Bonn Acts to Stave Off Disaster in Eastern Germany

The German government, alarmed by the accelerating collapse of the economy of the former East Germany, announced a series of measures today to try to stave off disaster.

Economics Minister Juergen Moellemann acknowledged that Bonn had underestimated the crisis in the east and proposed a 10-point emergency aid program that would cost an extra $6.9 billion a year if adopted.

Chancellor Helmut Kohl agreed with top union leaders and employers to combat massive unemployment in the east by doubling from 130,000 the number of jobs created by public works projects.

At a meeting, he told the business and labor leaders that support for the five new states carved out of the former East Germany is his government’s top priority, government spokesman Dieter Vogel said.

Separately, the Finance Ministry said it will transfer an extra $3.4 billion in cash this month to help eastern cities and states ward off the threat of bankruptcy.

Eastern Germany’s economic crisis has deepened daily over recent weeks, and Moellemann told a news conference that up to 3 million eastern Germans could lose their jobs this year if Bonn does not act.

“We need quick action now,” he said. “I have to admit we underestimated the problems . . . but we must correct our plans; otherwise we will not succeed.”

Moellemann said the collapse of trade within Eastern Europe, which the government had not been able to predict, had worsened the basic problems in eastern Germany’s economy.

Moellemann’s 10-point plan includes concrete measures to stimulate investment, modernize infrastructure and create new jobs. A key issue will be how to raise the billions of marks of extra aid needed in the east. Kohl ruled out tax increases to finance unification ahead of elections last December.