Foreign Relations of the United States, 1977–1980, Volume XXVII, Western Europe

113. Memorandum of Conversation¹

Washington, November 20, 1978, 9:03–9:16 a.m.

SUBJECT

• Summary of the President’s Phone Conversation with Helmut Schmidt

PARTICIPANTS

• President Jimmy Carter
• Helmut Schmidt, Chancellor of the Federal Republic of Germany

The Chancellor initiated the call. The President told the Chancellor he understood that the Chancellor had had surgery for his eye injury and he asked him how it went. The Chancellor replied that it had gone extremely well. The President said the Chancellor looked very interesting in an eye-patch.

The President noted that we still have a difficult situation concerning the Israeli-Egyptian negotiations and indicated that he would be interested in knowing how King Hussein’s trip to Bonn went. The Chancellor replied that the visit had gone well and that he had found the information which we had provided helpful. He said that he shared with Hussein his evaluation of the Camp David agreements; he added that he had referred publicly to that evaluation and that he had also publicly condemned Israel’s two settlement activities on the West Bank and Gaza. The Chancellor reported that Hussein said repeatedly that the Camp David agreements were unacceptable but that at the same time Hussein intended to keep his lines open. The Chancellor said he had the impression that Sadat was more or less isolated among the Arab countries. The Saudis, he added, were helpful behind the scenes but not publicly.

The President told the Chancellor that the longer the negotiations are dragged out, the more difficult it would be for Egypt and Israel to reach an agreement that would be acceptable not only to their own people but to their neighbors as well.

The Chancellor told the President he wished to congratulate him on the results of the elections.² It seemed to him that the President’s party did better than average. The President thanked the Chancellor and replied that he was pleased with the outcome. In this century, he noted, some 35 or 40 seats were normally lost in the House of Representatives with an incumbent President but this time we lost only 10 or 12. We also have a lot of vacancies, the President added.

The Chancellor asked the President how his anti-inflation program was going.³ The President emphasized that it was a top domestic priority, and will remain so for the next year or two. The President noted that he was chairing a Cabinet meeting on that same subject this very morning.⁴ He is preparing the FY 1980 budget, which will be very strict and will cut the deficit by 50% from what it was when he ran for President. He told the Chancellor that he was determined to succeed in this area. The President recognized the importance internationally of anti-inflation control and stressed that it was important domestically as well, and of course politically. The people, he said, have shown in the elections that they want anti-inflation control along with ways to eliminate inflation from government. The President thought this could be achieved in ways that were not incompatible with meeting the needs of our people.

The Chancellor said he and his people were watching our progress very closely. It was important, he said, not only for us but also for them.

The President went on to say that it was very important to keep down protectionist sentiment. He said he appreciated the Chancellor’s help on MTN. He added that he would later be calling Giscard and would encourage him to add French influence toward an agreement.⁵ The President expressed concern that if there were no successful agreement to present to Congress, he feared a massive effort to raise tariff barriers. He had no doubt, he added, that success was possible, and it was important to keep in contact with one another on the subject. The President said he would appreciate any late assessment of Giscard’s attitude on this subject which the Chancellor could share to help the President with his call.

The Chancellor replied that the last time he had talked with Giscard the latter was rather angry because of Congress’ attitude. The Chancellor urged the President to consider the proposal the Chancellor had made on how to approach Giscard. The President assured the Chancellor that he would keep that proposal in mind. He had every expectation, he said, that Congress will act quickly on the issue in the next session; he had commitments from both the Democratic and Republican leaderships.

The Chancellor said he would like to come back to his proposal. He suggested that the President and Giscard have a private meeting on a French island in the Caribbean, during which the subject could come up at Giscard’s initiative. The President asked if the Chancellor was still talking about a meeting in the first week of January. The Chancellor said he was. The President said he thought the Chancellor’s idea a good one and he would let Giscard take the initiative on raising the subject.

The Chancellor told the President he would welcome receiving in the next few days some information on the extent of our efforts to stabilize the external value of the dollar. The President replied that he had gotten a report from Mike Blumenthal just before the latter’s trip to the Middle East which showed how much intervention there had been and how much was intended by the nations involved.⁶ The President expressed his appreciation for the Chancellor’s help in this matter.⁷

The Chancellor reported on the status of the conference committee of the two houses, which indicated that the FRG would be in a position to fulfill its Bonn Summit commitment by passing the 1% of GNP tax-cut economy stimulus measure. To the President’s question concerning the magnitude of the tax-cut, the Chancellor replied that it amounted to 13 billion DM. The President expressed his favorable view of the FRG action and noted that the 1% of GNP was in line with what we had accomplished last year with our own $21 billion cut.

