 I think Europeans in some agreement, which is unusual. Unusual, they're greedy. Mark of the Heriot match will start, and then Marino, then Nick Ashford of the London Times, Tom Keelinger of the Belt. We have time. You mean if I filibuster on the first question, I don't have the time? That's right. That's right. As long as I'm the guy that will take eventually. Do you think so? Yes. Well, Mr. President, Mr. Mitterrand is the first French president with a socialist president in France. He invites his fellow heads of state and government into King's Palace. How do you feel about all that? Well, having been a visitor at Versailles myself once before, some years ago, I'm looking forward to it, to seeing all that beauty again. Well, it seems to me that it wasn't Louis XIV known as the Sun King. Maybe we'll all go there for enlightenment. And how close you are with Mr. Mitterrand and what kind of relationship, how often do you communicate with him and how do you feel? Well, I don't know what the schedule has been for previous presidents, but in this year and a half or so that I've been here, I have met several times, more than once, with all the leaders that I will be meeting with in a very open relationship in the meetings that we've had in Ottawa and in Cancun, here in Washington. And I think it's been a most helpful thing. I think we have a closer relationship, perhaps, than has existed before. And I mean all the leaders of the Northern American Alliance will be summit meeting that will be there in Versailles. But in between the meetings, do you communicate and how with the language barrier and all that? Well, we have to resort to interpreters and I've learned to get along with that. Some of the others, I speak some English. I had a couple of years of schoolboy French many, many years ago because it was compulsory in the school that I attended, but I couldn't rely on it myself now and I shouldn't be taking up all this time. But I told the president about an experience that I had with having to use French the first time that I ever went to France. I went with a couple from England, been in London for the winter and we went across the channel in the spring to go down to the south of France. I didn't know that they had never crossed the channel before and they knew not one word of French and we were going to drive in their car. And I realized that if there was any communication it was going to be up to me and we were coming to a town where we were going to have lunch. And I was thinking and trying to dredge up all the words that I could remember as to how to find the best café. And as words began to come back to me I sort of patted my part. And we did arrive in a little town there was a gendarme on the street we pulled up the siding and by this time I was ready. I said, pardon me, je suis grand fan, who will am I a café? But with six Western European head of states and government you'll all be having a meeting again together and again this may sound unusual perhaps to some. What have you accomplished since then? Not only in a personal level but also in terms of politics. What have you accomplished collectively? For instance that you could not accomplish separately. Well I've always believed that a lot of problems are resolved if you are talking to each other instead of about each other. And I think that there have been tensions in the past that have affected us as allies and friends. We all share a great many mutual problems. We're all having economic problems, unemployment is a problem for us. And I think that the bond, the personal bond that we've established has created a relationship that is very close and that makes us able to discuss openly and freely those things that are of mutual interest to us. Those problems where maybe we can solve them better together than we can by going our own way. Last year you heard some complaints from Europeans on the high rates of interest in the United States and you told them that the United States was suffering from those high rates as well. Certainly your assertion looks a little bit more credible now. And now the Europeans are complaining about unemployment which does great damage to the social and economic fabric of Europe, of Western Europe. What will you tell them now, given the fact again that unemployment is also a problem in this country, it's low recovery, what will you be discussing with them in concrete ways to face this problem? I think that the answer has to be a correction. You can't correct unemployment unless you correct the problems that have caused a virtually worldwide recession and these have to do with trade. These have to do with important export and I think all the things that we can put on the table that may be restricting the free flow of trade, things that could stimulate markets are essential to that. When they had the feeling about the high interest rates, I believe there was an honest misunderstanding that they thought these were somehow a part of our policy, of our economic policy that we were using high interest rates because of our double digit inflation. They weren't and I think they've begun to realize that we have here in the Federal Reserve system an autonomous body that is not subject to pressure of any kind from those of us who hold office but that in addition the interest rates are set somewhat very much by the marketplace itself, the money market here and we believe that in our case the high interest rates were the result of inflation. Well now we have brought inflation down. The Doomcriers were saying a year ago that it would take ten years to get a handle on the inflation problem. Well last month inflation actually disappeared for a month in America and we had deflation and now this last month or the month after that well it came up just a fraction of a percentage point above the level. We're down to where for the last six months inflation has been around the 3% mark and when these, I think that we're