European Stars And Stripes (Newspaper) - June 26, 1988, Darmstadt, Hesse                                Page 1h the a tars and stripes business news Rosy Economy fuels Dollar s upward swing the Greenback should continue ils cautious climb on International currency markets in the coming weeks fuelled by generally Bright eco nomic conditions in the United slates and a swell of new Dollar investors. But while the Dollar gained 4 pfennig on the West German Mark and Rose against All major currencies in the past week currency traders in Frankfurt and London offered mixed views on How Long the Buck can sustain ils climb after six months of relative stability. Same said the Dollar will climb As High As 135 yen. From ils current fix of 128, and to 1.85 Marks. Ii also could reach $ 1.72 against the Brit ish Pound Sterling. But most traders agree that intervention by the Central Banks remains a threat if the Dollar rises too fast and appears to threaten the West s pledge of currency stability. The Central Banks have worked too Long an too hard for stability to let it All slip away in a couple of weeks one German trader noted. If Paul Coiry they perceive things arc getting out of hand they ii come in and in a big Way. Other traders however said the Dollar s new strength cannot easily be sapped. Only massive coordinated intervention bythe Central Banks will be Able to slow the Dollar right now one american banker said. There s just Loo much upward Energy there. The Bundesbank was in the Market every Day this weekend has accomplished next to nothing in holding the Dollar mom mid consecutive improvements in the . Trade deficit in the last two months were the biggest Factor fueling inc Dollar s climb also there appears to be sentiment among Western leaders Lor a slightly stronger Dollar. West Ger Man finance minister Gerhard Stolton Borg infant said wednesday that inc Dollar s climb was no cause for concern. Finally traders said a flood of japanese investors arc now resuming to Dollar positions joining Large foreign corporate clients who arc buying the dollars they need for commercial transactions there s just lots of new buyers one Frank Furt banker said and there s a whole lot of investors who just realized icy missed a 10-Nfenn in swing in the Dollar and Are Gen ing on the bandwagon now with the Hopes it will keep on  most traders and Bank economists expect favor Able economic conditions in the United states to prevail for inc rest of 1988. Among them consumer spending remains Strong. Economists had expected the october Slock Market crash which wiped out trillions of dollars of paper wealth to Dampen consumer Confidence and trigger a recession. An economic decline however has failed to materialize. Inflation has been kept under control. The experts feared that the american Economy had been expanding too fast and that the increased demand from americans and now that . Exports arc up foreign buyers would Strain production capacity and Lead to shortages driving prices and inflation upward. A slight slowing of the Economy appears to have dampened those fears. The inflation Index Likely will stay close to the expected 4.3 percent rate. Growth should remain steady. The Reagan administration has had to raise ils growth Esti mate for the Gross National product the widest measure of a nation s economic health. Original predictions of a 2.9 percent growth rate for 1988 have been pushed up to 3.5 percent. German economic machine May be running out of steam by Joan Fischer and Terrence Petty associated press Bonn on inc surface West Germany is Boom ing. Rashy Mercedes Benz sedans whip along the Aulo Bahns and shoppers pack High priced boutiques. Travel agencies Beckon West germans to exotic vacation spots and a new Yuppie generation packs trendy bars after work. Yel private economists looking below the surface and into he future fear something might be awry. They Sec weak spots in the  the economic Miracle thai won West germans acclaim not Long after it got under Way 39 years ago with the proclamation of West Germany As a separate nation. Specifically these non government economists see complacency and sluggishness setting in Between the lines of statistics that continue to show economic strength. They believe the government must fire up the econ omy in some key sectors promote More investment by West German business and Lake other measures to ensure that Good times last. The United Stales thinks so too but for one slightly different reason West germans should buy More . And other foreign goods to reduce its Trade surplus of around j70 billion everyone is trying to keep what he has even if ii Means rejecting measures that would bring Good opportunities in the future complains giant or grosser a specialist in world economics at the respected Institute for economic research in Hamburg. We seem to Lack the will to Lake daring Steps he said. He and other private economists arc pressing for the dismantling of obstacles they maintain Are stalling eco nomic growth. They say the obstacles include massive government subsidies for ailing industries like steel a Law that strictly limits stores business hours and a trend toward Shorter working hours with full pay. . Officials also express concern about West Ger Many s slow growth but More specifically they assail tic huge Trade surplus which Means West germans sell More abroad than they buy. In a report his month in Washington inc join economic committee of Congress called on West Ger Many to assume responsibility in the world Economy consistent with the importance