2The Daily Tar HeelWednesday, February 19, 1990
World and Nation
Czechs granted economic
From Associated Press reports
WASHINGTON President Bush
gave investment and trade rewards to
Czechoslovakia Tuesday for over
throwing communist rule but told Presi
dent Vaclav Havel the United States
wouldn't retreat from a precautionary
"strong military presence" in Europe.
Bush gave a warm welcome to the
first of Eastern Europe's new reform
leaders to visit the White House and
praised Havel, a onetime dissident
playwright who went from prison to the
presidency in a year's time, as "a man
of tremendous moral courage, one of
the heroes of the revolution of '89."
The tw o leaders talked for two hours,
and afterward, Havel said the talks had
been "very warm, very open, very
friendly," and he invited Bush to visit
Prague.
Bush announced a waiver of the
Jackson-Vanik amendment that restricts
trade relations with communist nations
that inhibit Jewish emigration.
The waiver clears the way for nego
tiation of a trade agreement and the
eventual award of most-favored-nation
trading status, which would provide
Czechoslovakia the most liberal access
possible to American markets. In re
turn, the Czechoslovak Parliament
would have to enact a law ending the
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strictive emigration policies.
Bush also authorized the Export
Import Bank to operate in Prague and
said he would support readmission of
Czechoslovakia to the International
Monetary Fund and World Bank. Bush
authorized sending Peace Corps volun
teers to Czechoslovakia by autumn to
teach English.
Regarding military forces, Havel has
called for disarmament throughout
Europe and has asked the Soviet Union
to withdraw the 75.000 Soviet troops in
Czechoslovakia. Some Czechoslovak
leaders have called for eventual disso
lution of NATO, along with the War
saw Pact, the Soviet-led alliance to
which Czechoslovakia belongs.
In his public comments. Bush said,
"I know I can speak for all Western
leaders when I say that the Atlantic
Alliance will continue to play a vital
role in assuring stability and security in
Europe at this great and historic mo
ment. "And America w ill continue to play
its part, including a strong military
presence for our security and for
Europe's," said Bush, who has pro
posed that the United States and Soviet
Union reduce their troops in Central
Europe to 195,000 on each side.
East Germany presses to accelerate reunification
From Associated Press reports
EAST BERLIN East German
Prem ier I Ians Modrow, pressed by mass
emigration and a crumbling economy,
appealed Tuesday for immediate reu
nification talks under a formula worked
out with the Allied victors of World
War II.
Chancellor Helmut Kohl, the West
German chancellor, urged Modrow's
government to create a social security
system as generous as West Germany's
as a means of stopping the flight.
More than 400,000 people most
Greenspan
From Associated Press reports
WASHINGTON Federal Reserve
Chairman Alan Greenspan on Tuesday
expressed "guarded optimism" that the
country can avoid a recession this year,
but his warnings on the dangers of
accelerating inflation helped send fi
nancial markets into a tailspin.
Setting up a potential clash w ith the
administration, Greenspan said the
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Bush, in the private discussions,
talked at length about a need for U.S.
troops in Europe and portrayed NATO
as a stabilizing factor at a time of great
transition, said Assistant Secretary of
State Raymond Seitz.
Seitz quoted Havel as saying, "There
is no doubt about the stabilizing role of
NATO and the United States." And he
said the Czechoslovak president agreed
on a need for NATO and U.S. forces
until "new security structures emerge
in Europe."
Bush said NATO perhaps should
have a broader role than at present,
Seitz said.
Moreover, the official said Bush told
Havel "he did not envisage the U.S.
presence going on forever and ever and
ever and ever ... It was contingent on
the U.S. presence being centrally wel
comed in Europe and that if the United
States were no longer welcomed in
Europe, the U.S. forces would come
home, forthwith, right away, last one
out turn out the lights."
The Czechoslovak president said he
has no fears about German reunifica
tion so long as the new country is a
democracy. "I wouldn't be afraid of a
democratic country if it had 100 mil
lion people, but I would be afraid of a
totalitarian country with a million
of them skilled workers have left the
East for West Germany in the past year
after giving up hope of significant
improvement in living conditions at
home.
Kohl met with West German indus
trial leaders Tuesday to draft plans for
"solidarity with East Germany," and
told journalists his government would
help finance unemployment benefits
and pensions for East Germans.
He was vague about the degree to
which West Germany would under
write the costs of East Germany's tran
says recession may not
central bank expected the economy to
grow at a rate far below the one on
which the administration based its 1991
budget.
Wall Street, which has been battered
this year by rising foreign interest rates,
took Greenspan's inflation warnings
and grow th forecast as further evidence
that the central bank is intent on pursu
ing a tight money policy to battle infla
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1
George Bush
people," he said.
Havel, who arrived in the United
States on Monday, will address a joint
session of Congress on Wednesday
before traveling to New York for busi
ness, political and cultural meetings.
He will return home Thursday night.
Next week, he will make his first visit
to Moscow.
sition to capitalism, however, saying
only that Bonn could provide "start-up
financing" for the benefits.
His references to German "social
unity" reflected a growing realization
among West Germans that they must
pay for reunification. Kohl's govern
ment has leen reluctant to make firm
deals with Modrow, a reform-minded
Communist whose interim Cabinet will
govern until free elections March 18.
East Germany's parliament passed a
constitutional amendment and legisla
tion Tuesday setting rules for the elec
tion and thus will not move anytime
soon to lower interest rates.
At mid-afternoon, interest rates on
long-term government bonds had
jumped sharply while the prices, which
move in the opposite direction, fell as
much as $18 per $1,000 in face value.
