West German Chancellor Helmut Schmidt, meeting privately here tonight with visiting U.S. Treasury Secretary Michael Blumenthal, is set to reject once again, increasingly tough American demands that Bonn commit itself to a far stronger economic expansion to help pull the West out of a lingering recession, according to Schmidt aides.
The Bonn policy, aides explained, remains the one publicly outlined here in November during Blumenthal's last visit - namely that no additional economic stimulus would be considered until the results of existing tax reduction and credit policies are measured.
Tonight's meeting, however, has taken on added importance because it was personally suggested by President Carter and because of the approach of the seven-nation economic summit meeting here in July. Carter is expected to combine a state visit to West Germany with the conference.
Blumenthal is not expected to go so far as to threaten that the U.S. would not attend that summit unless the Germans first agree to expand their growth rate. But it seems clear that the administration would like to extract whatever leverage it can with Schmidt on the proposed meeting and to make clear American doubts about the usefulness of such meetings if they result in only meaningless platitudes or erupt into open confrontation.
At the last summit in London in May, the West German government forecast a 1977 growth rate between 4.5 and 5 percent.It achieved half of that - 2.4 percent. This year, they are propecting only 3.5 percent. Even that, which is well below U.S. and Japanese forecasts, is in some doubt.
German officials said here tonight they do not believe the summit is in any jeopardy. They added that summits in fact become all the more important when all the representatives, don't agree.
Nevertheless, the Americans clearly view the German growth rates as far too conservative for Europe's economic powerhouse. West Germany, along with the U.S. and Japan, is being counted upon to help play a major role in pulling the rest of the West out of economic stagnation.
The German and American counter arguments are old and well known. Yet no common denominator has been found to bridge the differences in economic philosophies: the American dedication toward growth and the German's historical postwar resistance to inflationary policies.
As the summit approaches, officials on both sides privately acknowledge the possibility that economic relations between the two capitals could become worse than either country wants if no compromise is found. In addition, the personalities of all the players involved now, especially on the German side, could contribute to heightened rhetoric.
Bonn's new Economic Minister, County Otto Lambsdorf, recently returned here after a visit to Washington, where he says he was disappointed to find not much understanding of Bonn's arguments.
Lambsdorf is a respected economics officials, but also is viewed as abrupt and outspoken. Internationally-respected Finance Minister Hans Apel has just been replaced in the cabinet by Hans Matthoefer, who is also viewed as outspoken by his colleagues. And Schmidt himself is not nicknamed "Schmidt the lip" for nothing.
The rhetoric has also been heightened by the German press, which has backed Schmidt solidly, saying he must remain "consistent and hard," and a conservative opposition which has already said Germany must not further into budgetary deficits.
The influential Frankfurter Allgemeine newspaper yesterday editorialized on the eve of Blumenthal's visit that Bonn "apparently must continue its efforts to rake the American flight of fancy, which leads to more and more ununrealizable demands on the Germany economy."
The paper, echoing widespread German sentiment, said "domestic and international growth must be based on stability and not inflation-prone growth experiments."
The Germans are also attacking the Carter administration view that Germany's cautious expansion plans are not helping neighbors such as France and Italy, and therefore are feeding the danger of Euro-communist takeovers in those countries.
The Frankfurt paper yesterday called it "nonsensical" to try and saddle West German economic policy with such a responsibility. "Whether or not Italy and France turn Communist depends on their domestic policies," the paper said.
After almost three hours with Schmidt and his top advisers tonight, Blumenthal chatted briefly with newsmen. He said the Germans gave " no indication that they are going to raise their growth targets beyond 3.5 percent.
"They have the feeling that is a good growth rate for them and expressed confidence that they will achieve it," he said.
The secretary, who arrived from Paris this evening and will return there later tonight, said, however, that this "was not a meeting to bring pressure" on Bonn but rather "to describe things as we both see them."
If they do achieve the 3.5 percent growth, he added, that "would be at least some progress" over Bonn's 1977 performance and, combined with a somewhat slower U.S. growth this year than last, "the difference will narrow, and it should have some positive impact on U.S. trade and current accounts."
Blumenthal also said he was "pretty sure" there would be a summit, but they just "haven't fixed a final date."
He said both governments were also determined to see stability in currency exchange rates in terms of erasing erratic movements.
Schmidt claims that Bonn is already doing more to stimulate its economy than anyone else, with a tax reduction, investment credit and federal and state spending projects already approved. German Federal Bundesbank President Otmar Emminger estimates those projects costing close to $12 billion.
The West German deficit is now about 4.5 percent of gross national product, a figure which Schmidt repeatedly has pointed out is well above that of the U.S.
Though German exports continue to pile up surpluses despite a rising currency, German tourism, capital expenditures in other countries and large sums of money sent home by foreign laborers here reduce the current amount to a rough balance, they claim.
Nevertheless, the German inflation rate of 3.9 percent is the lowest of any major Western country.