in their economies that they put their hands to.” (R.W. Apple, Jr., “Summit in London is Termed a Failure,” The New York Times, September 3, 1977, p. 3)↩