GERMANY LBO of the FRG? : Greenmail Goes Transnational : If Michael Milken popped into this dream, they’d need a new wall to keep the West Germans out.

Here was my dream after pepperoni pizza and reading the newspaper last night:

The negotiations between the two Germanys take an unexpected twist when Michael Milken, the indicted junk-bond maven, flees to the German Democratic Republic and offers his expertise in exchange for safe haven. That next week, the East Germans stun the world by announcing a leveraged buyout offer for the Federal Republic of Germany.

Since the East German currency is suspect, the GDR offers each West German man, woman and child 250,000 in West German marks in the form of bonds to be issued by the new government and perhaps some tax anticipation notes. There is early talk of selling off Munich and some NATO bases to engender cash flows, but that turns out to be unnecessary--generations of non-deficit governance have left the West Germans so cash-rich that their credit rating would be good even with the additional debt load.

Like so many American companies, the West Germans find that their fiscal virtues have made them vulnerable to the financial predations of outsiders. The East Germans propose a referendum in the West on its plan with the slogan “Each family a millionaire.” The Kohl government, in panic, hires New York counsel to defend against the takeover.

Now the corporate defense campaign begins in earnest. The first move suggested by counsel--the search for a “white knight” or friendly buyer for West Germany--fails dismally. The United States is a popular favorite, but that country is so overburdened with its own debt that self-respecting German citizens would regard American-issued securities as the junkiest of junk bonds.

The French, by contrast, have an excellent credit rating, but German public opinion runs against a French takeover at any price--old wounds heal slowly. RJR Nabisco is the first private concern solicited, but it has cash-flow problems. Coca-Cola, the next, says that it focuses its acquisitions on entertainment and leisure industries, never the strong suit of the German nation.

Then came the inspiration that would change world history--transnational greenmail. The Federal Republic would give to the smaller Democratic Republic bonds equal to 300,000 deutsche marks per East German citizen at 8% interest, payable over 15 years, all this in exchange for a “stand-still” provision and the promise of no further raids of the West until the year 2020.

The bribing of 17 million people in the East is much cheaper than paying for the buyout of 60 million in the West. The deal is done. And that is how East Germany achieves the highest per-capita national income in Europe.

The outbreak of prosperity in the East is immediate but so are the problems. Illicit drug use, air pollution, high-serum cholesterol, and, of course, a tremendous increase in poor-relation visitors from the West closely follow the West German buyoff. Reunification talks come almost to a halt as the rich Easterners grow recalcitrant.

One letter to the editor in the East even suggests a new edition of the Berlin Wall, this time facing West to keep out the relatively lean and hungry West Germans.

Then I woke up. No more pizza for me. And thank God that our European neighbors are financially unsophisticated.