of the Federal Republic in the world Economy. But inc West German government shows no sign it is ready to act As the critics suggest fearful that a Reed up Economy might touch off inflation. A deep running fear of inflation has pervaded Ger Many since he devastation of the inflationary early1920s, when a Pound of butter could Cost 100,000 Marks in the morning and 500,000 in he afternoon. The German Mark became worthless at the time As he government primed More Bills in a futile Effort to Deal with Post world War i economic problems. In contrast. West Germany s inflation rate for 1981 was a Mere 0.2 percent. Private West German economists say the most important problem stemming from slow economic growth is the country s High unemployment rate the Rale last year averaged 8.9 percent or about 2.23 million people compared with 6.1 percent in the United states. About 3 million of West Germany s 61.3 million people now live on welfare up from slightly More than 2 million in 1981, an increasing number of recipients Are the Long term unemployed who switch to welfare when their unemployment insurance runs out. Fears also run High that unemployment May be fueling hatred of the 4.5 million foreigners living in West Germany Many of whom were invited As workers Dur ing the country s economic booms of the 1960s and this past october in Bremerhaven an unemployment plagued port voters elected a right Wing Radical to the Bremen stale legislature. But Interior ministry officials strongly reject any suggestion that High unemployment could Lead 10 a widespread Rise of extreme right Wing sentiment As in the years before Adolf Hitler s third Reich. In the 1960s, when he Economy was booming there was much More right extremist activity Here Han there is  said Interior ministry spokesman Michael Andreas Butz. Government officials also Point out hat the Esti mated 25,200 known right Wing extremists Are a very Small percentage of the country s population. Meanwhile economic experts Are predicting he country s Economy actually will slow Down from an expected 2 percent growth rate his year to 1.25 per cent in 19b9, despite a 4.2 percent growth performance in the first Quarter 6f this year. West Germany s Economy grew by about 1.4 percent a year Between 1982 and 1987, compared to j.5 per cent in Japan Over the same period and 2.6 percent in the uni Ltd slates among the More frequently mentioned obstacles Loim proved economic growth arc Laws curtailing store business hours quotas on licenses for new businesses and labor taws that severely restrict layoffs. These Laws Are great for people already set up with jobs or businesses but they make entry for newcomers very difficult said Juergen Donees vice president of the prestigious Institute for world economic research in Kiel. Proposals to change such regulations face intense opposition from in vat inter Cal groups and labor unions. For example about 7,000 protesters hit the streets in Bonn on May 29 to protest government proposals that would extend the hours stores could stay open. Stores must close by 6 30 . On weekdays and by 2 . On saturdays. However they can remain open All afternoon on one saturday a month. Additionally inc West German parliament on wednesday approved measure that would allow businesses to slay open late one evening a week. At the same Lime workers and Tabor unions Are pushing to have their workweeks shortened without pay cuts. The country s biggest Trade unions have declared a33-hour workweek As their goal. The Meta working automobile and printing industries already arc Down to j8.s hours i h contracts to reduce it to 37 hours in the 1990s. The critics say fewer working hours mean less production. Government officials however insist that measures will be taken to ensure healthy economic growth. They also reject the stinging claims made in con Gross report. Government spokesman Fried Helm Ost said West Germany is fulfilling its responsibility toward the world  he pointed to inc government s plans to Reform Ilstad and postal systems As Means of stimulating greater West German consumption. Grosser the Hamburg economist does t agree with the United slates on he Rad surplus and the Sugges Ion that it could seriously damage the world Economy. I would t consider this one of the problems Ham Pering the world Economy in a very important sense said grosser. I think his Issue is often  he maintained that the . Budget and Trade deficits have a far greater Impact on the world Economy. The nation s wealth is further reflected by ils 1987 Gross National product of $1.1 trillion the third High est in the industrialized world. West Germany s automotive and chemical sectors remain especially Strong. In Japan sales of West German care last year were up 125 percent Over he 1979 level while . Makers sales were off 76 percent for the tame period. Hochul. The leading West German chemicals group posted a 10.4 percent after tax Profil last year and expects Strong sales this year As Well with much of its business overseas. Grosser says he in t worried about the automotive and chemical sectors our Trade surplus May be a Louric of trouble with our friends but it still shows something very important about West Germany the Quality of our work is highly respected he said. But some experts still insist that West germans will have to be More daring if hey want to preserve he legacy of the  there will have to be some new concepts in eco nomic policies but in the end it will be better said Ute Geipel a West German economist for the Ameri can owned Citibank in Frankfurt