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West Germany gives thumbs up to US deficit-reduction plan

West Germany approves of the United States' efforts to put a brake on the American budget deficit. And Bonn hopes the way now is clear for a new agreement by industrial nations to curb currency swings. This was the message from both Chancellor Helmut Kohl and Finance Minister Gerhard Stoltenberg, who welcomed the US plan reached Friday to cut its deficit by $30 billion this year and nearly $46 billion next year.

It is now up to the Europeans to consider how they might contribute to stability, Dr. Stoltenberg said.

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But Otto Schlecht, state secretary in the Economics Ministry, warned against ``exaggerated expectations'' that Bonn might yield to US pressures to stimulate the economy. ``The Germans cannot be a locomotive for the world economy or for the USA,'' he said in a weekend radio interview.

``An example: If we double our growth - which is altogether impossible - the American growth would grow by only 0.1 percent,'' Mr. Schlecht said. ``But we, too, together with others,'' he added, ``must think through very fast - we are already in the process - what a realistic, feasible contribution could look like. But a basic condition for this is that it must not lead to uncontrolled breaking out of bounds of our debts.''

Dr. Schlecht rejected the notion that this West German action was doing only the minimum necessary to placate the Americans. ``No, no, no, no,'' he responded. ``The turbulence of the past five weeks has left its mark with us, in exports and also in investment decisions by enterprises. And in our own interest we must naturally do everything to ensure sufficient domestic demand.''

He stressed again, however, that the government should not succumb to ``short-term activism'' that could undermine its ``medium-range growth strategy.''

In response to the US move the dollar recovered slightly against the mark Friday, ending at DM 1.6746 in Frankfurt, where trading closed before the announcement. As the news emerged, the dollar rallied to DM 1.6825 in London and DM 1.6835 by 3 p.m. in New York.

Schlect rejected the view that reducing the US budget deficit by $30 billion in the first year was too little. ``It's not at all a question of making a huge step in the first year, but it's a question of setting goals for the next several years,'' he said.

With this, the ``precondition'' has been set for the major industrial nations to renew their agreement to stabilize currencies, Schlecht stated. He discounted concern that the US might let the dollar drop further if Bonn doesn't stimulate its economy, saying he doubted Washington would go for such short-term advantage at the risk of long-term inflation.

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