BUSINESS ABROAD: Raise the Mark?

Said West Germany’s liberal daily Frankfurter Allgemeine last week: “The Federal Republic is becoming an international finance center comparable to New York and Zurich.” What prompted such proud talk was the flood of foreign money that has poured into West Germany and sent its stock market off on a sharp rise. By last week, the official index of all shares had risen from 169 to 180 since June, and many industrials had piled up gains of 20 points or more. Chief reason for the influx of capital: persistent rumors that West Germany’s superstrong Deutsche Mark will soon be revalued upward.

Some foreign investors pass up the stock market, buy up large amounts of marks. Said a Dusseldorf banker: “The other day a Norwegian walked in with 2,000,000 DM he had bought and asked us to keep it until the day when it might suddenly become a much larger sum.” Throughout the world, foreigners who have bought goods from West Germany are paying their bills with unaccustomed haste to beat any possible revaluation, and sellers to West Germany are letting their debts go in expectation of revaluation profits.

Inflation Curb. West Germans themselves are less agreed on the merits of revaluation. Most German businessmen are against it because it would make German goods more costly in world markets. On the other hand, some economists feel that revaluation is necessary to curb inflationary pressures caused by the influx of money from West German industry’s booming overseas operations—money that chases goods already in short supply precisely because of such heavy exports. Since revaluation would make the mark worth more in foreign currency, it would encourage imports, thus ease inflation.

The chief pressures for revaluation do not come from inside West Germany, but from its European trade partners. They are worried because West Germany has lured so much investment capital away from the soft British pound and the French franc, captured many overseas customers that other European nations would like to have. Great Britain is in the forefront in demanding German revaluation. Britain’s gold and dollar reserves dropped $225 million in August. the biggest dip since the Suez crisis, and its deficit with the European payments union reached $178 million (compared with West Germany’s fat surplus of $280 million). The rush to turn pounds into marks has been so great that Britain had to spend scarce dollars to support the pound to keep it from a bad slump. Some British economists even suggested that the mark be declared a scarce currency at the October meeting of the Organization for European Economic Cooperation, thus opening the way to severe restrictions on exports from West Germany.

Eventual Necessity. For such reasons the feeling is growing in West Germany that revaluation is an eventual necessity. Economics Minister Ludwig Erhard has hopefully hinted that he would like the U.S. to revalue the dollar simultaneously, since West Germany’s only adverse balance is with the dollar area, but no one expects this to happen. Once through with this week’s elections. West Germany is expected to revalue the mark—possibly at the meeting of the International Monetary Fund in Washington at month’s end.