The Helsinki Pact

by Alex Cugia

  The lack of information and the ignorance of his contacts was thoroughly frustrating. It was now dark, there were no lights on the bike, the wind was rising and as he realised it would take him a good twenty minutes or more to reach the Dornbusch farm he decided to give up although he was hardly wiser about Phoenix than when he'd started in the morning. He had at least got important confirmation of the involvement of the local Stasi, he thought. As he pedalled back, tired and with the gusts of wind and flurries of snow snapping at his face and chilling him further, cars suddenly looming up uncomfortably close to him before they braked suddenly and swerved past, hooting at his lack of lights, he wondered how Bettina was getting on. He hoped she at least was making some progress.

  Still irritated with his day he slammed the farm door behind him, shutting it more brusquely than he had intended. The crack resonated throughout the house and Frau Dornbush, alarmed, rushed out of the kitchen.

  “Oh, it’s you, Mr Wundart. Thank God the children aren’t sleeping yet.”

  “I'm sorry. The door slipped in my hand, I think.” He stamped his feet and shook himself like a dog coming in, the snowflakes melting off his clothes and puddling the entrance floor.

  “There was a phone call for you. From a Mr Peetzen, if I got the name right. He gave me a number where you might sometimes get him in Berlin and said he hoped to see you around the end of the week. He'll call again, he said, maybe on Wednesday if you've not spoken by then. I've written it all down to make sure I got everything for you."

  Chapter 26

  Monday January 15 1990, morning onwards

  THE governor of the Bundesbank, Buba as it was familiarly known, prided himself on his specialist economic understanding but found himself increasingly having to turn politician in order to salvage his professional recommendations, arguing variously that there was insufficient economic data available from East Germany or that where there was information it was unreliable. As far as Buba was concerned what mattered was economic stability, a tight lid on inflation, and sound money and decisions therefore needed to be delayed and delayed until good information emerged.

  Kohl, astute politician that he was, would have none of it. He and his advisers were seeking to wear down the bank's caution by holding frequent meetings and deliberately setting short time-scales for producing complex reports. Today's meeting, in Kohl's view, was primarily to hear the arguments for different ranges of exchange values before settling on the most advantageous political one. Stephan looked forward with interest to the inevitable scrap and mentally put his money on Kohl to win with little difficulty.

  Kohl glanced crossly at his watch. "Herren, find out for me please just what's going on. We're running late and I can't waste time sitting around here - it's intolerable. I have far too much to do."

  As Herren turned to Stephan the door opened and the governor of the Bundesbank, followed by four senior colleagues, came in. He took the head of the long rectangular table and his colleagues sat on either side. He made no attempt to apologize for the delay.

  “Chancellor, gentlemen, thank you for coming. Let me present our views on monetary unification with the German Democratic Republic. Here are our findings.” He nodded to the younger colleague to his left, who got up and turned on the projector.

  “As you'll know, we have very little information on how the economic system of the DDR works. There are no reliable statistics on any of the key monetary masses, multipliers, or anything of that sort. We decided it was essential, therefore, to create our own models. We took some time to do this carefully and duly input a range of possible variables to verify the potential outcomes." He looked with approval at the screen. "This is similar to a Monte-Carlo simulation for option values, if you’ll permit me the comparison.”

  Kohl looked annoyed. “Go on, please.” he growled "We're here to learn what you've established, not to be lectured on fanciful comparisons or subjected to jargon."

  The governor pursed his mouth, breathed out audibly, and resumed. “We’ve had a little more luck in getting information on industry production levels, and we hired some experts to provide views on comparative costs and product competitiveness in key industrial sectors."

  The first set of slides, which showed cost-competitive charts for various industrial sectors, were projected in rapid succession. “Apart from a few exceptional situations, mainly in the precision mechanics sector, the DDR’s production is high-cost and low-quality compared to its western counterparts. Output is significantly down and the events of the recent months are bringing about near-paralysis in the production economy. The following slides show the picture from the individual/family side in terms of purchasing parity and wealth, assuming different levels of savings rates. Then there’s a third element, the fact that a number of goods are currently heavily subsidized in the DDR: bringing their factory-gate prices to Western levels would cause an immediate shock to the system.”

  Dry though the information presented was Stephan listened carefully, mentally translating the generalised data into information about how the people of East Germany lived day to day, trying to put a human face on to the statistics presented. Since he'd been given the job of scouting for potential business opportunities for Deutsche Bank in East Germany he'd come to see the country in a new way.

  Thomas The presentation ended and there was silence. Kohl leaned over and spoke quietly for a few moment with his advisers. He turned to the governor. “I didn’t see slides on realistic values for conversion. What’s the conclusion?”

  “I thought those were best discussed rather than presented. We’re having to take a decision largely groping in the dark. And within limits we can decide how we want the future to shape up: that is, do we want to add 16 million consumers or do we want to improve our competitive positioning by creating our own low-cost production centre in Germany? The choice of the exchange level of the currencies hinges largely on this.”