going to see even more improvement as we go on through the year on an annualized basis is down to that point. We think this is a big factor and that if we in our Congress now can get the savings that we're asking for in the budget for 1983 we think it will send a signal to the money markets that will bring interest rates down further. We don't believe that we were the cause of Europe's problems we could point to Italy's own interest rates which are twice and three times the interest rates of Germany and Japan and they I don't think it had any effect on those countries but I think that they now understand that this was not a deliberate part of an economic policy this was a problem that we're trying to leg. If I could follow up on that point Mr. President while inflation has come down most of the other economic indicators are still fairly grim I talk about the rate of corporation failures savings that haven't really picked up and unemployment of course is at almost record levels and then one's also got this record budget deficit as well. At Ottawa last year you linked the question of interest rates to a revitalization of the US economy but this revitalization doesn't seem to have started yet. What has gone wrong from this end and when will you be able to assure the European leaders that happy days are here? I don't believe that anything has gone wrong. I think that many people confuse the adoption by Congress of the first phase of our plan with the plan being an operation. You have to realize we asked for we believe very much in the incentive tax package that we passed the reducing of taxes but that's to be spread over a three year period. We had asked for originally three ten percent cuts in the income tax we got one five percent cut and then the other two were ten percent but they have not yet gone into effect. We had also asked those tax cuts to be retroactive to January 1st, 1981 and we in the compromise that goes on in a parliament or a congress we had to take the best that we could get. The five percent cut, not ten, went into effect not until October, last October. We did see an immediate increase in personal savings rates after that had happened because of some features of the tax program but if there is an incentive to those tax cuts as we believe there is we have to wait until people are actually getting those cuts and having that extra money in their pockets. So the next cut, the ten percent cut will go into effect July 1st and then the next one a year from then in July of 1983. So I think that what we have to wait and see is when the program is actually in operation when the effects are felt not just the fact that you could point to a piece of legislation and say well it has been passed into law wait until it takes effect but I think there have been when you stop to think that in the last six months of 1980 during the campaign the increase in our money supply the flooding of paper money was the highest it has ever been in our history at a 13 percent rate and with it came the interest rates the skyrocketed to 21.5 percent and we had two years back to back of double digit inflation and when I took office inflation was 12.4 percent. Now they pulled the string on the money market at about that same time way down to below normal needs and so we had a problem the interest rates they hung on for a while but from the very first in getting our cuts in government spending billions of dollars in reductions the rate of increase in spending was 17 percent in 1980 the annual rate of increase we cut that in half in the first year that we were here now with that the interest rates did come down about 20 percent not enough but they did come down but the inflation the unemployment I mean the recession the unemployment had begun in 1979 we had what was called a recession in 1980 with all these other things going on and it did continue and we've had this market dislocation this inflation well inflation increases government costs quite considerably I mean unemployment increases them quite considerably we feel that the evidence of history that unemployment is the last thing that recovers when you're coming out of a recession but we think the indices are all there that we are in the trough and are bottomed out in that recession and we from the very first said that we could not hope for recovery until the last half of this year and we think in the last half we are going to see that recovery how far is that recovery dependent on you breaking the budget still do you think you would have that still ended by the time we go to that I think it is very important I think the money market is waiting to see if the Congress will since we don't dominate or have the majority in both houses if the Congress will stay with its old-fashioned policies of artificial stimulation of the market and quick fixes to cure things which all they ever did was temporarily reduce the fever and then a couple of years later we had even worse recession each time but if they see that Congress will do what it did last year and stay with us on our plan and make the further reductions that we are asking for in spending stay with our tax program I think that this will be the signal that will bring interest rates down there have been signs scattered signs in the money market that they want them down also the signs being various areas our automobile industry which is hard hit mainly because of the interest rates our people buy the cars as I'm sure they do elsewhere on the installment plan they have to pay interest on the mortgage that will be such as on our house and this has hurt the automobile market well here and there in the country groups of bankers, local bankers have gotten together and put up sums of money specified for automobile loans at a rate of interest about four points below the market and as long as that money lasted they would lend it at that lower interest rate for those who wanted to buy automobiles and the