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West Germany to Pump $9 Billion Into Economy

December 01, 1987|Associated Press

BONN — The West German government, under increasing pressure from the United States and other countries to expand its economy, indicated Monday that it is preparing new steps to boost domestic spending.

Economics Minister Martin Bangemann said the new measures will come soon, and West German newspapers reported that officials are preparing to pump an additional 15 billion marks--the equivalent of $9 billion--into the economy.

Industrialized nations, led by the United States, have for months urged West Germany to stimulate its domestic economy as a way of correcting the worldwide trade imbalance and halting the slide of the American dollar.

Government spokesman Herbert Schmuelling said the Cabinet would discuss possible ways of boosting the economy at a regularly scheduled meeting on Wednesday, even though "the subject is not a slated calendar item."

Bangemann, speaking at a separate press conference, said he would meet with Finance Minister Gerhard Stoltenberg to discuss the subject today in advance of the full Cabinet meeting.

Stoltenberg said last week that the government would soon announce plans to stimulate the West German economy but declined to provide a time schedule or disclose details.

Bangemann also refused to provide details on Monday, and he declined to confirm or deny West German news reports that said officials would pump up the economy by about 15 billion marks.

The government may decide to inject the money into the economy by doubling the lending volume at a Frankfurt-based government loan institution, the Kreditanstalt Fuer Wiederaufbau, according to several West German newspapers.

The expectation is that by injecting money into the economy, West Germans will buy more foreign and domestic goods, thus easing the huge American trade deficit.

Other news accounts predicted that the government would cut interest rates at the Kreditanstalt Fuer Wiederaufbau, which provides West German companies with subsidized loans for new business ventures.

The Bundesbank, West Germany's central bank, and the Finance Ministry declined comment on the reports.

"We can say little about this now," said Karlheinz von den Driesch, chief spokesman for the Finance Ministry.

Meanwhile, a growing number of private economists are expecting the Bundesbank to cut its benchmark discount rate at a meeting of its governing council later this week.

The discount rate, the lending fee charged by the central bank to other banks, is the most important of the Bundesbank's various interest rates.

West German officials have ruled out moving forward with tax cuts, slated to be put into effect before the 1990s, as a means of stimulating the economy.

But other measures include allowing the budget deficit to expand, and possibly instituting more flexible retail shopping hours, deregulating industry or boosting capital expenditures at government-owned institutions.

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