Deteriorating East German Economy Worries East Berlin, Bonn : Europe: Both governments deny that collapse is imminent. But Kohl is expected to discuss immediate aid.

The deteriorating condition of the East German economy, crippled by a daily drain of 1,800 people leaving for the West, has heightened concern among officials, but both German governments denied Friday that collapse is imminent.

A top official in Chancellor Helmut Kohl’s government, speaking privately, said Friday that the decline fueled by the exodus of workers, widespread strikes and high absenteeism at many industrial sites has accelerated to the point that “insolvency could be within a few days.”

Kohl will discuss the need for immediate aid in the “billions of marks” for East German neighbors during his weekend visit to Moscow, said the senior official.

But Bonn government spokesman Hans Klein issued a statement later in the day saying Bonn is not officially predicting an East German collapse.

“The federal government is not of the opinion that East Germany in the next days will be insolvent,” Klein said, but noted that some individual leaders “fear such extreme possibilities.”

A spokesman for East Germany’s Communist government of Prime Minister Hans Modrow denied that the nation of 16 million people is in such dire circumstances.

“As long as the Modrow government exists, East Germany will remain solvent,” spokesman Wolfgang Meyer told reporters in East Berlin.

The senior Kohl official also said East Germany’s first free elections, set for March 18, are threatened by the economic disaster.

“Certain state offices don’t exist any more. There are those in East Germany who doubt that the March election date can even be reached,” the official said. “The situation cannot be assessed dramatically enough.”

An accelerated decline would probably send more people fleeing to West Germany, which is finding it hard to absorb hundreds of thousands of East Germans, many of them craftsmen, who already have fled seeking a better life.

Kohl on Wednesday formed a Cabinet committee charged with working out unification of the two German states, including immediate efforts to make the West German mark the common currency in an effort to stabilize East Germany’s economy. The East German currency is virtually worthless outside the country.

Since the October ouster of hard-line Communist leader Erich Honecker and the November opening of the Berlin Wall, reunification has become a major issue of debate. West Germany, with 61 million residents, has tried to dismiss fears that a single Germany would endanger the rest of Europe.

In an address in the East German city of Potsdam, West German Foreign Minister Hans-Dietrich Genscher proposed that the two German states jointly agree to issue border guarantees to their neighbors and renounce possession of atomic weapons as a prelude to unity.

The Communist officials still running the East German government have reacted coolly to Kohl’s currency union offer, as it hinges on wholesale adoption of market economics.

But East German Economics Minister Christa Luft said Modrow would discuss the proposal when he visits Bonn next week.

Bundesbank President Karl Otto Poehl met with reporters earlier Friday and emphasized the positive aspects of monetary union, although he had said after an East Berlin visit three days earlier that it was far too early to introduce hard currency to East Germany.

Economic union with East Germany will mean major sacrifices for both populations, Poehl acknowledged. But he pointed to West Germans’ prosperity and glowing economic forecasts in arguing that Bonn could afford such a bailout.

Poehl made clear that he has strong doubts about the timing and pace of the monetary union proposed by Kohl, and said he was “surprised” that the chancellor announced the plan without talking to the central bank first.

Economists are predicting higher interest rates and taxes for West Germans, but Poehl said there is no cause for alarm.