WORLD

First step: the money

East and West Germany agree on economic union

HOLGER JENSEN May 28 1990
WORLD

First step: the money

East and West Germany agree on economic union

HOLGER JENSEN May 28 1990

First step: the money

WORLD

THE GERMANYS

East and West Germany agree on economic union

West German Chancellor Helmut Kohl, trying to speed reunification with East Germany, picked up his own pace last week. First, he travelled to West

Berlin for a meeting with East German Prime Minister Lothar de Maizière. Then, in Bonn, he persuaded the premiers of West Germany’s 11

federal states to help finance an $82-billion so-

called unity fund. Later, he flew to Washington to confer with President George Bush, before returning home to sign a draft treaty on monetary, social and economic union that will precede a political merger of the two Germanys. The treaty will take effect on July 1 if it is approved by both parliaments. Kohl said that he wants “a single German parliament elected” later this year, a reversal of his previous insistence that political union not take place before 1992.

Under the economic agreement, West Germany’s powerful deutsche mark will replace the East German ostmark and East Berlin will surrender control of its monetary policy to the Bundesbank, West Germany’s central bank. East Germany will also have to switch to a market economy and make its labor laws and social welfare system synonymous with West Germany’s. “What we are living through here,” said Kohl at the signing ceremony in Bonn’s ornate Schaumburg Palace, “is the birth of a free and united Germany.” De Maizière cautioned that not all the “flowery dreams” of East Germans would be fulfilled by the treaty. But he added, “No one will be worse off than before.”

Many of de Maizière’s countrymen are clearly concerned about their futures. After the wave of euphoria that followed the opening of the Berlin Wall last November, East Germans have expressed growing concern that capitalism will bankrupt their inefficient industries and agricultural enterprises, leaving as many as two million people jobless. Farmers and factory workers recently staged a series of demonstrations demanding future job protection. Gregor Gysi, leader of the old East German Communist party, now known as the Party of Democratic Socialism, told Maclean ’s : “What has happened is all wrong. Instead of first joining the economy, the political and social problems should have been solved.” He added: “There is nothing to be done about it now. So we must try to protect the workers.”

West German taxpayers, meanwhile, openly resent having to pay for increased social services and other East German debts. Voters signalled their misgivings in two state elections on May 13. The opposition Social Democrats, who advocate a slower pace of unification, defeated Kohl’s Christian Democratic Union in Lower Saxony and retained control of North Rhine-Westphalia. Kohl is still favored to win the national election scheduled for Dec. 2, but he is now seeking to make it an all-German election. Aides expressed concern that the economic fallout from reunification could erode his popularity if he waited two more years for political union.

Even Kohl’s own finance minister, Theo Waigel, has expressed reservations about taking on East Germany’s budget deficit, which is expected to reach $23.4 billion in the second half of the year and $37.4 billion in 1991. Last week, Waigel acknowledged that he and his East German counterpart, Walter Romberg, had argued fiercely over pensions and unemployment benefits. They also disagreed on the full extent of East Germany’s foreign debt,

accumulated during 40 years of Communist mismanagement. Romberg estimated it at $19.4 billion; Waigel claimed that it is $89 billion, adding, “There is no further money in the West German budget to pay for it.”

Still, at week’s end, Waigel announced that all outstanding issues had been resolved. And he reassured West Germans that they would not have to pay for the $82-billion unity fund with higher taxes. He said that $14.3 billion of the fund would come from government savings and the rest would be borrowed on capital markets between now and 1994.

The money will be used to modernize East Germany’s outdated factories and public services, help the nation adapt to the West German tax system, clean up its severely polluted environment and compensate East Germans for the loss of their social safety net. Even if East Germany agrees to a political merger this year, there will be many details left to settle. East Germany will have to reconstitute the five states it had before the Communist era, and they will have to elect local governments before an all-German election.

The two Germanys also have to obtain foreign endorsement for unification. The so-called two-plus-four talks begun earlier this month between the Germanys and the four postwar occupying powers, the United States, the Soviet Union, Britain and France, have to resolve a host of complex security issues before unification can proceed. They include the future Germany’s military alignment and, by implication, the future of NATO and the Warsaw Pact. Soviet leaders advocate a neutral Germany, with the four powers retaining some kind of residual veto power over its right to join alliances and other international organizations. Bonn and the Western allies are insisting on NATO membership for the new Germany and termination of four-power supervision at the time of unification.

Bush and Kohl reaffirmed that position after their talks in Washington. Said the President: “Germany should be fully sovereign, free to choose its own alliances and security arrangements.” Added Kohl: “We don’t want to be nonaligned. We don’t want to be a wanderer between two worlds.”

Many East German citizens say that they are looking forward to unification, but they are clearly anxious about what it will involve. “We don’t want any handouts,” said East Berlin pensioner Maria Schwengfelder. “We are not second-class citizens, we’re very proud.”

Others are openly worried about their livelihoods. “There’s a great sense of frustration here,” said Angela Kunkel, a 44-year-old highschool teacher from East Berlin. “It’s a sense that everything is being decided for us in Bonn.” She added that she sometimes tells herself, “Get me some concrete, I want to put the Wall back up.” But most of her neighbors openly acknowledge that they are bracing for the rigors of capitalism.

HOLGER JENSEN

MICHAEL KALLENBACH

DAVID LINDORFF

WILLIAM LOWTHER