Mr. Saint-Paul. Mr. President, let us speak before of the Versailles summit. The President of my country, Francois Mitterrand, among other European leaders, would like to reach a better harmony between the dollar, the Japanese yen, and the European money. Do you foresee a possible compromise about this question?

The President. Well, I don't know that it's so much a compromise as I believe that what is necessary to have a stable exchange is to have more stable economies for all of us. And I hope that out of our talks we can find ways to approach the problems that face all of us economically in such a way as to be going more in the same direction.

Here, we, in our own country, have undertaken to curb inflation and have had, I think, a remarkable success in that for the last 3 months it has been running at less than 1-percent rate here -- and for the last 6 months, only 2.8 percent.

The exchange -- the idea -- we're opposed, as you know, to government intervention on an ongoing basis in exchange rates in our floating exchange. We would like to see a study made of the history, recent history of government intervention and what its record has been. At the same time, we will support intervention for extreme disruptions and dislocations in the exchange rate.

But above all, again, I repeat, I think that achieving a stable economy for all of our countries is the best insurance that we will have a stable rate of exchange.

Mr. Telmon. Mr. President, I remember that last year in Ottawa, you were promising -- you were predicting that the U.S. interest rates would have decreased in 6 months. Are you going to do the same statement this year in Versailles?

The President. I think I could safely say that because, while at that time we had not yet put our economic program in place, we got the most of what we were asking from our Congress. And the interest rates did come down. They are down about 25 percent, but that's not nearly enough.

When we started in office, this administration started, we inherited interest rates that were the highest they had been in our country in more than a hundred years. We did come down, as I say, about 25 percent, but with the increase in unemployment, they have stayed much too high.

I am hoping that the Congress will be more forthcoming with regard to the new budget than they were last week, because I believe that when we get another budget of the kind we had last year that shows continued reductions in the rate of increase in government spending here, we will see another drop in the interest rates before the end of the year.

Mr. Bell. Mr. President, there hasn't been an economic summit, I think, which didn't end with a ringing declaration against protectionism, and we expect that to happen now, although protectionism seems to be creeping onwards. I wonder if, whether on this issue as on others, it's going to make all that much difference whether you go to Versailles or whether you don't.

The President. Well, I'm going to Versailles, but that will be a very important subject, and I am going to try hard -- and I'm sure that others will, too -- to point out the fallacy of protectionism. What the world really needs today is a greater extension of free trade, removing the obstacles to that free trade. And this is also very important with regard to the developing nations, the lesser developed nations that all of us have met with regard to helping, as we met at Cancun.

One of the things that they need is to know that there is an open market for their product, whether it be agricultural produce or whether it be something manufactured. And I am going to strive hard to preach the sermon that protectionism actually ends up in a restraint of trade, and open trade means more jobs for all our people.

East-West Trade

Mr. Kronzucker. East-West trade, Mr. President, is an important prospect of European economy. It is said that you want to curb this trade; especially, you want to refrain the allies of providing the Soviet Union with extra-cheap credit for their economy. Could you elaborate on that?

The President. Yes, I could.

It's not a case of wanting a permanent quarantine of the Soviet Union or anything of that kind. But we have all discussed and have taken various actions because of our opposition to what the Soviet Union is doing in Poland, Afghanistan, its military buildup to the point that it hangs over all of us as something of a threat.

The Soviet Union is having its economic problems, too. And I just believe that now is a time not to continue subsidizing them with cheap credit so they can continue their military buildup. But is it time to approach them and point out that there is a different way?

But none of the countries of the Western World represent a threat to the Soviet Union, none of us have any desire to be aggressive where they're concerned. But maybe we could through restraining credit and refusing any longer to subsidize their military buildup, that we could persuade them to come closer to becoming a member of the family of nations -- Europe and here and in Asia -- that want peace and want a trade relationship worldwide.

And so, what I will be proposing is not some return to the cold war as such, but a temporary period of restraint while we show them what we have to offer; on the other hand, if they will give up their expansionist policies and their obvious militarism.

