Written Responses to Questions Submitted by Agenzia Nazionale Stampa Associata of Italy

June 2, 1987

Venice Economic Summit

Q. The Venice Economic Summit will be held at a very important time: The World economy is still growing, but there is real danger of a recession if the industrialized nations are not able to agree soon on their actions for the near future. Given differences in expectations among the seven countries, is a satisfactory agreement possible?

The President. Economic growth in the summit Seven is well into its fifth consecutive year, and future growth prospects are enhanced by relatively low inflation, moderate interest rates, and a strengthened framework for coordination of economic policies. The summit Seven agree on the basic ingredients of policies that are necessary to sustain this growth: stable, noninflationary macroeconomic policies and market-oriented microeconomic policies that tap the inherent dynamism of the private sectors of our economies. We need to intensify our efforts to promote growth through the more consistent application of such policies. In particular, I expect the Venice summit to give impetus to progress in a number of areas, including reform of agricultural and other structural policies, strengthening the world trading system, and promotion of further adjustment of trade imbalances through stronger domestic-led growth in surplus countries. We will be doing our part by continuing our efforts to further reduce government spending.

Arms Control

Q. The timing of the Venice meeting is also very important, because it takes place at a moment when it seems that the United States and the U.S.S.R. are on the verge of the first ever agreement on the reduction of nuclear arms. How close is an agreement between the United States and the U.S.S.R.? Would an agreement open a new chapter in the relationship between East and West?

The President. We made some real advances towards an INF reductions agreement last year in Reykjavik. Secretary Shultz' April meetings in Moscow further enhanced prospects for progress. Several problem areas remain, however, including verification. We are working in Geneva to see if the Soviets are willing to accept the kind of verification measures that will be needed. Of course, we have no way of knowing how long this will take. An INF missile agreement would be an historic achievement in that it would be the first time an arms control agreement actually reduced nuclear weapons. At the same time, we must be very careful to ensure that arms control enhances our security and is effectively verifiable. That is why we have consulted closely with our allies on INF and are continuing to do so.

Arms control only comprises one aspect of our relations with the Soviet Union, however. We also conduct important exchanges with the Soviets on human rights, bilateral issues, and regional affairs, and are trying to improve our dialog in these areas, as well. We stress with the Soviets that a sustained improvement in U.S.-Soviet relations depends on progress in all four areas -- human rights, arms reductions, regional affairs, and bilateral relations.

Developing Countries

Q. The Marshall plan's 40th anniversary is on June 5. The cooperation it fostered among the countries of the West was one of the most significant events in the post-World War II period. Is it possible that a similar idea, a common effort towards a goal of economic growth, could be proposed to solve the debt and other difficult economic problems of the Third World?

The President. In October 1985 Treasury Secretary Baker proposed to strengthen our existing approach to the management of the Third World's external debt and other economic problems by launching the program for sustained growth. This initiative has the goals of promoting growth-oriented macroeconomic and structural reform in the Third World countries and mobilizing international support for such reforms. We have already seen substantial progress under this approach.

In some respects, the Marshall plan never ended. Many of the summit nations are providing coordinated assistance to Third World countries through the international institutions, such as the World Bank and the IMF. The difference, of course, is that the original beneficiaries of the Marshall plan are world economic powers in their own rights and must assume the responsibilities commensurate with that role, including the continued assistance to developing nations. However, providing significant amounts of assistance in the absence of comprehensive economic reform policies could well prove to be to the long-term detriment of the countries involved. Money alone will not set the stage for sustainable and balanced growth and in fact could weaken the incentive to pursue sound policies designed to remove impediments to growth.

Italy's Role in the Western Alliance

Q. In the past few months Italy, with its expanding economy, has fulfilled its responsibilities in many economic multilateral groups and institutions as well as in the international financial markets. Italy has also taken part in the current discussions about disarmament and its potential consequences for Europe. How do you see Italy's role, both economic and political, among the countries of the industrialized world?

The President. Italy is among our closest and most trusted friends. We work together in many fora on issues confronting the alliance, such as East-West arms control, terrorism, and drug control. In recent years, Italy has carried out an increasing international role, participating in the UNIFIL in Lebanon and in the MFO in the Sinai. A growing economic power, Italy also is a member of the Group of Seven industrialized nations which meet annually to discuss important economic and political issues and will host the summit this year in Venice. Certainly, the sustained growth of the Italian economy has contributed to promoting a growth-oriented reduction of extended imbalances. We look forward to continued collaboration with the Italians on a broad range of economic and political issues.

Participation in Economic Summits

Q. Do the ``Seven'' plan to discuss in Venice the possibility of increasing the number of participating countries?

The President. There is nothing magic about the number seven; it has increased since our first meeting. But this will not be on our agenda for Venice.

Meeting With Pope John Paul II

Q. On Saturday, June 6th, you will have an audience with Pope John Paul II at the Vatican. Does this meeting have special significance, given the fact that the United States only recently reestablished diplomatic relations with the Holy See and the fact that the Pope plans to visit the United States this summer?

The President. I have met before with Pope John Paul II, both in Rome and in the United States. The Holy Father is a man of peace whose words for a more just society inspire all. Our meetings have always been very warm and very useful. The present meeting is a continuation of talks we have had on a broad range of world issues.

Note: The questions and answers were released by the Office of the Press Secretary on June 4.