Newspaper article The Christian Science Monitor

US and Germany in Conflict over Interest Rates Each Country Blames the Other for Tailoring Economic Policies to Fit Domestic Concerns

Newspaper article The Christian Science Monitor

US and Germany in Conflict over Interest Rates Each Country Blames the Other for Tailoring Economic Policies to Fit Domestic Concerns

Article excerpt

DESPITE polite communiques, relations between the world's dominant economic powers are strained as they meet here this week.

The friction is largely between the United States and Germany, which blame each other for being motivated only by domestic considerations.

Citing concerns about recession here and abroad, US Secretary of the Treasury Nicholas Brady has pushed internationally for lower interest rates as a means of spurring growth.

The Treasury is concerned that Germany - the world's fourth-largest economy and leading exporter in 1990 - is looking only at its own domestic economy, now under strain as reunification exacts higher and higher economic and political costs.

Inflation conscious, Germany's Bundesbank (central bank) has resisted a marked reduction in rates; it asserts that the Bush administration feels pressured to revive the US economy for the 1992 presidential elections.

The Bush administration's ongoing plea to the central bankers and finance ministers from the so-called Group of Seven (G-7) countries - the US, Britain, Canada, France, Germany, Italy, and Japan - has been to adopt a "world economic view" that keeps interest rates down and spurs economic growth.

Bush is also nudging the US Federal Reserve, according to Norbert Walter, chief economist for Germany's largest commercial bank, Deutsche Bank. He says the US Treasury is urging the Federal Reserve to further reduce interest rates.

Mr. Walter, who met in Washington with Michael Boskin, chairman of the White House Council of Economic Advisers, also attended a G-7 conference of leading US economists. Walter says Bush must first address his own internal policy disorder.

US government figures released Friday confirm the US recession: The gross national product (GNP) declined by 2.8 percent in the first quarter of this year and declined by 1.6 percent during the fourth quarter of 1990. Walter asserts that Washington's purported concern about worldwide recession is partly a mask for its anxiety over the US domestic economy.

While he concedes that worldwide economic growth is "not impressive" at 0.5 percent to 1 percent a year, Walter points to Europe's upswing, "which started in 1987 and will continue through the mid-1990s." The US, says Walter, is in fact "looking inward, and the political element is quite obvious - the administration wants to get the economy moving faster in view of next year's election."

Sen. William Roth (R) of Delaware, who recently returned from Germany and Japan, says "moving out of recession is not a domestic political issue but an international issue. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.