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Germany: IMF Advises An End To Eastern Supports

Washington, 1 September 1997 (RFE/RL/) - The Executive Directors of the International Monetary Fund (IMF) have warned Germany that unless it phases out special support programs for labor in states of the former East Germany, the process of integration may last much longer and cost a lot more than anyone anticipated.

The IMF directors, in Germany's annual economic review, said unemployment remains an especially serious problem in the east. Despite massive government payments and tax-induced investment into the region, the process of economic convergence has "slowed substantially," they said in a statement released last week.

The IMF said the cost of labor in the east has discouraged private investment and that while efforts to moderate wage increases there are welcomed, Bonn must end the support programs which they say are keeping wages in the east artifically high.

For the country as a whole, the IMF directors said Germany's labor rules remain far too rigid -- making the current recovery "less vigorous" than it should be.

The 24 IMF executive directors represent all the nations in the fund in conducting its daily business.