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East German Worry: New Competition

`KONKURRENZF^AHIG.'' That dandy German word spotted the conversation of the senior employee of East Germany's state-owned maker of television tubes. It means ``competitive.''

Over a German afternoon Kaffee at his suburban home here, he talked of his concerns about the future of his company and its 3,000 or so workers. The firm, Werke f^ur Fernsehelectronik (WF), delivers its tubes and other electronic components to Fernsehger^atewerk Stassf^urt (FS), which basically had a monopoly in the German Democratic Republic on making TV sets. It sold them for a huge profit - about 5,000 East marks for a standard set, or half a year's wages for the average worker. Profits were turned over to the government to cover, among other expenses, large subsidies on food and apartment rent.

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But the tumbling of the Berlin Wall last fall has changed everything. Now East Berliners can be seen on the subway lugging huge cartons containing TV sets bought in West Berlin to their homes. A South Korean color set can be purchased for perhaps 650 West German marks; a better West German-made set for 1,000 marks or so.

As a result, the East German firms have seen their sales plummet. The sets are apparently well-made. But they tend to run behind the latest in the West. Only now are they are coming out with square rather than round corners to the screens. Coming soon will be sets capable of accepting video cassette recorders.

What will happen? Will Siemens or some other West German electronics firm buy into the East German companies, bringing in fresh capital to modernize them? My friend hopes so.

Prices will obviously have to decline dramatically. Since Jan. l, 1990, the official exchange rate between East and West German marks was three to one. As a result of an agreement Wednesday between the two German states, the new official exchange rate is two for one. Wages and salaries for all East Germans will be exchanged at a one-for-one rate. Because East German wages are so low compared to those in West Germany, WF, FS, and other East German firms will have some advantage in a unified German economy - now scheduled for July 2.

Indeed, at May Day events Tuesday (jointly planned by trade union officials in both sides of Berlin for the first time this year), speakers demanded protection against unemployment and exploitation. Ernst Breit, head of West Germany's Federation of Trade Unions, told a gathering of about 60,000 banner-waving East and West Germans at the Reichstag, the former German parliament building, that some West German businesses and politicians view East Germany as a ``new low-wage land with possibly less social security, fewer controls, and weak unions.''

The reality may well be layoffs in East German firms as they strive to be konkurrenzf^ahig. WF, my friend reckoned, is heavily overstaffed compared to similar operations in the West. Economists have predicted that 500,000 to 2 million East Germans could lose their jobs in the next two years as inefficient state-owned companies are closed or forced to compete.

But troubles in the economy of East Germany could be short-lived compared to those in other East European countries. ``It is going to be the eastern part of a new Germany,'' notes Josef C. Brada, an economics professor at Arizona State University. With the help of West German capital and technical aid, many East German companies will be modernized relatively quickly. The new Germany will have a common currency, a common market that is part of the European Community, and a market economy.

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Whereas other East European nations will for a time be able to maintain a separate price structure from that prevailing in Western Europe, that won't be possible in what is now East Germany.

A large part of East Germany's exports are shipped to the Soviet Union and other East European countries. When the four World War II allies that divided Germany - the Soviets, United States, France, and Britain - meet tomorrow in Bonn to discuss the international implications of unification, they may want to devise means for preserving as much of that flow as possible, thereby reducing economic dislocation in East Germany.

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