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

2. Memorandum From Zbigniew Brzezinski to President-Elect Carter¹

Washington, January 19, 1977

SUBJECT

• Preview of Schmidt Economic Announcement

As Chancellor Schmidt promised in your telephone conversation,² the German Government has provided us with the attached paper outlining the investment program which he, Schmidt, will announce on January 20.³ The program calls for approximately 10 billion German marks ($4.1 billion) worth of investment over a period of four years at the federal, state, and local levels; the federal government share will be more than 50%. The spending will concentrate on river cleanup, regional water supplies, inner-city development, energy saving measures, and protection of seashores.

The 10 billion mark figure—only 1% of GNP—appears unlikely to have a major impact on the German economy. Even if the program becomes effective early this year, it is probable that no more than 1–2 billion marks will be spent over the year as a whole, and most of that will probably be in the second half. The smallness of the program appears to indicate that the government will wait until early spring before making a decision on whether significant additional stimulus is required.⁴

German GNP will probably fall below the 5% real growth target in 1977, although the Germans continue to argue that this target can be achieved. The US Treasury projects 4% growth; the OECD projects 3.5%. Treasury’s projections appear to be more accurate. The new measures, although marginal, will probably assure that the Germans attain the Treasury projected figure.

As you promised Schmidt in your telephone conversation, we will provide the Germans with a summary of your stimulative economic package.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 24, German Federal Republic: 1–3/77. Confidential. A copy was sent to Mondale. A stamped notation reads: “The President has seen,” and Carter initialed “C” at the top of the page.
2. No memorandum of conversation of this telephone conversation was found.
3. Attached but not printed is a courtesy translation of a paper entitled “Public Investment Program for Growth and Environmental Foresight—as per January 15, 1977—.”
4. At a January 22 NSC meeting, during a discussion of national economic stimulus programs and Mondale’s forthcoming visit to Europe and Japan, Schultze noted that while the United States was spending 1 percent of its GNP on its economic program, West Germany was spending “only about ¼ of 1% of their GNP” to stimulate its economy. When Vance asked why the West German program was so small, Schultze replied: “Schmidt is just very, very conservative. Also, instead of trying to compromise between labor’s desire for greater production capital and business’ desire for investment capital, they have done neither. They don’t want to antagonize either side.” Carter instructed Mondale to tell the West Germans that “we are quite disappointed with their performance in this area” and that “we think 1% of GNP is an appropriate figure. Say we’re very disappointed.” (Memorandum of conversation, undated; Carter Library, National Security Council, Institutional Files, Box 54, NSC–001, 1–22–77)