ANALYSIS : What Reforms in East Germany Mean for Business : Economics: Some analysts are predicting a ‘second economic miracle’ similar to the postwar recovery. But there could be short-term problems.

What does it mean for business that the Berlin Wall is down, figuratively speaking, and East Germans are free to travel to the West?

There was not much doubt among German economic and financial analysts on Friday that the end of the Wall promises a great boon to the economy of West Germany and by extension to all of Europe and the United States.

But there was also an awareness that freedom to travel did not mean reunification of Germany--the Soviet Union has ruled out a change of borders. And there was recognition too that the poverty and backwardness of the 17 million people who live in Communist East Germany pose short-term problems for West Germany--the nation of 61 million that, since World War II, has become one of the world’s most prosperous.

Mostly, the hopes ran high for “a second economic miracle,” as one financial analyst put it, recalling the original miracle of West Germany’s postwar recovery. “It means the 1990s will be politically and economically the most rewarding decade of the 20th Century,” said a German banker.

Few mentioned it specifically but for many West Germans the end of the Wall, like the whole recent process of change in the Soviet Bloc, means the end of fear. For all its prosperity-- and the presence of American troops--West Germany has been the most insecure country in Europe. West German businessmen became infamous in the 1970s for secretly sending money out of the country, because they feared an ultimate Soviet invasion. The wealthiest West Germans built their houses near the autobahn--to allow for a fast getaway.

Lately such fears have been fading. And they were nowhere in evidence Friday as traders on the Frankfurt stock exchange eagerly bought up stocks of department store chains and cement companies, reckoning that newly arriving East Germans meant a housing and retailing boom. There were predictions that the West German economy--the world’s fourth largest at $1.8 trillion in gross national product--would grow by about $80 billion more in the next year.

Volkswagen will benefit, said some analysts, because East Germans can now replace their Brebant cars--”They have a small engine, like a motorcycle,” sneered a West German.

Just where East Germans would live and do their spending, however, posed an interesting question. The end of the Wall could mean a slowdown in refugees, said Heiko Thieme, investment strategist for the Deutsche Bank, West Germany’s largest financial institution. “They will be able to commute to jobs in West Germany and go home at night to the East,” he said. Indeed, officials of East and West Germany have begun to negotiate increased bus and subway service between the two zones of Berlin--the divided city of 3 million.

So sunny prospects of East Germans as new consumers was the dominant theme in West German reaction.

But there were minor chords of caution too. One was that the problem of subsidizing and housing East German refugees--many of whom whom are now sleeping in West German schools--would increase inflation in the West German economy. In fact, while German stocks rose on the Frankfurt exchange, the West German deutsche mark declined on world currency markets Friday.

Nobody doubted the East Germans were eager to buy--”some of them come to West Berlin just to buy bananas and M&Ms;,” said one observer. But whether they had the money was another question. So many East German marks are flooding into West Germany that their value has declined by half in recent days--from the equivalent of 6.5 U.S. cents to 3.3 cents.

And as a pool of new labor for the West German industrial machine, the Easterners have surprisingly few skills, said Hauke Andresen, a vice president of DG Securities, an arm of the largest West German savings bank. “I know a man who hired a plumber from the East, but he couldn’t work with copper pipes because they don’t have them in East Germany,” Andresen said.

Still, there was an underlying confidence that a historic process was under way and would not be turned back.

Politics and economics were working in tandem to see that that was so. The fact that money would be needed to help the East Germans meant that the West German Bundesbank--and by implication other Western central banks--would not tighten money supplies, said a banker. “High interest rates could cause a setback here.”

And several West German financial analysts said the fact that President Bush was meeting Soviet leader Mikhail Gorbachev on Dec. 2 meant that progress would continue. “Gorbachev is broke,” said a German banker, “he can’t admit it but he needs Bush’s help.”

But in another sense the thousands of East Germans who have already crossed to the West and the hundreds of thousands who have marched in East Berlin and Leipzig tore the openings in the Wall that were being formally dug by West Berlin municipal employees Friday night. And they also provided the spark that may make the 1990s a “politically and economically rewarding decade.”