E. German Leader Calls for 1 Nation : Europe: Modrow favors a reunified two-state, federated structure with Berlin as the capital. He asks for a peace treaty that would formally end World War II.

East German Prime Minister Hans Modrow, in a surprise announcement, called Thursday for a reunified but neutral Germany with Berlin as the capital.

Modrow, a Communist, told an East Berlin news conference that the two German states should be reunified gradually in a federated structure and also urged that a peace treaty be concluded, formally ending World War II.

In Bonn, West German Chancellor Helmut Kohl welcomed Modrow’s four-point plan for German unity but rejected the reformist prime minister’s proposal that a reunited Germany be neutral.

“I strictly reject the concept of German neutrality,” Kohl declared in a statement issued in West Berlin, where he met with members of the East German opposition. “A united Germany in the heart of Europe cannot have a special role and thus be isolated.”

Western diplomats here said Modrow’s historic support for reunification could make some form of a reunited Germany possible by the end of this year. But Kohl said he would discuss the unity issue with East Germany only after the scheduled first free elections in the Communist state March 18.

Diplomatic analysts here predicted Thursday that after that election, the new and presumed non-Communist government would, under popular pressure, quickly hold a plebiscite among East Germans on the reunification issue.

Popular feeling in East Germany is running overwhelmingly in favor of reunification, political observers and opinion polls indicate.

Some East German analysts suggested that Modrow’s announcement shows he is buckling under public pressure--but also that he is trying to stem the flow of about 2,000 East Germans who daily continue to move west, threatening economic chaos.

Modrow has come to realize that favoring reunification is the only way his Communist Party, by whatever name, can keep from being totally devastated in the March election, according to senior diplomats here.

“Germany should once again become the united fatherland of all the citizens of the German nation,” Modrow said in his announcement.

But the prime minister said the steps toward unity would have to reflect the views of the four victorious occupying powers, who still maintain various rights in Germany--especially in Berlin.

“The hour has come,” Modrow said, “to draw a line under the Second World War and conclude a German peace treaty.”

In Moscow on Tuesday, both Modrow and Soviet President Mikhail S. Gorbachev agreed in principle that reunification was possible--but Modrow made that goal much more specific Thursday. Modrow said he discussed his plan with Gorbachev.

In his four-step proposal, the 61-year-old leader said that the two countries should first sign treaties to link their economies, currencies and transport networks, then should set up various joint political institutions.

As a third step, sovereignty rights would be turned over to the joint bodies and, finally, unity would occur through what he called “the creation of a unified German state in the form of a German federation through elections in both parts of the confederation; the convening of a single parliament that would decide on a single constitution, and a single government, with its seat in Berlin.”

However, most observers believe that Modrow may not play any role in the government that follows the March election and that the new government may prefer to take a much more rapid route to reunification.

“Modrow’s plan will be ancient history after the election,” one diplomatic source here said.

Kohl put forward a 10-point plan leading to reunification in the Bonn Parliament last November. The plan also spoke of preliminary “confederative” structures but ruled out an actual confederation of the two states, which Modrow said Thursday was the essential intermediate step.

Discussing these structures will be the main point on the agenda when Kohl and Modrow meet in Bonn in two weeks. The two leaders are also expected to talk this weekend at a world economic conference in Davos, Switzerland.