  “The exchange rate we settle on has to be fair. It can't be a shock to the East German population otherwise their anger against their own government will switch to us and we'll have riots on our hands. That's not a great start for a newly reunited country and I won't allow that to happen." Kohl said. "I also accept, of course, your arguments that it has to be sustainable economically - we can't risk the future of a united Germany and so we've got to find a rate that will make people in the East happy without raising eyebrows in the West."

  Kohl, clearly irritated, looked hard at the governor. "Your job is to put forward the economic arguments, derived from your analyses, relevant to different rates; mine is to evaluate the political dimensions. What I cannot understand is why this process is taking such an absurd length of time. If we were as slow as this in the Bundesregierung we'd never achieve anything."

  “We’ve made progress but analysis takes time. We’re finding statistics about two years ago, yet we hear rumours that the East German bank has been printing currency at twice the historic levels and that Shalck-Godowlsky is agreeing contracts for huge levels of imports of foreign goods - some of these may be completely fictitious of course. We have no information whatsoever on the reserves of cash held by the Stasi or the SED, and those could be substantial. Any estimates we make could be completely wrong. I would err on the side of caution and opt for a relatively high exchange rate.”

  “Yet you still haven't come up with a range of possible values. What do you mean by high?”

  The governor paused and took a deep breath. “All our models suggest that a sustainable exchange rate is somewhere between five to seven Ost Marks to the Deutsche Mark.”

  There was immediate stillness in the room, something going beyond merely absence of sound as if everyone present had stopped breathing while they digested the implications of this extraordinary figure. Kohl rose as if to leave then thought better of it and sat down again, suppressing his obvious fury.

  “Don't be ridiculous! Numbers of that sort are completely out of the question. The only exchange rate anyone in
the East has heard about is the official one, at parity with the Deutsche Mark. We can’t get too far away from that - the people in the DDR simply wouldn't understand it.”

  “You worry about the electoral implications, I have to worry about the economic ones. We’re talking two different languages." The governor motioned his colleague to put on another slide. "Here’s the chart showing the black market valuation of the Ost Mark. It’s gone from over twelve to one to roughly eight, and that's purely on the basis of political speculation on unity. The markets, being rational, aren’t betting on anything higher than that.”

  “Markets don’t vote. People do. Markets don't govern. I do.”

  “We’re making a historic experiment here. We can’t get it wrong for short-term motivations. History will judge how we’ve handled this. The future shape of Germany depends on our choices today.”

  “May I make a suggestion?” Herren’s strong voice broke in. “I can see the reasons behind both arguments. In an ideal scenario, we’d like to add 16 millions of happy voters and consumers with a good level of spending power. On the other hand, we want to ensure that the country’s productive base remains competitive whilst it integrates in the West. The two objectives are diametrically opposed, so there’s only one clear solution.”

  Kohl turned his great bulk towards Herren and slapped his hand hard on the table in front of him, smiling broadly as he did so. “That’s why I need external experts like you to be here, Alfred. Some people simply pose problems, you offer solutions.”

  “We should look at applying two different exchange rates." said Herren. "A lower one for individuals, and a higher one for corporations. If we strike the right balance we could ideally get the best of all worlds.”

  “And what would stop a massive movement of funds from one sector to another?” the governor replied. “When you create artificial differences you’re loading the guns of speculators. A parallel market would flourish almost immediately to try to reposition the cash to where the highest value was.”

  “There's no other way around it. You could put a maximum limit on the amount of cash each private individual could trade at preferential levels, with any excess having to be traded at the industrial level. That would be a crude but effective way to ensure that your approximate calculations turn out to be broadly correct. And it would go in the direction of social equality, which is something people on each side of the border would understand and support.”

  “My job isn’t that of pleasing the electorate, it’s safeguarding our economy! May I remind you our main objective at the Bundesbank is containment of inflation. What you’re proposing to do will fuel inflation in Germany for at least a decade.”

  “We need to pay for this in one way or another." Herren said. "Inflation can be an acceptable way of funding growth and helping smooth out the differences, if it's limited in time. Runaway inflation is clearly unacceptable but controlled inflation in pursuit of improved output is acceptable and can be managed.”

  “Alfred, I appreciate your input.” Kohl intervened, “But having two different exchange rates seems overly complex in my view. The exchange rate needs to be set somewhere close to parity. Maybe two to one could still be acceptable, but nothing more.”

  “Two to one? Two to one!" The governor looked at Kohl in horror. "That number is simply unreachable. Unless you plan to subsidize their economy forever, their industries will fold in a matter of months. You’ll have record unemployment levels in the East after just a few years.”

  “My belief is that jobs lost in the East will roughly equate to jobs created in the West. Many easterners are just waiting for a chance to move over to the West anyway. We’re just accelerating that process. I’ve spoken to a number of industry board members who are eager to create new plants in the East. The workforce is quite numerate, if a little lazy from what we hear.”

  “So what you’re expecting is a rapid colonisation by Western firms of the current production base?” the chairman of Commerzbank butted in.

  “I don’t like the term you used, Herr Obermeier. I prefer to consider it the best way for the East to wake up to reality. We all know the best way of taking a bandage away is to pull it off quickly. Otherwise it will become an excruciatingly long agony.”

