Mr. Schmidt Goes to Washington

By James Kelly

To get acquainted with Reagan and help himself back home

One thing that Ronald Reagan has restored to the White House is a sense of pomp and ceremony. On a balmy spring day last week, hundreds of Executive Office workers turned out to watch as the President greeted West German Chancellor Helmut Schmidt in grand style. There were ruffles and flourishes when Reagan and Nancy strode out of the White House to greet the Chancellor's limousine at the diplomatic entrance. While guns boomed out a 19-gun salute, a Marine band played the German national anthem and then the Star-Spangled Banner. There was a flashy presentation of colors by an honor guard, and a bewigged fife and drum corps, wearing colonial dress, marched by.

It was a warm welcome for a troubled friend. In the past few years, countless U.S. diplomats and politicians have flown to Bonn in search of West German support for everything from shoring up the dollar to bolstering NATO's defenses. This time, it was Schmidt who needed a little propping up. His popularity in the polls is down, the West German economy is sputtering, and the defeat of French President Valery Giscard d'Estaing deprived Schmidt of his closest European ally. In short, the Chancellor could use some signals of support from Reagan, and the White House knew it. As a senior State Department official put it: "We need to meet him halfway."

Reagan did that and more. In their opening remarks on the White House lawn, both host and guest took care to strike as harmonious a note as possible. A common theme of their addresses was wariness toward the Soviet Union. Reminding listeners that 1981 marks the 20th anniversary of the building of the Berlin Wall, Reagan observed: "On one side of the wall, people live in dignity and democracy; on the other side, in domination and defeat." Schmidt somberly noted that his visit was taking place against the background of a "serious international situation." He referred specifically to "the excessive Soviet arms buildup and the challenge of the continuing Soviet intervention in Afghanistan."

In the meetings that followed during the next two days, Schmidt was his usual bristly, outspoken self. One of his primary concerns was what he perceives as the Administration's strident saber-rattling against the Soviet Union. The Chancellor has become increasingly critical of Soviet expansionism in the past year. At the same time he fears that the U.S. is not trying hard enough to open a dialogue with the Soviets and thus defuse East-West tensions. "Schmidt wants to be assured that our policy toward the Soviet Union is more than one of simple hostility," said a senior U.S. diplomat.

East-West relations were discussed at length by the two leaders. They conferred twice in the Oval Office, with each meeting lasting about an hour. Top aides for both men were present, and Schmidt did most of the talking. (He brought an interpreter, but his English is almost flawless.) Reagan once again assured Schmidt that the U.S. intends to live up to the 1979 NATO agreement that calls for stationing 572 medium-range nuclear missiles in Europe on condition that the U.S. and Soviets begin talks about a mutual, balanced reduction of the number of missiles on the Continent.

The President also reiterated a pledge, made by Secretary of State Alexander Haig at a meeting of NATO foreign ministers in Rome last month, that negotiations would start before the end of the year. Though Schmidt prefers that the talks begin in early autumn, he did not expect Reagan to move up the timetable and thus had to be satisfied with the President's assurances.

Schmidt also complained about the impact of U.S. economic policies on Western Europe. He contended that America is fostering unreasonably high interest rates, which in turn inflate the value of the dollar abroad and raise the price of German imports, most notably oil. Over the past two years, Germany's balance of payments deficit ballooned from 9.6 billion deutsche marks in 1979 to 29 billion in 1980. The President told Schmidt that he expected interest rates to drop dramatically in the U.S. once his economic program was in effect.

The talks covered a wide array of subjects, ranging from Poland to the Middle East to the Third World. Still stung by Giscard's defeat, Schmidt predicted that incoming President Franc,ois Mitterrand's economic program would quickly pose problems for France. Yet Schmidt also stressed that the new French leader should be welcomed into the Western alliance, and he offered to stop in Paris on his way home to deliver greetings from Reagan to Mitterrand. The offer was quickly accepted.

Schmidt became quite irritated at one point, when the subject of growing pacifism in Western Europe was brought up. The U.S. was no stranger to similar sentiments in the past, he pointed out forcefully, but Europe had not wavered in its allegiance to the alliance. Schmidt reminded Reagan that the U.S., unlike West Germany, no longer had a draft, and therefore was less susceptible to the youthful protests that have bedeviled Bonn.

True to their style, the Reagans were hosts at a lavish state dinner in honor of Schmidt and his wife Hannelore. Among the 102 guests: Arthur F. Burns, 77, the former chairman of the Federal Reserve Board, who was chosen by Reagan last week to serve as the U.S. Ambassador to West Germany. In his reply to Reagan's toast, Schmidt was almost embarrassingly extravagant in praising his host, referring several times to the "confidence" and "self-assuredness" generated by Reagan's inspirational leadership.

The talks produced no significant policy decisions, but both Washington and Bonn considered the first official meetings between the two leaders a success. Hoping to avoid the frosty relationship that existed between himself and Jimmy Carter, Schmidt wanted to strike a good initial rapport with Reagan--and the President obviously wanted to oblige. By all accounts, the two got along well. Said one Administration official: "There must be no surprises between us. Schmidt wants to go back and tell his people the President promised him there would be no Carteresque zigzags."

It is, of course, much in Reagan's interest to foster a good working relationship with Schmidt. West Germany possesses the largest conventional forces in Western Europe and is the centerpiece of the Continent's defenses. Schmidt's importance to the U.S. as an ally has been enhanced by the victory of Mitterrand--still very much an unknown quantity to the Administration--and the increasing political woes of Britain's Margaret Thatcher. Finally, despite Schmidt's protestations, many in the Administration believe that a growing wave of pacifism is sweeping across Western Europe. They consider Schmidt one of the strongest voices speaking out against the threats of Soviet adventurism.

His welcome in Washington may help a bit, but the Chancellor remains very much the beleaguered leader at home. The West German economy, though still the hardiest in Europe, is showing signs of sluggishness, and the nation is expected to experience a negative growth rate in 1981. Unemployment has climbed from 825,000 to 1.1 million persons over the past year, and inflation persists at 6%--low by most Western standards but high by Bonn's. The Chancellor's approval rating in polls has dropped from 62% last year to 41.5% this year--lower than the rating accorded to Willy Brandt before he quit in 1974.

But Schmidt's greatest worry rests in holding together his own government. He faces growing criticism from leftist members of his Social Democratic Party (S.P.D.) for supporting the NATO decision to place nuclear warheads in West Germany.

At a state party convention in Bavaria last week, Schmidt warned that unless the internal bickering stops, the strongly pro-NATO Free Democrats might bolt the governing coalition and join the opposition Christian Democrats, thus toppling Schmidt's government. Though the convention voted overwhelmingly to endorse Schmidt's stand on the missiles, the issue will continue to divide the party and threaten the Chancellor's ruling coalition for months to come. By James Kelly. Reported by Roland Flamini and Gregory H. Wierzynski/Washington

With reporting by Roland Flamini, Gregory H. Wierzynski

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