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Address by the Chancellor of the Federal Republic of Germany1, Helmut Kohl

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1988
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I have the great honor and pleasure of welcoming you to Berlin today for the Annual Meetings of the International Monetary Fund and the World Bank. In particular, I would like to welcome our guests who have come to our old capital, Berlin, from all over the world.

By choosing Berlin as the venue of your meetings you have placed special trust and confidence in this city, for which I thank you on behalf of all Germans, especially the Berliners. This city is situated in the heart of Europe, where East and West meet. In their particularly exposed position, the inhabitants of Berlin have learned from personal experience over the last 40 years that the solution of international problems must not be sought through confrontation, but by peaceful means and through constructive cooperation between everyone concerned. Not least for this reason, you have made a good choice by opting for Berlin as your venue. The central task of your two organizations is, after all, to contribute through cooperation in a spirit of mutual trust to the positive development of the world economy and of the member countries.

In view of the subjects to be dealt with at this meeting, it comes as no surprise that different views exist on the right paths to follow. This applies above all to the difficult economic situation of many developing countries, especially to their overwhelming debt burden. Nobody can remain unmoved by the want and misery in many countries all over the world, particularly in the Third World. It is thus all the more important, despite divergent points of view, to hold constructive discussions. But let us not delude ourselves; however understandable the morally based demands for a development policy that is above all socially oriented, real help can ultimately be provided only by those who tackle the problems head on, and not by those who shun responsibility and advocate deceptive panaceas.

What we need is a steadfast commitment to a fair balance of interests and to solutions that bring progress, especially under the current difficult conditions. This is precisely the goal of the International Monetary Fund and the World Bank, which they make great efforts to attain. For this highly important work I would like to express to you the respect and recognition of the Federal Republic of Germany.

Constructive cooperation rather than unilateral action without regard to others, working together instead of opposing each other—these are basic elements of the Articles of Agreement of the International Monetary Fund and the World Bank. Since being established over 40 years ago, the two organizations have made important contributions toward ensuring a general expansion of the world economy, despite difficult conditions at times. World trade has expanded to an extent that surely far exceeds what the founders of these organizations envisaged. Through considerable financial assistance, through support for project funding and structural adjustment, and through expert economic advice, the World Bank and the IMF have paved the way for better integration of the developing countries into the world economy.

The importance of these organizations is underscored not least by the fact that the vast majority of all countries are members of the organizations, irrespective of their political and economic values, and again, this cooperation is proved today most impressively. They regard these institutions as a forum for close, businesslike cooperation, a forum in which—and this cannot be stressed strongly enough—the vast majority of decisions are taken unanimously in a spirit of trust. The aim must be to preserve and enhance this cooperation. And in view of the encouraging changes in East-West relations in the past few years, let me add this: when, in the last 40 years, were the prospects better than today for the intensification and expansion of international cooperation?

There is cause for hope not only on political grounds. Optimism is also justified in the light of world economic developments. The economic upswing in industrial countries has now reached its sixth year; in other words, we are currently experiencing one of the longest periods in the postwar era characterized by both economic growth and high price stability. After the turmoil on financial and foreign exchange markets last year, quite a few people feared a general crisis of the world economy. Close international coordination and economic prudence on the part of governments and central banks have played a decisive part in successfully averting such a development.

The Government of the Federal Republic of Germany has also made its contribution in this respect. At the beginning of this year, we reduced taxes to a considerable extent, lent additional support to private and public investment, and declared our readiness to accept a higher budget deficit this year. The success is now clearly visible. In the first half of 1988, economic growth in the Federal Republic of Germany reached 4 percent—the best result in nine years. And—what is even more important—the growth should continue in the years ahead, because it is based on a sound foundation.

This economic growth has also benefited our partners abroad. As a result of the steep rise in imports, our trade surplus has fallen appreciably in real terms; in relation to gross national product it has decreased by more than half over the last three years. This is an important step toward reducing trade imbalances. In the first six months of this year, our imports from developing countries rose by over 5 percent, while our exports to those countries dropped by more than 8 percent in the same period. These are tangible changes which directly help to improve the economic situation in numerous countries.

Nonetheless, one cannot overlook the fact that important tasks still have to be mastered. The high unemployment in many countries is a situation that we cannot accept, nor do we intend to. In the Federal Republic of Germany, we have adopted an extensive tax reform. In this way we shall make a substantial contribution toward strengthening growth and, hence, toward creating more new jobs.

