Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Businessweek Archives

Not So Quiet On Germany's Eastern Front

International Outlook


German politicians usually try to avoid making foreign policy waves. But when Chancellor Helmut Kohl visited his old friend Boris Yeltsin in Moscow last month, he boldly revamped Western policy on Central Europe. Kohl told the Russian President that inclusion of such countries as Poland, the Czech Republic, and Hungary in NATO "needs to be postponed for a long time." The remark pleased Yeltsin but came as a shock to Central Europe and the U.S., which has been pushing to extend the NATO umbrella eastward.

Of course, Kohl was trying mainly to boost the tottering Yeltsin's chances in Russia's June presidential elections. But the chancellor's controversial pronouncement also underscored Germany's increasing willingness to play a heavyweight role to its east, where it finds itself inexorably drawn. The major security threats lie in that direction--mostly in Russia. So do the big opportunities--in Central Europe. "These are new responsibilities that the Germans have taken up at last," observes Alexander Rahr, Russia expert at the German Society for Foreign Policy in Bonn. "Finally, the political elite is realizing that Russia is in trouble."

The last thing the Germans want is for Yeltsin to be replaced by Communist leader Gennady Zyuganov or one of the other dubious figures stalking the presidency. An unstable Russia would be a nightmare for Germany. Among other things, it would jeopardize Germany's budding sphere of influence in Central Europe.

EASY CREDIT. As infrastructure improves, a closely knit commercial region is emerging in the heart of Europe with Berlin as its future capital. German companies view this area as one with enormous potential both as a manufacturing zone and as a market. They are much more skeptical about Russia. Only $31 million in German investment went into Russia in the first half of last year--a puny sum that Yeltsin complained about to Kohl. By contrast, some $1.9 billion in German investment went into Central Europe in 1995--as much as went to the U.S. Kohl recently redressed the balance somewhat by helping persuade the International Monetary Fund to extend Yeltsin a $9 billion loan on easy terms. He also leaned on German banks to cough up $2.7 billion in loans for the Kremlin in early March.

Stabilizing Russia, of course, makes the Central European nations more secure, but they want more. These countries have made early admission to NATO and the European Union their top priority. It makes them uneasy to see other countries cutting deals on their futures--especially Russia and Germany, who have a history of carving up Central Europe.

HUGE COSTS. But the Central Europeans do not have much choice but to go along with whatever timetables Kohl sets. They need German money to grow, and Kohl is still their chief patron inside the EU and NATO. In the heady days after the fall of Communism in 1989, Kohl promised support for putting these countries on the fast track for membership in both groups, but now he is putting more emphasis on the EU, which doesn't raise Russian hackles. "The first step is EU membership, with NATO membership as a follow-up later," says Horst Teltschik, a former Kohl foreign policy adviser who is now on BMW's board.

Although the Central Europeans may balk at that message, it is a tough one to brush off. NATO membership would require huge and probably unnecessary defense expenditures from these relatively poor countries. Why not instead devote their limited resources to bringing their economies up to EU standards? That is certainly what German companies putting their money into these countries would prefer.EDITED BY STANLEY REED $by By John Templeman in Bonn, with Karen Lowry Miller in WarsawReturn to top


British Prime Minister John Major is expected to soon decide whether to call a referendum over Britain adopting the single currency that the European Union is planning to implement at the end of the decade. Major is under growing pressure to hold such a vote because of the activities of Euroskeptic Sir James Goldsmith. The Anglo-French financier is threatening to put $30 million of his own money into an anti-European Union campaign in Britain.

Goldsmith has been laying out his position in a series of full-page ads in the British press. He plans to recruit some 400 Parliamentary candidates for the next general election--to be held in May, 1997, at the latest. The Goldsmith party would favor a vote not just on currency union but on the whole question of Britain's role in Europe. With emotion on Europe running high in Britain, a pro-referendum party would likely draw away enough Conservative voters to assure Major's defeat, almost certainly bringing in a Labor government.

The issue is splitting Major's Cabinet. Kenneth Clarke, Major's pro-Europe Chancellor of the Exchequer, is threatening to resign if the Prime Minister goes the referendum route. Major is likely to see his parliamentary majority trimmed to one after a by-election in early April.EDITED BY STANLEY REED $by By Paula Dwyer in LondonReturn to top

blog comments powered by Disqus