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international reactions to Chancellor Kohl's statement. Soviet and French governments had already reacted cautiously. Chancellor Kohl's speech had shown signs of hasty preparation. It would be important to pay careful attention to the way in which the West German government interpreted the statement in the coming months.

ONFIDENTIA

rime Minister's

isit to Camp

avid

revious

eference

C(89) 35.3

PRIME MINISTER said that in her discussions with the dent of the United States, Mr George Bush, at Camp David on 24/vember, he had shared her assessment of the correct Western approach to developments in

to developments in the Soviet Union and Eastern Europe. They had agreed that the question of border changes should not be raised, and that the existing North Atlantic Treaty Organisation (NATO) and Warsaw Pact structures should be maintained The present negotiations on force reductions should be pursued. President Bush had been concerned about the situation inthe Baltic States. She had pointed out that the extent to which West could influence developments there was limited. It was right to argue for greater independence and liberty for the

States within their own countries. It would be wrong to gurage these States to leave the Soviet Union. President

sh had shown some impatience with restrictions placed the West German government on the training activities ATO forces, particularly low flying exercises. He had als embarrassed by statements by his Defense Secretary, Mr Deney, about a 5 per cent reduction in defence spending. Present Bush had wished that the statement had not been made that way, though the United States government was undoubtedly facing budgetary problems. She had pointed out that it would be damaging if the impression was created that the first target for budget cuts should be defence. Nor should Western goverments put forward the view that the grounds for further reductions was the diminished threat from the Warsaw Pact. It was not possible now to say what would happen in the future. President Bush had made an enigmatic remark about cuts in defence spending which he had characterised as "what peace was about". She had reminded him that defence spending was needed in order to reserve peace.

Continuing, the PRIME MINISTER said that President Bush had questioned her about the dangers of increased protectionism within the European Community (EC). She had assured him that Britain would continue to argue for keeping the open. This was why she was opposing the Social Charter. President Bush had told her that he did not expect any dramatic new developments to arise from the United States/Soviet Summit at Marta 2/3 December. She thought it possible that President Corpashev might press for naval forces to be included in arms cool reductions. She had advised President Bush that, if Pre Gorbachev raised this question, he should argue that the were the highway for Western countries and vital to

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