German Leaders Agree on Unity Steps by July 2 : Reunification: Kohl and De Maiziere meet for the first time. The decision comes after only three hours.

Leaders of the two democratic Germanys met here for the first time Tuesday and pledged to complete an economic, currency and social union by July 2.

The decision, which followed a three-hour meeting at the federal chancellery between West German Chancellor Helmut Kohl and his East German counterpart, Prime Minister Lothar de Maiziere, means that basic agreement on how to combine Europe’s most powerful free market economy--West Germany--with its ailing, obsolete, centrally planned East German counterpart must be completed within the next few weeks.

“The chancellor and the prime minister have agreed to achieve this goal as soon as possible,” declared a formal government statement after Tuesday’s meeting. “They both affirmed their commitment that the economic, currency and social union can come into effect on July 2.”

A few hours later, the two German foreign ministers also met in Bonn and announced plans to shape common positions on foreign policy matters in a joint committee and also exchange personnel between the two foreign ministries.

Although Kohl and De Maiziere have talked frequently by telephone since De Maiziere was sworn in as East Germany’s first democratically elected prime minister earlier this month, such speedy agreement on a fundamental element of the unification process after only three hours of talks was one more indicator that the initial phases of German unity are likely to be accomplished extremely quickly.

“We can’t say exactly, but our goal remains to get an agreement by the beginning of May,” West German deputy government spokesman Dieter Vogel said. “It could slip a bit beyond that, but not too much beyond.”

The first full, detailed negotiations on the state treaty are scheduled to begin today in East Berlin.

Vogel said the talks are expected to deal with such subjects as the required legal changes in East German law to implement a market economy and to give the West German central bank, the Bundesbank, the required authority in East Germany to manage the implementation of West Germany’s deutschemark there.

Tuesday’s meeting came only one day after the Kohl government rejected the Bundesbank’s advice and bowed to political pressure from East Germany, agreeing that East German wages, salaries, small savings accounts and pensions will be converted from overvalued ostmarks to deutschemarks at a highly favorable 1-to-1 exchange rate--roughly five times the present black market value.

The Bundesbank had recommended a more cautious 2-to-1 exchange rate for wages and salaries.

But the West German offer would put a cap on the amount of savings that could be exchanged at the 1-to-1 rate, and the upcoming talks will also deal with East German attempts to improve those terms.

“It’s a treaty proposal, not an ultimatum, so it must be negotiated,” De Maiziere said.

The currency union would come in the form of a state treaty, which would set out the conditions of a common economic and social German space.

The West German proposal was considered a triumph for De Maiziere, whose call for a 1-to-1 exchange rate has been backed by all other East German political parties and large street demonstrations. However, it was viewed as a setback for those arguing that economic and fiscal prudence must prevail over political imperatives.

Kohl’s finance minister, Theodor Waigel, described the West German offer as “the upper limit.”

Bundesbank officials have privately criticized the Kohl government offer and in Tuesday’s editions of the Frankfurter Rundschau, Wilhelm Noelling, a member of the bank’s central council, expressed concern about the stability of the deutschemark and hinted at a possible increase in the interest rate to dampen the inflationary effects of the proposal if it is implemented as presented.

Any such interest rate rise in a currency as pivotal as the deutschemark would be likely to have a global impact.

Deutschemark stocks and bonds failed to recover Tuesday on European financial markets after their fall Monday when the proposed currency union terms were announced. Trading was reported to be light, with little movement, as investors attempted to weigh the impact of the German move.

The rush to complete the treaty by July is ostensibly due to the concerns of both Germanys that failure to introduce the convertible deutschemark into East Germany by the beginning of the summer holiday period could trigger a new flood of refugees to the West.

Officials in the West German chancellery have repeatedly insisted that it is the restive, uncertain mood of the East German population that drives the pace of unity and that only the security of unification can counter this.

However, there are few voices in government circles here lamenting the speed of events.

De Maiziere’s visit was played down here, apparently in an attempt to ease growing Soviet concern about the pace of German unity. The timing of his arrival was kept confidential, and neither leader held a news conference after the talks, although both spoke briefly to reporters before the meeting.

At the day’s only formal news conference, West German Foreign Minister Hans-Dietrich Genscher specifically stressed the need to consider Soviet interests in the unification process.

He also declared that German unity could proceed only after what he termed the “external elements” were agreed.

As one of the four victorious World War II powers, Moscow is a participant of the ‘two plus four talks”--negotiations involving the four major powers victorious in World War II, the United States, the Soviet Union, France and Britain--and the two Germanys, charged with ensuring that German unity does not prejudice the security interests of the major powers or their allies.

The first ministerial-level meeting of these talks is scheduled for May 5 in Bonn.

Genscher’s comments are seen as a response to unofficial Soviet notes received in both Bonn and East Berlin last week expressing concern about the speed with which unification is developing.