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East Germans Cashing Life Insurance Policies

May 11, 1990

EAST BERLIN (AP) _ Many East Germans are cashing in their life insurance so they can have more savings on hand when their money is converted to West German marks, the government said Friday.

Long lines have formed at state insurance bureaus in recent days because East Germans believe they will get a better exchange rate on cash than on insurance, the official news agency ADN said.

Cash savings up to $2,440 for most East Germans will be converted at a 1-1 rate, while insurance policies are expected to be converted at a 2-1 rate to the West German mark.

Many also fear dissolution of the state insurance system after the two Germanys merge their economies.

The state insurance office on Wednesday asked that a 1-1 conversion be granted for East German insurance policies.

Experts from the German states are negotiating a state treaty under which their economies and social institutions are to be joined by July 2.

East Germany will move to a free market economy, which will replace the 4- decade-old socialist system that heavily subsidizes food, housing and employment.

Prices and unemployment already are increasing as Western products flood into East Germany. East Germany is trying to negotiate some job and social benefit guarantees during the transition to a market economy.

East Germans pay about the same amount of money for their monthly rent - sometimes as low as $38 per month - as a West German pays for two tanks of gasoline.

An East German official said Friday that some price controls on rents must be maintained.

″The prevailing income structure in (East Germany) makes rent price maintenance absolutely necessary,″ said Ingemar Axel Viehweger, minister for housing and construction.

″Too hasty steps in this sensitive area will only imperil the real income of the citizens during the monetary union,″ he said.

He proposed a gradual adjustment of rents to market prices, taking into consideration income and actual costs for upkeep and management of apartments.

Unification with West Germany has been fueled by East Germany’s decrepit economy, eroded by the exodus of East Germans to West Germany and poor economic planning by the ousted Communist government.

Large numbers of East German factories are expected to close when they are forced to compete with more efficient Western businesses that produce better quality goods.

East Germans already swarm across the borders, opened in November, to buy West German food and clothing. Border crossings are typically packed with returning East Germans toting huge satchels stuffed with groceries.

East Germany’s beleaguered shoe industry, where in recent weeks workers have held one-hour strikes to protest Western imports, said it would cut prices and try to improve quality to compete with the West, ADN said Friday.

Tens of thousands of teachers, textile workers and farmers staged protests and strikes Thursday to demand protection from the unemployment expected as East Germany moves to a free market.

Hans Klein, spokesman for West German Chancellor Helmut Kohl, said the organizers of the strikes were former Communists who ″are to some extent exactly the forces who caused″ East Germany’s dire economic problems.

Klein told a news conference in the West German capital, Bonn, that there was legitimate ″uncertainty and fear″ over talks between the Germanys on the merger of their economies and social institutions.

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