Looking The Other Way

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The West Germans are reluctant to push their economic growth, which is expected to be only 2% next year, because of a deeply ingrained memory of the hyperinflation the country experienced in the 1920s. Says West German Economist Dieter Mertens: "Inflation is regarded by most Germans as on a par with Communist domination and morally equivalent to the work of the devil." Even a rate of 3% or 4% is unacceptably high to Finance Minister Stoltenberg, whose resistance to foreign prodding has earned him the nickname "Ice Prince" among U.S. economic officials. The 59-year-old, white-haired Stoltenberg, the son of a Protestant pastor, is revered in West Germany for his fiscal rectitude, which enabled him to reduce the country's budget deficit by nearly a third, to $13.1 billion, in five years. Says a West German economist, speaking for the population at large: "Beneath everything, we are all Stoltenbergs."

What may finally have persuaded the Finance Minister to make at least a mild concession on interest rates was the beating that German exporters are taking because of the rise of the mark against the dollar, which makes their products more expensive in the U.S. In an interview last week, Stoltenberg told a West German newspaper, "We now want to cooperate again constructively." One eventual outcome could be a meeting among the finance ministers of the seven major industrial democracies, the so-called G-7 group, to work out a plan to support the dollar at its new, lower level. Indeed, right now the battered currency could use a little help from its friends.

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CREDIT: TIME Chart by Nigel Holmes

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DESCRIPTION: U.S. dollar vs. Japan's yen and West Germany's mark. Color illustration: Uncle Sam, turning his back on the dollar, reads Stock reports in newspaper.