YOU ARE HERE: LAT HomeCollections

Bonn Approves Spending Plan to Bolster Dollar

December 02, 1987|Associated Press

BONN — After months of pressure from the United States, West Germany today approved a multibillion-dollar plan to bolster the falling dollar by stimulating its own slow-growing economy with increased spending.

But the plan met with lukewarm approval from foreign diplomats and was criticized as too little, too late by many West German economists.

The package is designed to boost spending on both West German and foreign goods, thus helping ease the U.S. trade deficit as well as support the dollar. It also marks a shift in West German economic policies.

For months, Bonn has resisted demands to expand the West German economy, saying it was already doing its part to help boost worldwide economic growth.

Cut in Discount Rate

The program provides an extra $13.1 billion in government spending, calls for the deregulation of some industries, steps up investments by the giant Post Office Ministry and urges a loosening of tightly controlled shopping hours.

It is expected to be followed Thursday by a one-half-percentage-point cut in the important discount rate by West Germany's independent central Bundesbank, according to government officials.

In unveiling the program, Economics Minister Martin Bangemann said it is aimed at warding off possible recessionary effects of October's worldwide stock market crash and the subsequent continuing decline in the dollar. He also told a news conference that it is the "German contribution" to an international effort.

Bangemann said the plan will ensure West Germany's economic growth next year, but foreign analysts said they doubt that it will have much effect.

Businessmen Critical

"I'm not sure this will provide all that much stimulation" for the domestic economy, one West European diplomat said.

Businessmen also were critical of the plan.

"This could have had a more positive effect if it had been passed earlier," said Otto Wolff von Amerongen, president of the West German Industry and Trade Assn.

West German economists noted that the plan provides extra loan capital for communities and small businesses at low interest rates. But they said it does not force more money into the economy, as would a more sweeping tax reform plan that other nations have urged the West Germans to adopt.

Los Angeles Times Articles