GERMAN FINANCIAL POLICY MAKERS IN RARE DISSENSION
  Karl Otto Poehl, head of West Germany's
  central bank, and Finance Minister Gerhard Stoltenberg are
  normally so much in agreement that some foreigners doubt the
  central bank's independence.
      But a rare public row between the ebullient Poehl,
  president of the Bundesbank, and Stoltenberg, over a
  controversial investment tax proposal, has added to the woes of
  the country's already nervous financial markets, bankers said.
      Poehl told an investment symposium in Frankfurt last
  Thursday he feared the tax would raise borrowing costs and
  interest rates
      Stoltenberg quickly issued a statement rebutting Poehl's
  criticism, saying West Germany would remain an attractive place
  for foreign investors.
      "The obvious lack of coordination between the Bundesbank and
  Finance Ministry does not instil confidence in foreign
  investors," said one economist for a London broker, who asked
  not to be identified.
      Bankers here expressed confidence the two top financial
  policy-makers would quickly patch up their relationship to
  steer the economy through a particularly difficult time.
      "There are plenty of objective pressures which will result
  in things getting back to normal again after a period of ill
  feeling," said Commerzbank AG chief economist Juergen Pfister.
      News on October 9 that the government was planning a 10 pct
  withholding tax wiped billions of marks off shares and bonds in
  a market already reeling from rising interest rates at home and
  abroad.
      Bankers said the Bundesbank was angered by the way the
  finance ministry announced the plan -- without consulting the
  Bundesbank adequately, and allowing apparently conflicting
  details to dribble out into an unprepared and uncertain market.
      Both Poehl, 57, and Stoltenberg, 59, have been under
  extraordinary pressures lately.
      Poehl has had to switch to the hard line promoted by his
  deputy, Helmut Schlesinger, jacking up interest rates to fight
  inflationary fears and abandoning the pragmatic policies he had
  pursued so far this year to promote currency stability.
      In recent statements Poehl has sounded more like
  Schlesinger. For years the softly-spoken economist has been
  warning in speech after speech that excessive money supply
  growth would eventually lead to rising prices.
      Schlesinger now has a majority of support in the Bundesbank
  council, and since late summer Poehl has had to represent his
  views, bankers said.
      "Poehl is in a minority in his own house," said Commerzbank's
  Pfister.
      "Poehl is in a dilemma. He must follow a policy that is not
  entirely his own," said another economist.
      The dilemma is that if German interest rates rise too far,
  they will attract funds into the country, pushing up the mark
  and hurting West German exporters.
      The dollar has now shed some seven pfennigs since the
  Bundesbank's new tack became clear in early October.
      Since last Thursday, United States Treasury Secretary James
  Baker has criticized the Bundesbank rate increases.
      Bankers said this could foreshadow a revival of the 1986
  war of words between the U.S. And West Germany, in which U.S.
  Officials talked down the dollar to force West Germany to
  stimulate its economy and thus suck in more U.S. Exports.
      One way West Germany agreed to do this was making a round
  of tax cuts worth 39 billion marks from 1990.
      But financing these tax cuts has proved more difficult for
  Stoltenberg than he had bargained for.
      The cool, unflappable northerner, who was regularly voted
  most popular government politician last year, had to face
  resistance from local barons in the government coalition
  parties and from trade unions to his planned subsidy cuts.
      The withholding tax was intended to plug one gap by raising
  4.3 billion marks.
      But it has caused an outcry among bankers, who say it will
  push up borrowing costs. The extra amount this costs the
  government could wipe out the revenue the tax brings in.
      Meanwhile Stoltenberg is dealing with a local political row
  which has turned into the country's worst political scandal.
      Stoltenberg had to leave monetary talks in Washington last
  month early to sort out a row in the northern state of
  Schleswig-Holstein, where he heads the ruling CDU party.
      The state's CDU premier, Uwe Barschel, had to resign after
  allegations of a "dirty tricks" election campaign led to heavy
  losses for the CDU in state elections.
      Barschel was found dead in a hotel bath in Geneva last
  weekend. Police say the death appears to have been suicide.
      Cooperation between Poehl and Stoltenberg is all the more
  remarkable as Poehl is in the opposition Social Democrats, and
  was appointed by former chancellor Helmut Schmidt.
      When Poehl's contract came up for renewal earlier this
  year, Chancellor Helmut Kohl's CDU-led coalition government
  gave Poehl another eight-year term.
      Werner Chrobok, managing partner at Bethmann Bank, said he
  hoped the two men would soon be of one opinion again.
      But when Poehl criticized Stoltenberg's tax plans he was
  not only voicing what many bankers felt but demonstrating the
  Bundesbank's independence of government, Chrobok said.
  