upsurge in automobile buying was instant well now this shows and indicates to us we've seen some building companies construction companies that evidently were able to liquidate their inventory of newly built houses by themselves pulling down the interest rate and again the same thing was happening and we think that this indicates that the money market is ready and wants to do it but they have to be sure that we have inflation down for good that it isn't going to go zooming back up Mr President if I may go beyond the summit in Versailles for my question there's another summit looming that is the NATO summit it's almost like an alpine assault you scale one summit up another and as you talk about NATO nowadays immediately you are into this crisis talk we've had the year behind us where things didn't all go smoothly and the relations between America and the European allies were somewhat strained indeed there are cries right now in congress for a withdrawal of American troops to show the Europeans how upset you are how satisfied with their performance how much do you think it's true about this crisis talk do you view the alliance in a similar way and if so where would you say one can improve the performance of these two? I think we have preferred I think it has improved and I think the recent meaning of ministers in Luxembourg indicates this I think when we came into office this administration there were some strains in the alliance and there was some ill feeling both sides we set out to resolve that and I think we've done it the I believe in the North Atlantic Alliance Treaty and I think the fact that we've had 37 years of peace there in Europe is the greatest proof of its effectiveness we have no intention of withdrawing troops we recognize our responsibility there we recognize that this is not those troops aren't there as some have said in congressional debate that that is something that we're generously doing for someone else our own security is involved we're there because that NATO line is our first line of defense as well and I think the relationship now I don't think there's any crisis at all I think that NATO is on a better footing than it has been for some several years and we're where there could be and has been some problems of the southern flank of NATO we are working on those and I think have come to some better agreements there you think about Greek and Greek and Italian on this subject follow-up question I suppose, can you visit a likely scenario or a constellation of political crisis where America would have to look beyond NATO because it had global commitments and where the importance for you of NATO would be diminished and would have to go back to your NATO allies and say they'll have to pick up more for their own defenses because you have global commitments that require a greater deployment of American forces in spite of the economic problems that will be such Europe as well as the United States I think that their spending level has has been consistent and I have no quarrel with it at all with regard to the part of your question about other areas when incidentally has evidence of the improved situation could I point out that we've had cooperation from our NATO allies with regard to the multiple force in the Sinai and yet when we came here a year ago we hadn't been able to find a single country that wanted to participate in that now they have I think that a subject for discussion with NATO would be that NATO that we all together look at the Persian Gulf the Middle East as an area of concern because of our energy dependence on a particular area that would be a new subject for NATO to discuss but the no I think the the allies are holding up therein very well and as I say I think there is a better sounder relationship than we've had in the past part of the question of how well NATO is doing seems to be tied into the question of east-west relations in general and we have heard that you now favour a summit meeting with your Soviet counterpart you're used to tie this to the condition that such summit meetings should have a tangible outcome or result do you feel the time is coming where such a meeting could have accomplished something concrete I would hope so because I think that the Soviet Union also has some very real problems and maybe it's time for someone to point out to them that their their attitude of hostility their worldwide aggression their denial of human rights whatever it's based on whether it is a concern that they are threatened by the western world or whether it is just determination to pursue the Marxist Lenin theory of world domination maybe someone should point out to them that the road to peace giving up of that aggressive intent might be helpful to them with their own economic problems the Soviet Union if there is any truth to the belief of some that they are motivated by fear of the west that they think the west is going to threaten them I don't think there is anyone in the west who believes that for one minute they could have a guarantee of peace tomorrow if they themselves would follow the teachings or the words of Demosthenes 2000 years ago in the Athenian marketplace they said what sane man would let another man's words rather than his deeds tell him who is at peace and who is at war with him and so far it is the west that has to feel the Soviet Union is at war with us on the basis of their great military buildup I don't think they can point to anything from our side that indicates that some years ago after World War II when our country was the only one with the nuclear weapon and really the only one left undamaged by war in a position to do as we did to go to the aid of our allies and even our former enemies what if the situation had been reversed the Soviet Union had had that bomb and not anyone in the west if we had an aggressive intent wouldn't we have acted then when we could have done it so easily I think it's the greatest guarantee that it