Bonn Asks E. German Talks Now on Economy, Currency

The West German government declared Wednesday that it wants to negotiate “immediately” with East Germany on a monetary union and economic reforms.

The Bonn Cabinet managed to enlist the support of West German central bank President Karl Otto Poehl, an independent official who has been skeptical that merging the currencies of East and West Germany would solve the former’s critical problems.

And the Cabinet, under prodding from Chancellor Helmut Kohl, agreed to work out details of a currency union that would be presented to East German Prime Minister Hans Modrow when he arrives here on an official visit next week.

The government also decided to set up working groups to harmonize differences in the legal, political and administrative structures of East and West Germany, as a prelude to unification.

East German government spokesman Wolfgang Meyer said the East Berlin regime will consider the Bonn proposals at its regular Cabinet meeting today.

After the Cabinet decision, Finance Minister Theo Waigel told Parliament that the decisions to proceed toward a single currency are necessary to dampen the “escalation of the crisis” in East Germany.

“We must remain master of the political process,” said Waigel, who is head of the conservative, Bavarian branch of the ruling Christian Democrats.

“The deutschemark has become the currency of choice for the people,” he added.

The Bonn government now envisages a virtual takeover of the East German economic and monetary system to keep it from collapsing.

In East Berlin on Wednesday, Deputy Prime Minister Lothar de Maiziere welcomed the West German decision as perhaps the only solution to keeping East Germans from leaving for the West, currently at the rate of about 2,000 a day.

“The proposal is suited to give signals for people to stay here,” said De Maiziere, who is head of the East German Christian Democratic Party.

Bonn economists and financial experts hope that substituting the West’s hard mark for the East’s weak mark will convince East Germans that they are being paid in a solid currency and encourage them to remain where they are. East German workers paid in West marks would see their purchasing power immediately jump by 5 to 10 times.

Further, some experts say, if East Germany had a freely convertible currency, Western investors would be more easily persuaded to put their money into major efforts to renew industry and redevelop the economy there.

However, a West Berlin economic research institute reported Wednesday that monetary reform might not stem the flow of East Germans heading west for better jobs and lives.

“The real differences in standards of living, which are at the core of the extremely difficult economic situation in East Germany, would remain,” said the report of the DIW Institute.

And Helmut Geiger, head of West Germany’s Savings Bank Assn., said Wednesday that rescuing the East German economy will need staggering financial assistance--”substantial double-digit sums in billions (of marks).”

West Germans are beginning to realize, to their dismay, that their own standard of living might drop if ambitious programs to salvage the East German economy are enacted.

But Kohl and Waigel say that the alternative is the westward flow of millions more East Germans. East Germans are guaranteed automatic citizenship and benefits under the West German constitution, and a flood of them would create a housing and job crisis in the Federal Republic.

A senior Western diplomat said Wednesday that the standard of living in a united Germany would probably at first decline while East German was being modernized but that later, a new “economic miracle” could well take place.

The mass circulation newspaper Bild quoted an internal Bonn Finance Ministry report on Wednesday as suggesting that in the short term, as many as 1.4 million East Germans could face loss of work in the shift to a free market economy.

In Brussels, the European Commission on Wednesday set up a special “German group” to study the implications of a joint East-West German currency. It issued a statement saying that Kohl had called Commission President Jacques Delors to brief him on the Bonn developments, adding: “The chancellor underlined that the negotiations which are to begin will not cause any delay in the timetable of community business,” referring to the community’s single market, scheduled to begin at the end of 1992.