The Dow Jones industrial average of 30
stocks was down more than 38 points at
the close of business.
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Defense secretary in Japan :
to gain more troop support
From Associated Press reports
TOKYO Defense Secretary
Dick Cheney arrived Tuesday from
the Philippines seeking what the
United States hopes will be a "siz
able increase" in Japan's $2.4 billion
annual support for American troops
stationed here.
Cheney's visit came as Philippine
President Corazon Aquino signaled
a willingness to work out differences
over U.S. bases there, despite her
refusal to meet with Cheney during
his stay in Manila the previous three
days.
The defense secretary had a
warmer reception in Tokyo.
"The Japanese are very under
standing and are very willing to help
us as much as they can." said a senior
Pentagon official traveling with
Cheney.
Ruling to battle abusive parents
WASHINGTON The Supreme
Court ruled Tuesday that parents
suspected of child abuse sometimes
may be jailed indefinitely for refus
ing to disclose the whereabouts of
their children.
Voting 7-2, the justices permitted
the indefinite jailing of a Maryland
tions. The new parliament will have
400 seats, 100 fewer than the current
People's Chamber.
At a meeting in Ottawa, Canada, last
week the United States, Soviet Union,
Britain and France agreed with East
and West Germany on a two-stage plan
for reunification.
In the first stage of what became
known as the "2-plus-4" formula, Ger
man experts would discuss political,
economic and legal steps to unity. In
the second, the Germanys would be
joined by the Allies to discuss interna
occur despite inflation
"We're in an area where (inflation)
is in danger of accelerating," Green
span said in his appearance before a
Mouse Banking subcommittee.
He called the performance of infla
tion so far this year "horrendous," al
though he said January's jump in prices
was attributable in large part to tempo
rary factors stemming from severe cold
in December.
But he said the risks of higher infla
tion in the present circumstances were
"larger than we should be willing to
tolerate."
In the new Fed economic forecast,
the central bank projected that the
economy, as measured by the gross
national product, will grow at an ane
mic rate of 1.75 percent to 2 percent
this year, the slowest annual growth
rate since the 1981-82 recession.
The Bush administration, in a fore
cast released last month with its 1 99 1
budget request, forecast growth almost
a full percentage point higher at 2.6
percent, w hen measured from the fourth
quarter of 19S9.
The administration also predicted
that interest rates would drop sharply
from their current levels, a decline that
would lower the government's borrow
ing costs on the $2.9 trillion national
debt. With the Fed expected to keep
interest rates high to restrain inflation
ary pressures, economists said both the
administration's growth and interest
rate assumptions would prove to be too
optimistic, thus ballooning the federal
budget deficit by billions of dollars.
'The Greenspan testimony is a clear
indication of a toughened central bank
stance against inflation," said Alan
Sinai, chief economist of the Boston
Co.
'The message is that interest rates
will stay high and perhaps go higher as
the central bank keeps the economy
throttled back to bring down inflation."
From June through December, the
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News in Brief
woman for refusing to tell authori
ties where her young son can be
found. The boy is feared dead.
Society's interest in protecting the
boy from harm prevails over the
mother's claim that her right against
self-incrimination will be violated if
she is forced to reveal the child's
location, the court said.
These bugs eat drugs
WASHINGTON The Bush'
administration is pushing research
into a possible new combatant in the
war against cocaine: a caterpillar with'
a taste for coca leaves. However,
officials said Tuesday the insects
won't be deployed in South America
unless local governments approve.
"We are not undertaking any bio
logical war," said spokesman Mar
lin Fitwater. "Neither troops nor
caterpillars will go in without prior
request and consultation."
Peruvian and Bolivian growers
supply the vast majority of the world's
coca leaves, the raw material for
cocaine.
tional ramifications.
Modrow said parallel plans should
be made for a meeting of the 35-nation
Conference on Security and Coopera
tion in Europe.
A joint government commission of
East and West Germany met Tuesday
to discuss ways of achieving monetary
and economic unity.
Leaders of both countries hope
monetary union will stem the flight of
about 2,(KX) people a day from East to
West, but no agreement is expected
until after the March elections.
central bank had been gradually easing
short-term interest rates out of concern
that weakness in the economy might
spell the end of the seven-year-old
economic recovery, the longest in
peacetime history.
While economic growth did slow to
a barely discernible 0.5 percent annual
rate from October through December,
the worst performance in 3 years, Green
span in his testimony said that he be
lieved the danger point for an imminent
recession had now passed.
He cited a variety of January statis
tics from rising auto sales to a surge in
new home construction to bolster his
belief that a modest rebound was oc
curring and that the "weakest point
may have passed." ;
"While we cannot be certain that we
are as yet out of the recessionary woods,
such evidence warrants at least guarded
optimism," he said. The Fed's eco
nomic forecast for 1990 represented
only a modest change from a prelimi
nary estimate of 1.5 percent to 2 per
cent GNP growth made last June. But
the central bank did significantly alter
its forecast on inflation, predicting
consumer prices would rise 4 percent to
4.5 percent this year, down from a June
forecast of a 4.5 percent to 5 percent
increase.
Analysts took this revision as ai
other sign that the Fed was toughening
its inflation-fighting resolve.
"The ultimate objective of economic
policy is to foster the maximum sus
tainable rate of economic growth,"
Greenspan said, adding, however, that
the economy might have to undergo
sub par grow th for a period of time to
make sure inflation remained contained.
On other topics, Greenspan said there
was never a desire on the part of federal
officials to rescue Drexel Burnham
Lambert, the large securities firm that
got into financial trougle because of its
aggressive marketing of junk bonds.
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