West German Official Says U.S. Can Avoid Recession
FRANKFURT, Feb. 5-The United States' and its western partners can avoid a recession if financial markets are convinced that "the United States i3 willing to defend its currency," central bank president Karl Otto Poehl said in an interview today.</br></br>Poehl said he believes "there is a chance" of exchange rate stability in the wake of Black Monday, both because the Oct. 19 market plunge dampened fears of inflation and because more progress than is realized has been made in reducing global trade imbalances.</br></br>But he warned that discussions such as the Washington meeting Thursday between West German Finance Minister Gerhard Stoltenberg and Treasury Secretary James A. Baker 111 have limited value. "I am not against close cooperation, but [these discussions] should be kept on a low-profile basis," Poehl said, Û÷We donÛªt want to create too many expectations.Û [In Washington, Stoltenberg told reporters that the close coordination between finance ministers and central bank chiefs produced a ÛÏmore promisingÛ outlook for the world economy this year than most had thought possible in the immediate aftermath of the global market collapse. He said this coordination led to the joint statement issued just before Christmas, as well as ÛÏnot secret but open market inter-</br></br>[Aq a result, he said, there is a "more stableÛ situation with exchange rates, the dollar has recovered some strength and there is a change in the expectations of currency traders, who had been pushing -the dollar down. [Stoltenberg said his talks this week with Baker and Federal Reserve Board Chairman Alan Greenspan ÛÏconfirmed and strengthenedÛ his conviction that Western Europe, the United States and Japan now believe in good international cooperation to get through a year "of problems and some risksÛ in the international economy.</br></br>[This represents a sharp change from the situation before the market crash, which was blamed in part on BakerÛªs public criticism of West GermanyÛªs economic policies and a threat that the United States would let the value of the dollar fall, hurting BonnÛªs export-oriented industries, if the government refused to stimulate its economic growth. Stoltenberg said West German growth would be about lVi percent to 2 percent this year "if there is no major volatility in exchange rates.ÛªÛª]