clarinews@clarinet.com (PATRICK MOSER) (02/08/90)
BONN, West Germany (UPI) -- The West German government agreed Wednesday to begin immediate negotiations with East Germany on the establishment of a monetary union between the two states, Finance Minister Theo Waigel said. Waigel said at a news conference that Cabinet ministers had shown particular interest in a proposed system that would introduce the West German mark into East Germany, which would then have to give up its monetary sovereignty. Economics Minister Helmut Haussmann, also speaking at the news conference in Bonn, said it was possible to create ``a German-German economic miracle, in both German states or in a unified state.'' The proposal for a monetary union is largely seen as a step toward the reunification of the two German states divided since the end of World War II. West German Chancellor Helmut Kohl had suggested the monetary union in what appeared to be an offer to bolster East Germany's troubled economy, crippled by the migration west of an estimated 2,000 East Germans each day. The Bundesbank, West Germany's central bank, had warned against setting up a monetary union before East Germany had thoroughly reformed its economy. But government and bank officials said Wednesday that Bundesbank President Karl-Otto Poehl, in talks with government ministers, agreed with the call for early negotiations on the issue with East German authorities. The move toward the monetary union was immediately praised and criticized by some European economists, who said it would inevitably cause complications in the European Community's monetary system. ``Of course this will have consequences for the European Monetary System,'' a European diplomat said. ``Consultations between EC member states will be very important in this respect.'' West Germany and eight other EC countries have linked since 1979 their currencies and the West German mark, the strongest currency, is considered the linchpin in the system. In Bonn, Haussmann said the union could be agreed to before the beginning of 1993, but Kohl said he wanted to act as fast as possible in a bid to help restore confidence in the East German economy. Waigel said there were several possible alternatives for a monetary union but he indicated that the West German government favored bringing the West German currency to East Germany. ``We have intensively dealt with and discussed the introduction of the deutsche mark as legal tender in the GDR (East Germany), which would speed up the mobilization of Western capital,'' he said. He said such a solution meant East Germany would have to ``partially give up its sovereignty'', hand over monetary control to the Bundesbank and ``adopt our economic order and our economic laws.'' Waigel also admitted that the proposal would initially cause some problems, such as increase the rate of unemployment in East Germany. He said another, more gradual scenario would require ``patience, political authority and much strength'' adding that ``it is questionable whether these still exist in the GDR.'' Poehl also told the Cabinet that ``he realizes one does not have time and that he can understand the government is concerned and wants to act quickly,'' a Bundesbank spokesman said. Kohl said earlier that although the proposed union could not be established before the March 18 elections in East Germany, negotiations should start soon because of the rapid deterioration of the East German economy. He said he would discuss the issue with East German Prime Minister Hans Modrow in Bonn next week. One European economist said the West German deustche mark was strong enough to withstand a monetary union with East Germany. ``The German stock exchange is on the upswing,'' said the financial expert from Kredietbank, one of the major Belgian banks. ``Not only the expected economic growth in West Germany, but also the expectations of growth possibilities following German unification, are factors we should not underestimate.''