Germanys Agree on Unity Treaty - but Not on Financing

THE state treaty outlining the economic, monetary, and social union of the Germanys is set except for one detail - financing of the merger. On May 14, the East German finance minister was supposed to present the West German finance minister with reliable data on the East German economy. He did not deliver to Bonn's satisfaction, and another, perhaps final, meeting is scheduled for May 17.

Bonn says it can't initial the treaty, which contains a fill-in-the-blank clause on short-term West German economic aid, until it knows more about the basic costs.

West German Chancellor Helmut Kohl says he hopes this issue will be settled May 17 so that his Cabinet can approve the treaty on May 18. If the East Berlin Cabinet approves the treaty, too, then it will be sent to both countries' parliaments for approval by late June. This would allow for on-schedule introduction of the West German mark to East Germany on July 2.

Despite the lack of data, the West Germans have made considerable progress on how to pay for reunification. Bonn announced plans this week to set up a 115 billion deutsche mark ($70 billion) fund as the main source for East German reconstruction.

Most of the fund - $58 billion - will be financed by credits, half of which will be guaranteed by the federal government, the other half by West Germany's 11 states. The rest of the fund comes from savings on subsidies for West German border areas which reunification has made unnecessary.

One of Mr. Kohl's key aims has been to keep reunification steadily moving. He was able to do this with the state treaty, by decoupling the most controversial issues from the treaty and handling them separately.

One of these issues is the emotional subject of property ownership (about 1 million West Germans have claims to property in East Germany.) Industrial and agricultural restructuring - how these sectors will actually be turned into market-driven operations - was also put aside for further negotiation. Bonn wants these controversial subjects to be handled ``parallel'' to the treaty, a government spokesmen says.

In any case, the main goal of currency union will not be held up, because it has been agreed on in the state treaty. The key point of the treaty is the replacement of the weak East German mark by the strong West German mark at a rate of 1-to-1 for pensions, wages, and savings up to 4,000 east marks ($2,400). In return, the East Germans agree fully to adopt West Germany's financial, economic, and social-net system.

In response to East German demands, Bonn negotiators made compromises that were not in the original draft of the treaty. These include special provisions for the poor and protection from falling below the poverty line. Attention was also given to the way in which factory closings would take place.

The ``controversial subjects'' are not in the treaty, but the principles behind them are. Private property, competition, and the free movement of prices, workers, capital, and goods are named as part of the ``social-market economy'' that East Germany will adopt.

You've read  of  free articles. Subscribe to continue.
QR Code to Germanys Agree on Unity Treaty - but Not on Financing
Read this article in
QR Code to Subscription page
Start your subscription today