Mr. Kronzucker. You couldn't convince the European allies of refraining from building the Trans-Siberian Pipeline. How will you convince the allies of this program?

The President. Well, the reasons given for our not being able to convince them -- at least given by our allies -- was that these were contracts that in many instances had already been put in place before the present administration's leaders were in office. And so they felt bound by contract to go along with this.

I think the credit is a different matter. And again, I say it doesn't make much sense to be forced into programs of costly arms buildup on our side simply to meet a threat that comes from one place and one alone, the Soviet Union, which, in the recent years of detente, during what was supposed to be a detente, has gone forward with the greatest military buildup in the history of man. And maybe we need to get their attention.

Meeting With President Brezhnev

Mr. Saint-Paul. Mr. President, my question could be a followup now. Do you confirm your intention of having a summit with Leonid Brezhnev, and will this summit depend on the Soviet attitude in the world?

The President. Well, answering the last part of the question first, it would only depend on their conduct if they should make some overt move, such as military occupation of Poland or something of that kind. On the other hand, I view a possible meeting with President Brezhnev as a chance to point out the road to a better relationship. And it isn't a road that is simply paved with words; there must be some deeds. And I have quoted before, and will quote again, what the Soviet needs to understand is the meaning of Demosthenes' words 2,000 years ago in the Athenian marketplace, when he 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?'' Again, I refer to the military buildup of the Soviet Union, their policies of expansion.

I look forward to a meeting. He has expressed at one time in a communication with me a willingness for such a meeting. There has been no effort to pin down a time, a place, although I have invited him, and I've had no formal rejection of my expression of hope that he would join all of us at the United Nations following this meeting in Europe, when the United Nations takes up the problem of disarmament -- or reduction of arms, and that I expressed the hope that he and I could -- if he came to New York -- could have a meeting at that time.

If that is not to be and he cannot do that in his own schedule, then, yes, I would like to go forward and have such a meeting in which we could discuss the deeds that all of us might use to reveal our peaceful intent.

Peace Movements

Mr. Telmon. Mr. President, how much have the peace movements in Europe, in Japan, and now also in the United States influenced your decision? And how much -- how do you evaluate the importance of these movements?

The President. Well, I think it shows the desire of a great many people for peace and to be out from under the shadow over the world of nuclear annihilation. Actually, it didn't influence me. As a matter of fact, they're kind of following the leader because way back during the campaign, when I was campaigning against the incumbent President, on a number of occasions I publicly expressed my intention, if I occupied this office, to seek a program of arms reduction as differing from the recent years' efforts at arms limitation, but outright, sizeable arms reduction. And all I can say is that I'm with them.

I may disagree with some of the things they propose, such as if they are proposing again a freeze at the present levels, because we have now on the table in Geneva a treaty that we're discussing with the Soviet Union that would take the nuclear weapons, the intermediate weapons, entirely away from Europe. We have set the date, June 29th, for the beginning of the negotiations with the Soviet Union -- and they've agreed to it -- to discuss the reduction of the strategic nuclear weapons. And, of course, for some time we've all been discussing -- all the nations -- a reduction of conventional weapons. That's taken place in Vienna.

So, the only place where I might disagree is if some of those peace movements are demanding only a freeze at the present level. I don't think there'd be much accomplishment in freezing the Soviet Union into a position of superiority over all the rest of us.

Mr. Telmon. There is no point for me to put a supplementary question, because you have already answered.

U.K.-Argentine Conflict

Mr. Bell. Mr. President, I have a question I'd like to ask you about the Falklands and the extent of your commitment on Britain's side, for the British seem poised to repossess the islands now. Do you want them to go through with that and score their victory, or are you asking us to hold back, for there to be a negotiation and Argentina be left with some of the fruits of aggression?

