`Letterhead' Scandal Forces German Minister to Resign

GERMAN Economics Minister Jurgen Mollemann resigned yesterday after admitting his role in a controversy known here as the "letterhead" affair.

The post of economics minister is a key one, given that the German economy is entering recession, economic recovery in east Germany is behind schedule, and Chancellor Helmut Kohl has yet to complete a "solidarity pact" with unions, industry, and state and local governments to hold costs down and spread the burden of German unification.

The resignation adds to the likelihood that Chancellor Kohl will soon reshuffle his Cabinet, probably by the end of this month. Kohl lost another Cabinet member in December, when long-time Post Minister Christian Schwarz-Schilling resigned to protest German foreign policy, accusing the government of standing "idly" by in the war in Bosnia-Herzegovina.

The economics minister was brought down by the "letterhead" affair, in which he signed a letter on Economics Ministry stationary promoting a product manufactured by his wife's cousin to major grocery store chains in Germany. The affair consistently lead the German news over the holidays, and forced Mr. Mollemann to cut short his Caribbean vacation and return to Bonn to face his critics and explain his actions.

In his press conference yesterday, Mollemann said he had signed the letter himself, contrary to his earlier statement that the letter was signed by a Ministry employee without his knowledge. He said he signed the letter mainly for social reasons - the product was connected with securing jobs for handicapped workers. In retrospect, however, given the family ties with the firm, it would have been better to let the case drop, Mollemann said.

Although one of Mollemann's chief goals as economics minister was to make major cuts in government subsidies for industry, he was never able to gain enough support for his program. Kohl asked Mollemann to remain in the post until a replacement is found, likely during a Cabinet reshuffle early this year. His replacement is expected to come from his party, the Free Democrats (the junior partner in the coalition government of Chancellor Kohl). Mollemann added yesterday that he would no longer seek the chair manship of his party, but would remain active in party affairs and keep his seat in the Bundestag.