isn't the west that threatens the world with war May I ask you a question about the essence of the presidency because on paper you are the most powerful man on earth in practice I keep telling my wife that in practice you have at least some difficult days with every interest rates even avoiding a war on the folklands which in your view is the limits of the presidency what can you really achieve sometimes I ask myself that question there are limits of course great limits on the presidency because the very nature of our government and our constitution has prescribed them to an extent beyond anything I think known in any other country many countries have constitutions but most of them say we the government they say in their constitution we the government grant you the people these things our constitution says we the people we the government to do only these things that we permit in the constitution and that's reflected in this supposed power of the presidency the president can't dismiss a congress and a unlike the parliamentary system you do not automatically have a majority in what constitutes our parliament our congress here in one of the two houses I have a majority of the opposition party in the other house the senate I have a bare majority of our party and that's the first time that's been true for a republican president in 25 years Mr. President in a few days you will be visiting the four major european partners of the united states and the Atlantic Alliance three of these West Germany, Britain and Italy to go ahead and modernize the nuclear weapons of NATO in the decision that was taken December 79 in fact my country has already started work on our cruise missile base how do you assess the contribution of Italy and generally the prospect for productive negotiations in the area of intermedia nuclear forces I must tell you we're very grateful to Italy with regard to the fourth rightness with which Italy stepped forward with regard to the basing of those intermediate missiles we know why the missiles have been requested of us because there are 900 warheads on 300 SS-20 missiles in the Soviet targeted on all of Europe and nothing to counter them and so the request came for Pershing missiles and cruise missiles as a deterrent to prevent them from ever having that or continuing that monopoly and I know that politically in Europe this was a great problem in a number of countries because of the peace movement and all and some people they couldn't some people can't quite see that unilateral disarmament is not the road to peace but Italy was very as I say forthright and coming forth and saying yes we appreciated very much at the same time finally by the very fact that countries of Europe and Italy virtually in the lead were willing to say yes base these missiles deploy them here and we were willing to provide them that's why the Soviets I think agreed to go to Geneva and meet us when I proposed why don't we negotiate a total elimination of such weapons in Europe we won't put in the Pershings and cruise missiles if they'll do away with the SS 20s and I don't think they would have ever come to negotiate I had it not been for the evidence of that proposal the fact that we are all going forward I would hope that before all those missiles are in place on our side we would have negotiated an agreement in which they'll be unnecessary and the Soviets will remove theirs and you sang when about the prospect of this negotiation so can they be achieved say apart and before perhaps a larger start agreement well then well of course we are now we've completed our arrangements and proposals here to go forward with the start which has to do with the intercontinental missiles and again I believe that we're getting the evidence of willingness from the Soviet Union to at least negotiate to talk because we are going forward with the rebuilding of our own military and because our allies have shown their own determination with these intermediate weapons in recent years when we were letting our defenses crumble and we're virtually unilaterally disarming there was no incentive for the Soviet Union to meet us in any kind of arms reduction talk because they were engaged in the most massive buildup the world has ever seen at the same time that we were apparently not willing to even try and keep pace and so I think that it is well I think it was explained in a cartoon in one of our papers recently it was Brezhnev speaking to a Russian general and I liked the arms race better when we were the only ones in it President your speech at Eureka on strategic arms your administration's previous commitment to the concept of linkage the concept whereby you link arms control negotiations east-west trade some other trade with the Soviet Union with political progress by the Soviet Union on things like Poland and Afghanistan this was conspicuous by its absence does this mean that you've abandoned the principle? No, not at all and let me point out that in many times that I have spoken of that I had never particularly linked that to a thing as specific as an arms reduction talk but it was done in the context of the many summit meetings that have taken place with regard to trade with regard to features of detente and so forth and I thought of it in that context but that doesn't rule it out even for arms reduction talks but I could answer it very briefly just with this I think that much of what is concerned in that linkage some of the very subjects you talked about are not things that you headline in the paper the fact that you did not proclaim it or put it up there in the newspaper does not mean that it can't be brought up when you're sitting at a table I think sometimes that politically to publicly discuss things of that kind makes it politically impossible to get them where maybe in what I've called quiet diplomacy you can secure them very briefly I may just to get you to ask to expand a little bit on what you said Luxembourg