The President. Well, now, I could be presumptuous in one way if I answered directly some of that. I recognize that both sides have lost men, but England in responding to this -- a threat that all of us must oppose, and that is the idea that armed aggression can succeed in the world today -- you have lost many fine young men, as has the other side, and a number of your vessels and planes.

I don't know exactly -- at what is the right moment for a negotiated settlement to that problem. I would hope it could come before there is further loss of life on either side. And we stand ready to do anything we can, as we have for all these many weeks, to bring about a peaceful solution and resolution of this problem. And we'll continue to offer our help, do whatever we can. Whether that can take place without further military action or not, I don't know.

But we -- I think all of us hope and pray that no more blood needs to be shed or should be shed in arriving at a proper settlement, and, again, as I say, observing the principle that armed aggression, as originally took place there, must not be allowed to succeed.

Mr. Bell. Could we take this forward, Mr. President, to the future of the islands, that after spending so much blood, so many ships sunk, there will be a disposition on the part of the British, perhaps, to hang on in there for the foreseeable future. Will you be with us then as you are now?

The President. Well, that question poses a hypothesis that I don't think I'm at a position to answer. I do know that there had been many attempts at negotiation before this armed invasion of the Falklands took place, in which your country has suggested a solution to the dispute over sovereignty and has evidenced a willingness to find some fair answer, particularly fair to the people who are presently living there on the islands.

Now, I would not like to put myself in the position of saying what that solution should be, except to say that I do believe and I know that Prime Minister Thatcher has expressed many times the desire to do what is best for those people presently living on the Falklands.

Mr. Kronzucker. Sir, you risked your Latin American policy over your commitment for Great Britain in the Falkland crisis -- or the Malvinas crisis, as the Argentines say. Do you also see a threat for the Alliance coming up with this conflict?

The President. No, I don't believe so. I believe that the Alliance -- now we're speaking now of the North Atlantic Alliance, NATO -- I believe that we're closer together than we've been for some years past. I think we're seeing much more eye to eye than we have in the past.

With regard to our desire for better relations with the rest of the nations here in the Americas, North and South and Central, we did observe neutrality as a peace broker, trying to bring about a peaceful settlement before there was the actual engagement that we now have, armed struggle. We finally had to say, in the face of intransigence on the part of the Argentines with regard to meeting any peaceful solution, that we could not deny the principle involved, that we cannot approve of armed aggression being allowed to succeed, certainly with regard to territorial claims. And we hope very much that this can be brought to a proper conclusion, and we will then again proceed with our efforts to improve relations with our neighbors here in the Americas.

I have said for a long period of time that I don't believe our country has ever approached, particularly the neighbors in Latin America, in the way that we should to erase some misunderstandings and all, forget some past history, and to have a mutually beneficial relationship as we have with our allies in other parts of the world.

West Berlin

Mr. Kronzucker. Permit me to come to West Berlin, an island perhaps nearer and dearer to NATO, so to speak.

The President. Yes.

Mr. Kronzucker. How far would America go in its commitment to defend West Berlin if it is necessary, even over, perhaps, a war?

The President. I don't think there's any question about how far we go. We are committed to the preservation of freedom in Western Berlin, and that island of freedom, I think, is a symbol to the whole world of what is at stake and what is at issue between the East and West.

Mr. Kronzucker. Would you also risk a limited nuclear war over West Berlin?

The President. I got in some trouble recently answering a gentleman's question, a member of the press, in a group meeting about -- he asked a hypothetical question, and I should have stopped short of a hypothetical answer when he said did I believe that there could be such a thing as a limited nuclear war. And I don't think that I will make that mistake again of answering.

I just believe that our goal must be peace, and this is what everything we're doing is leading toward, is a deterrent toward war of any kind. And if we don't have war of conventional kind, then we'll never have to worry about how much of a nuclear war you could have.

Mr. Kronzucker. You are aware, Mr. President, that in Berlin you are awaited by a hot reception, so to say? About a thousand different organizations prepare to protest against your visit there. What do you think about that?

