Germans Set to Think Big by Thinking Small at G-7 Talks

Germany is expected to push for a greater emphasis on “micro issues” to accelerate economic revival in the former communist nations of Europe when leaders from the world’s seven richest countries meet next month in Munich for their annual summit.

“We have to stop giving the impression that the global economy can be regulated by pushing a couple of buttons,” commented a German government official involved in preparing the July 6-8 Group of Seven summit. The official declined to be identified by name.

As the nation that has so far contributed more than any other to breathe new life into the economies of Eastern Europe and the Soviet Union’s successor states, Germany has been acutely frustrated by the meager results.

Bonn government officials also have been jolted by the difficulties of unwinding a communist economy as they struggle to rebuild eastern Germany. In Germany alone, transfers eastward are expected to top $200 billion for 1991 and the current year.

In light of this experience, Bonn has started to devote more attention to areas that one government source referred to as micro issues--problems such as developing a credible system of contract law, establishing a functioning commercial banking sector and defining more clearly property ownership rules.

Initially overlooked, strengthening these areas is now seen by many here as a vital prerequisite to lure the private investment considered essential to the eastern region’s economic revival. Chancellor Helmut Kohl is expected to push this message strongly in Munich.

“The larger reforms cannot succeed without first dealing with micro issues,” the German government source said.

These issues were first formally addressed last month in an unusual meeting of G-7 and communist successor-state trade ministers in the north German city of Muenster. That two-day session, which included Western businessmen airing directly to the assembled ministers the problems of trying to work in the former communist zone, produced a document urging the newly free eastern nations to implement quickly measures needed to spur investment. As a quid pro quo, the document called on Western countries to expand access to their markets as industries in former communist countries search for new business opportunities in the West.

With the G-7 nations already having agreed to back a $24-billion, one-year aid package to help the government of Russian President Boris N. Yeltsin ease the transition to a free-market democracy, squabbling over aid financing at the Munich summit is likely to be held to a minimum.

Instead, Germany, as the host nation, wants to focus that part of the summit dealing with the former Soviet empire on how to improve the investment climate and sustain the reform process. “Technical assistance, advice, training, the transfer of know-how--these will all come up,” a German government source said. “The summit will make it clear to Yeltsin that this transfer of know-how is necessary.”

Bonn is expected to resist pressure from its G-7 partners for any immediate reduction of Germany’s unusually high base interest rates, contending that they remain necessary to reduce inflation. Kohl hopes to dampen criticism at the summit by winning Cabinet approval early next month for tough fiscal measures to control unity-driven public spending, including a reduction of Germany’s budget deficit from last year’s $26 billion to about $15 billion by 1996, officials said.

G-7 QUIZ

It’s one of the world’s most exclusive clubs, a group that so dominates the global wealth that its members collectively are now known simply as G-7, or Group of Seven. So, quick--just which are the seven richest industrial countries? Time’s up. They are: the United States, Japan, Germany, Britain, France, Italy and Canada.