Bonn Hints at Aid to Soviets Once Reunification Is Over

By ART PINE

May 9, 1990 12 AM PT

TIMES STAFF WRITER

WASHINGTON —

West Germany hinted Tuesday that it will be prepared to join a U.S.-European effort to help “stimulate economic reform” in the Soviet Union once German reunification is completed.

The suggestion, made to reporters by West German finance minister Theo Waigel, was the farthest that Bonn has gone in promising eventual economic help for Moscow as part of its effort to sweeten the pie for Soviet approval of reunification.

Waigel did not provide details about such a move, and he specifically rejected any notion that the West would establish still more institutions to supplement the East European Development Bank that is being created this year.

But he did say there would be “room for a joint German-U.S.-European effort” designed to help Moscow--and particularly Soviet leader Mikhail S. Gorbachev--move the Soviet economy toward a market-oriented system.

As a result, Waigel argued at a news conference, “it is in our interest not to lose much time” in completing the reunification of West and East Germany, which is to begin July 2 with the creation of a unified currency and economic structure.

Waigel, a former West German defense minister who is head of the Bavaria-based Christian Social Union, a branch of the powerful Christian Democratic Union, proffered the same suggestion later in a private meeting with President Bush.

There was no immediate reaction from U.S. officials. Bonn floated a similar suggestion, though not quite as forcefully, during the two-plus-four talks--among the two Germanys, the United States, Britain, the Soviet Union and France--in West Germany on Friday. The Bush Administration indicated then that it generally approved of the idea.

Waigel’s comments came as, separately, West Germany and other members of the 152-country International Monetary Fund agreed to increase the organization’s lending resources by 50%, paving the way for more loans to Eastern Europe and developing countries.

After a contentious debate, the IMF’s policy-setting Interim Committee pushed the increase through but tied it to a companion plan that would penalize countries that are behind in repaying previous loans.

Under the new package, the increase in the IMF’s overall lending resources will not take effect until a majority of member governments have formally accepted the proposed rules governing countries that are in arrears--a move that requires a change in the IMF’s charter.

The combination package was a victory for the United States, which had consistently opposed efforts by other countries to approve an even larger boost in lending resources. Some nations had sought an increase as high as 120%. The lending pool available to the IMF totals $120 billion and would be boosted to $180 billion under the new plan.

Washington also had fought vigorously to push the arrears penalties through. Treasury Secretary Nicholas F. Brady argued that as more and more borrowing countries fell into arrears, it would damage the financial integrity of the IMF. Arrearages now total $4 billion.

Eleven countries are behind in their repayments on IMF loans: the Sudan, Zambia, Peru, Costa Rica, Honduras, Guyana, Somalia, Sierra Leone, Cambodia, Vietnam and Panama. Developing countries opposed the crackdown, arguing that it would unfairly hurt the poor.

The U.S. share of the increase in IMF lending resources is $12 billion, but the procedure is a technical one involving transfers of assets and does not require budget outlays.

As part of the compromise, Washington agreed to reassess total lending levels in 1993. But any action could be delayed.

Finance ministers of other major industrialized countries had solidly supported the U.S. position on both measures. French Finance Minister Pierre Beregovoy pronounced the new accord “a balanced agreement.”

However, it wasn’t immediately clear how the Bush Administration might fare in obtaining congressional approval for the U.S. share of the increase in lending resources. Senior officials conceded that lawmakers have generally been hostile to money measures for the IMF.

U.S. officials also successfully led a fight to shelve a proposal by the World Bank to create a special new fund to make loans for environmental projects--a plan that bank President Barber B. Conable Jr. unveiled last week as part of a new push on environmental issues.

Top Administration policy-makers said they supported lending for environmental programs in principle but were unable to back the Conable plan because it called for $300 million in additional spending--a package that they said Congress would be unlikely to approve.

Waigel’s comments Tuesday were made during a discourse on the economic impact of German reunification. He reiterated earlier assessments by Bonn that the process would spur more economic growth without exacerbating inflation.

THE IMF TOP 20:

WHERE THE LOANS ARE

Country: Outstanding loans in billions

Mexico: $6.1

Argentina: 2.9

Brazil: 2.3

India: 1.4

Chile: 1.3

Venezuela: 1.3

Philippines: 1.05

Pakistan: 0.88

Morocco: 0.80