The President. Well, I'm curious as to what's in their mind, and do they really understand what I represent? Or are they going by some imagery that has been concocted for them in which they think I'm a threat to peace? And if so, I hope that all of you will convey to them that I'm the first one in a great many years that has persuaded the Soviet Union to sit down in actual arms reduction talks, and that I'm dedicated to that.

U.S.-European Relations

Mr. Kronzucker. On the other hand, you are aware for sure that a lot of Germans -- there's even now a poll -- a high percentage of the Germans are looking forward to your visit, and they think they will enjoy it. Mr. President, the nearer this travel to Europe comes, the more conciliatory it seems is your approach to those points that are critical to the Alliance.

The President. No, I don't think -- it's just that now that we're going there, maybe they're paying more attention to what I've been saying. But as I say, I'm not saying anything any different than I said back when I was campaigning for this office.

I know that there has been some misconstruing of some remarks that I made early in a press conference with regard to the Soviet Union. And it's been portrayed that I accused them of all sorts of things -- actually, in answer to a question I was quoting what they say about themselves and their right to practice any morality or immorality that furthers their cause. I was quoting them, not making an accusation. So I don't retract anything that I said.

But again, as I say, I believe the answer is the reduction of arms and, again, not naively or pretending that the Soviet Union, that we can have a detente while they go on with their programs of expansion and all. No. Seeking to persuade them to, by deed, prove their contention that they want peace also.

Mr. Saint-Paul. I've got the chance to ask my very simple question, Mr. President. Before starting tomorrow, what will you say to young Europeans today, and what image would you like to give to Europe during your trip now?

The President. What image -- --

Mr. Saint-Paul. -- -- would you like to give of yourself during your visit?

The President. Well, as someone who believes very much in that alliance which has kept the peace for almost 40 years now, with all the criticism that has been leveled upon it even by members of it, at times; a believer in that. A belief that our fate is tied to that of Europe. We're not an outsider coming in trying to do something helpful for others. That alliance is important to us as it is to the nations of Europe. Also a belief that we can have better trade relations, freer trade relations, that our economic problems are similar in all our countries and that the answer must be reducing and eliminating inflation, freer trade that will provide jobs for those people in all our countries who at the moment cannot find jobs. And if I can be seen as honestly wanting and trying sincerely for all those things there, that'll be enough.

The Middle East

Mr. Telmon. Mr. President, can you say something about the Middle East? In this moment we know that you are going to have a summit meeting with President Mubarak and Menachem, alias -- --

The President. Yes.

Mr. Telmon. -- -- Prime Minister Begin. At the same time, there is this new -- a couple of new alinements in the Middle East. What is the position of the United States?

The President. Well, we have believed, there again, that the answer to the problem of Israel and the Israeli-Arab conflict must be the same type of thing that happened between Egypt and Israel, that other, more moderate Arab States, to begin with, must acknowledge the right of Israel to exist as a nation and then, bilaterally, make their peace with Israel. And we've been trying -- we can't impose a peace structure on the countries of the Middle East -- but we have been trying to establish ourselves as wanting to be fair and wanting a just and fair solution to the dispute between the Arab States and Israel and that, therefore, we could be depended on as long as we're wanted and our help is sought to try for a fair and just peace.

I recognize that there are some Arab States that are not moderate and that will represent a problem. But I believe that even most of those, if not all, would follow the lead if the more moderate Arab States should accept Israel's right to exist and be willing to do as Egypt did and seek a peace.

Mr. Kronzucker. Mr. President, thank you very much, also on behalf of my colleagues, in spite of the fact that this room, the library, turned to a steambath under the lights. And we wish you a successful trip to Europe.

The President. Well, thank you very much. I'm looking forward to it.

Note: The interview began at 3:20 p.m. in the Library at the White House. Interviewing the President were Gerard Saint-Paul of French Television 1, Sergio Telmon of Italian Television-RAI, Martin Bell of BBC Television, and Hans-Dieter Kronzucker of German Television-ZDF.