The Chancellor told the President he wished to express his appreciation for the work which had been done by the Group of Four in connection with the transportation agreement with the GDR.⁸ The Chancellor felt the agreement was a good one. The President noted that he had met with the Joint Chiefs of Staff on Friday⁹ and that we were all pleased with the agreement. He told the Chancellor he noticed that the autobahn went to Hamburg and wondered if that were a coincidence. The Chancellor chucklingly observed that it was a planned coicidence. The Chancellor said he also wished to express his gratitude for the reception accorded 250 people from Berlin who visited Washington. The President said that he had been pleased to see the group at Dulles and that his daughter-in-law Annette had told him that her own group had been overwhelmed by the generosity and friendship they had received in Berlin.¹⁰ The Chancellor observed that the President had a very strong constituency in Berlin; the President laughed and replied that he was very proud of that.

The President told the Chancellor that he wished to emphasize, before they concluded their conversation, that he is continuing constant pressure on the importance of the SALT issue. He noted that he hoped to have some public announcement before long. The President stated that when Brezhnev is ready to conclude an agreement—it was the President’s view, he said, that we’re very close to an agreement—the President presumes that a personal meeting would take place in the United States if Brezhnev’s health permits. In response to the Chancellor’s question concerning whether the President expected the agreement to come before Christmas, the President said he could not say for sure but there was no reason why it couldn’t. He promised to keep the Chancellor informed not only on the timing but also on the details. The Chancellor said that he shared the President’s hope for a full conclusion to SALT II and wanted the President to know that the FRG was prepared to be as helpful as possible on enlarging public understanding of the subject.

The President concluded the conversation by summarizing the principal items as follows:

— there was slow but important progress on the Middle East;

— an MTN agreement was essential, and the President will appreciate the efforts of the FRG and also the French;

— the stabilization program for the dollar was holding, and in fact the dollar seemed to be going up, even this week;

— we are pursuing SALT II without delay and with the heaviest pressure, and we are hoping for an early agreement; we will keep the Chancellor informed;

— we are very happy to see the German move on the tax-cut stimulus; the 1% of GNP corresponds to our own tax-cut measure;

— the Friendship Force visits are equally important to our country as to the Chancellor’s.

The Chancellor said he was looking forward to their private meeting. The President told him that this was at the top of our priorities and that he hoped he could get together with the Chancellor at the end of this year or early in the New Year.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 37, Memcons: President: 11/78. Secret. Carter spoke to Schmidt from the Oval Office.
2. Reference is to Congressional elections held on November 7 in which Democrats, although losing seats, maintained their majorities in both the House and the Senate.
3. See Foreign Relations, 1977–1980, Volume III, Foreign Economic Policy, Document 175, footnote 2.
4. On November 20, Carter participated in a Cabinet meeting in the Cabinet Room from 9 to 10:55 a.m. (except for the time he spent talking with Schmidt). (Carter Library, President’s Daily Diary)
5. Reference is to Carter’s November 21 call to Giscard to solicit his support for MTN. See Foreign Relations, 1977–1980, Volume III, Foreign Economic Policy, Document 180.
6. Telegram 22514 from Bonn, December 11, reported that “Blumenthal had wide-ranging discussion with Chancellor Schmidt, who was unusually friendly and forthcoming at breakfast December 8 including review of our programs to support dollar and counter inflation, and prospects for world economic cooperation in 1980s and beyond. Schmidt was pessimistic about utility of present economic institutions in conducting such cooperation and felt U.S. would have to take lead, although it would have to do so quietly and unobtrusively. Blumenthal urged necessity of FRG sharing leadership role. Schmidt criticized administration’s nuclear policy, which initially had appeared aimed at slowing down nuclear energy programs in Europe. He said he was determined to proceed with nuclear energy projects, including breeder reactors, for FRG.” (National Archives, RG 59, Central Foreign Policy File, P850104–2481)
7. Telegram 22698 from Bonn, December 13, reported that in his December 12 meeting with Miller, Schmidt discussed the U.S. anti-inflation and dollar support program: “As with Blumenthal, Schmidt stressed the need for long-term application of program. He also pointed to limited FRG resources in conducting intervention to support dollar and emphasized smallness of German capital market. On intervention, it was clear that Schmidt thought that rate of intervention was larger than actually has occurred. Schmidt expressed deep concern about growing protectionist pressures in all industrial countries; he hoped MTN negotiations would be completed, but doubted that they were sufficiently far-reaching in scope. He thought it would be useful to have some discussion of protectionist problem at Guadeloupe.” (National Archives, RG 59, Central Foreign Policy File, P850104–2499)
8. Telegram 20889 from Bonn, November 11, reported that on November 10 Schmidt and relevant FRG Ministers had approved transportation agreements with the GDR that called for the construction of a highway between Berlin and Hamburg. (National Archives, RG 59, Central Foreign Policy File, D780466–0741) British, French, and U.S. representatives had previously reviewed the proposed agreement and given their approval. (National Archives, RG 59, Central Foreign Policy File, D780460–0913)
9. November 17.
10. On November 7, Carter greeted members of the Friendship Force from Berlin on their arrival at Dulles Airport; the week before, Annette Carter had visited Berlin with a group from Virginia. (“Remarks on Greeting the Berlin Citizens on Their Arrival in the United States,” Public Papers: Carter, 1978, pp. 1966–1967; Dennis Radcliffe, “A Friendly Goodbye to the Friendship Force,” Washington Post, November 2, 1978, p. B9)