Talk of German Monetary Union Raises Inflation Concerns: An
Awinrwtinn nf a Common Currency Could Drive Up Interest Rates in the U.S., Other Industrialized Nations</br></br>The rush toward a monetary union between East and West Germany is sending ripples throughout the interlocked financial markets of the world, raising concerns that the unprecedented development in the heart of Europe could boost interest rates in the United States and other industrial countries.</br></br>In today's world, when rates rise in one major country, they may well go up in other nations as well. While many factors closer to home are more important in determining the interest rate someone pays on a mortgage in the United States, developments such as those in the two Germanys can play a role. In this case, the developments are pushing rates up.</br></br>Large West German government subsidies to East Germany, pent up consumer demand in the goods-starved East and a surge in investment by West German companies in the formerly Communist-controlled state are expected to combine to produce rising rates in West Germany, despite efforts by the West German central bank to keep the situation under control.</br></br>When the startling prospect emerged last week, investors in West GermanyÛÓwhose ranks include not just Germans but a host of foreigners as wellÛÓimmediately decided it would generate strong inflationary pressures. As a consequence, they bid up long-term interest rates there sharply. The changes quickly were felt in the United States, Britain and Japan because of the immense