  Kohl gathered his papers together and stood up.

  "Thank you all for attending, gentlemen. We'll finalise details next week. I'll tell you then what I decide."

  Chapter 27

  Monday January 15 1990, afternoon

  "THANK you, Fritz. I thought we should introduce our visiting colleague, Miss List, to some fine Dresden cuisine." said Spitze jovially as the proprietor of the small restaurant made a point of coming out from his office and showing them personally to their table. Roehrberg had excused himelf from the lunch but insisted that Spitze take Bettina as planned.

  "We like it here." he added as they settled themselves. "Fritz is discreet, the food and wine is good and so Roehrberg, Henkel and I often eat," He made a wry face. "ate, here, Modrow too on occasion. And it's where we usually bring important visitors, at least for lunch."

  He glanced at Bettina, checking her response, but she had anticipated this and was looking closely at the menu.

  "Veal, I think - but perhaps scallopini rather than schnitzel. Will they do that well here, do you think?"

  "You'll find it excellent, I'm sure. I believe Fritz's mother was Italian and perhaps that's why there's a few Italian dishes offered." He paused for a moment. "You must have Dieter's full confidence to be entrusted with what's really quite a perplexing and an important mission, Miss List. But then no doubt you've been in the service for some time and earned that trust."

  "Oh, I think it was more a matter of availability. Following the reorganisation it's all a bit chaotic but I'd just finished another project so I was free." She broke a bit of bread in half on her plate. "And, of course, with a level of experience appropriate to, as you say, an important mission."

  "I'm sure you're being too modest." he continued "I know Berlin keeps a tight rein on regional activities so they'd have wanted to get to the bottom of this promptly and efficiently. No doubt you had discussed it all in some detail at a fairly high level?"

  "Pillow talk!" she thought. "I wonder what he'd say if gave that answer." She spread some butter on her bread and took a bite before answering. "I really don't know, I'm afraid, that's beyond my level. But I have worked closely with Dieter for some time and, well," she looked down and played with her bread for a moment "I think we get on well together and we do discuss things, privately, and so ... " She looked away from Spitze and then turned to look at him. "But tell me, what are your thoughts about the matter. Do you suspect anyone particularly?"

  "It's very perplexing, very perplexing indeed. Let me say that we want to give you all the help and information we can to solve the mystery. I know Rosenberg’s already told you that but I want to underline it. You have our full confidence, of course."

  There was silence as they ate, each occasionally sparring with the other but gaining no particular insight, and the meal eventually dribbled to an end. As they drank coffee Spitze lit a cheroot, waving away the smoke between them.

  "Forgive me, Miss List, but I have meetings scheduled for this afternoon and with this recent incident, of course ... " Spitze's voice trailed off and Bettina gladly took the chance to escape, inventing meetings of her own to attend.

  She decided to try to meet Georg. Through his work and his personal connections Georg often picked up interesting snippets of information on what was going on in Dresden. Whether he’d want to discuss it with her was another matter, she thought, remembering how things had changed.

  Georg had been a close friend of her father's and had helped the family financially and continued to support them in other ways after her father had disappeared to the West. Her mother and Georg had become close and begun a relationship but although this was only short lived they remained good friends and kept in touch regularly afterwards.
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  Georg and Bettina had always been very fond of each other but something had interfered with this and at their last meeting his attitude towards her had suddenly changed and he’d become very detached, short and almost irritated with her. She’d caught him looking at her with a mix of sadness and anger and she knew then that he’d discovered her Stasi involvement. With his background as a political radical he was bound to take badly what he'd see as her betrayal of ideals he'd thought she shared.

  Georg's office wasn't far and the day, although still chilly, had produced a weak sun so she moved her car first to a convenient location then walked along the west bank of the Elbe and as it made one of its southern loops she turned left at the Art School and made for the old city centre. Georg’s office was one of the detachments of the Court, responsible for the administration of the appeals and the registering of the definitive sentences. It was close to the ruins of the Frauenkirche, the opulent baroque church that had once been the symbol of the city.

  She entered the modern, nondescript building and let her memory guide her through the seemingly endless corridors to where Georg “sifted paper,” as he sardonically said. Georg’s office seemed identical in appearance to the first time she had been there, - almost ten years earlier on a visit with her mother − a complete chaos of files, law books and chewed pencils. She’d thought then that it hardly fitted with the image of the blind goddess dispensing justice rationally and without favour or emotion.

  Georg was sitting at a worn-out desk, his head deep in a pile of documents and looking the same as ever. With his wide ears, seraphic expression and double chin he could have been a Buddha had he been sitting in the lotus position rather than conventionally on a chair.

  Bettina stood in the doorway looking at the engrossed figure, remembering with a rush of recognition how fond she’d been of him. She shuffled slightly, then coughed experimentally but got no response and it took a very loud “hmmmm” to get Georg to acknowledge that someone was present. He recognized her, smiled, and got up from his chair. They hugged for a long moment in genuine affection.