Securing economic growth, reducing trade imbalances, and, above all, making progress in coping with the debt problems—all of this presupposes in particular that we jointly take an unequivocal stand against protectionism and pursue a consistent policy aimed at open markets. Especially in this connection, it is true that economic problems cannot be solved through confrontation, but only through constructive cooperation. I am saying this, as Chancellor of the Federal Republic of Germany, because I know that our country in particular was only able to achieve its growth in the last 40 years, following the collapse of our country after the Nazi era, because we implemented an open market policy and because we rejected any type of protectionism. This will remain our policy, and it will remain an important contribution of ours to the European Common Market after 1992 as well. Let me add that the completion of the single European market by the end of 1992 is not directed against anyone. It must not be directed against any other parts of the world. On the contrary, this large market will, with its 320 million inhabitants, offer improved export opportunities for our partners throughout the world and thus contribute toward growth and employment in other countries as well.

It is essential now that the ongoing General Agreement on Tariffs and Trade (GATT) negotiations should lead to a tangible reduction of trade barriers. The favorable world economic conditions should help the mid-term review this December to make substantial progress. Such progress includes satisfactory solutions in the agricultural sector. By its decisions of February of this year, the European Economic Community (EEC) took concrete steps for reducing surplus production. Initial success is already clearly discernible. It is also indisputable that we must rely more strongly on market forces. This calls for realism and a sense of proportion in choosing the right path. The Federal Republic of Germany, despite the problems we too have in this area, will make a constructive contribution to this endeavor.

In spite of the improved world economic conditions, the situation in large parts of the Third World is clearly as grave as ever. For many of those countries the debt problem still constitutes an oppressive burden threatening their economic, social, and political stability. Further vigorous efforts are thus required. We must not be indifferent to hunger and misery, disease, and environmental disasters. Rather, we must make every effort to solve these problems, and we in Germany, as in all other parts of the world, must make our contribution to finding a solution. The prosperity which many of us enjoy makes it our duty to provide effective assistance. However, genuine progress can only be achieved if we address the existing problems in a precise and differentiated manner and take due account of the specific conditions prevailing in each case.

The situation in many African countries remains critical. I find it deeply disturbing that, despite repeated efforts, it has not proved possible in many cases to bring about durable improvements. Diverse assistance measures have meanwhile been initiated for the poorest countries in particular. I need only mention the large increase in the funds available to the World Bank, the International Development Association (IDA) and regional development banks, the World Bank’s special program for highly indebted low-income African countries, and the enhancement of the IMF’s structural adjustment facility.

But we cannot confine ourselves to placing additional funds at the disposal of international organizations, though this is without doubt highly important. Also needed are further measures that specifically help to improve the situation of the poorest and highly indebted countries. For this reason, the Federal Republic of Germany completely canceled the official development assistance (ODA) debt owed by the least-developed countries. Since then we have been providing financial assistance to them only in the form of grants. In June of this year we decided to extend the debt cancellation to other poor and highly indebted countries in Africa, provided that they carry out reform and adjustment programs in collaboration with the International Monetary Fund and the World Bank. My Government has thus effected or envisaged debt cancellation totaling almost DM 8 billion—i.e., about $4 billion.

In view of the particularly difficult situation of many African developing countries, we reached agreement in Toronto on providing additional relief for highly indebted countries in Africa. The Government of the Federal Republic of Germany is thus willing to make further efforts aimed at improving the economic situation of the poorest countries. We will actively participate in the implementation of the agreement of Toronto by providing additional grants to the sub-Saharan countries concerned, so as to reduce interest payments by up to 50 percent within the framework of debt rescheduling in the Paris Club. We have also decided to simplify the credit terms for our bilateral financial cooperation with developing countries and to make them considerably more favorable for our partners in the Third World. We are launching these new, additional initiatives with a view to improving the prospects of the countries concerned for coping with their debt problems.

Financial assistance from outside and an economic policy that releases growth potential and ensures attractive conditions for investment—these two factors together lay the foundations for a genuine improvement in living conditions. We consider it our duty to contribute to this through the provision of assistance and by applying our own personal experience in this century, thereby seeking to help others who are far worse off than we are. Coping with the difficult debt problems of many middle-income countries, especially in Latin America, also calls for a balanced mix of reforms within the country itself, debt-servicing relief, and fresh money.

Together with the countries concerned, banks bear the main responsibility for finding solutions that afford the prospect of overcoming the economic difficulties. Since this is primarily a matter requiring cooperation between the banks and the countries involved, it cannot be my task to provide concrete recommendations. But I would like to stress the urgent need for durable solutions in this field. Let me emphasize that the tax law and the bank supervision system existing in the Federal Republic of Germany provide the necessary scope for a flexible approach on the part of banks.

The aim of all joint efforts must be to ensure that the countries concerned again acquire access to international financial markets. They need new opportunities for economic growth and development today, and not sometime in the distant future. Only in this way can we give people new hope—the hope of improving their social conditions and at the same time preserving the natural foundations of life for coming generations.

However, it would be a Pyrrhic victory if increased prosperity could be gained at the expense of destroying our vitally essential environment. No nation can afford to exploit or destroy its natural resources and thus eliminate the foundations of its own life and ultimately that of other nations. We in the industrial countries have had to learn through a painful process that our environment is highly vulnerable to human interference. We have also gained the experience that environmental hazards and their consequences do not stop at national frontiers. Thus, they can only be tackled effectively through international cooperation.

This experience gained by industrial nations also applies worldwide. Protection of the earth’s climate and atmosphere, of endangered species, of oceans and forests is a matter that concerns all of us. I therefore appeal to everyone to take cooperation in these fields very seriously in view of this challenge. My Government has already drawn practical conclusions. For example, an environmental impact assessment is generally prescribed for development projects financed by my country. We suggest that where this is not already the case, other countries and international organizations also provide for such environmental impact assessments in the projects they carry out.

However, this is not enough. We must jointly make greater efforts if we are to master the global environmental challenges. At the economic summit in Toronto, I therefore proposed that environmental protection, especially the protection of tropical rain forests, be included to a greater extent than hitherto in cooperation with developing countries. Our debt cancellation for countries with large tropical forests, such as Zaïre, Ghana, and Madagascar, is intended not least to widen the scope of these countries for protecting their environment and their natural resources. It is essential that as many creditors as possible should provide comparable forms of debt relief. In this connection, one should above all examine to what extent debt relief or forgiveness can be linked more closely to ecological requirements. We would greatly welcome the World Bank stepping up its activities in this important field and ensuring the necessary international coordination.

The Government of the Federal Republic of Germany is determined to set a clear example through other efforts as well. By the end of this year we shall make available, in addition to the DM 108 million earmarked for forest protection and reafforestation, a further DM 150 million for the purpose of saving tropical forests. In the coming years the Federal Government will tangibly increase the funds for this important task. The Food and Agricultural Organization’s (FAO) plan of action for tropical forests provides a framework enjoying international support. It has been developed with substantial participation by the World Bank.

However, the decisive prerequisite for the success of these efforts is that countries that possess tropical forests do their utmost to protect the forests and ensure proper management of them. We are fully aware of the difficult economic problems that this poses for some of those countries. Let me stress this once more. Without a coherent strategy for protecting tropical forests in which everyone concerned participates, we cannot master the vast problems threatening the future of all mankind. Environmental protection must generally become a focal point of development policy.

I address this strong appeal to all countries, governments, and organizations. Environmental protection is certainly not the only objective of forward-looking North-South cooperation, and for some countries it may not even be the most important one. But without effective environmental protection, development cooperation can only lead to a dead end that could prove disastrous for mankind.

The tasks ahead of us are a challenge to our creative ability. We face them with our hearts and minds, with human solidarity, and economic prudence. We in the Federal Republic of Germany do so all the more resolutely, as we were confronted with similarly difficult tasks exactly 40 years ago. At that time, a few years after the war and in the middle of a seemingly hopeless economic situation, we had to find new solutions. We know, therefore, what it is like to be in a seemingly hopeless economic situation, to have to cope with a new currency and a new economic order. We opted for a basic reorientation: for the introduction of the deutsche mark; for a commitment to monetary stability; and for a liberal, socially tempered economic system, which since then has been known as a “social market economy.” In view of the huge problems existing then, probably nobody would have dared to hope for the success that has actually been achieved over the last 40 years.

Not least against the background of this experience you, ladies and gentlemen, can count on the Federal Republic of Germany remaining your reliable partner even, and in particular, under the difficult conditions currently experienced in many countries. Our common goal continues to be that of facilitating throughout the world living conditions that can genuinely be described as humane. We realize from our own experience that the path to that goal is far from easy and that there are no simple recipes for removing the obstacles. What we need in our joint efforts are mutual understanding, determination, and steadfastness. Our goal is to achieve more justice. Our common future is at stake. In this spirit, I wish you every success in your discussions here in Berlin, as we are jointly dependent on progress. I hope that there will be a great message from this conference in Berlin for everybody in the world.

Delivered at the Opening Joint Session, September 27, 1988.

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