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industrial West. The current account with the U.S.S.R. was nearly in balance in the early 1960's; in more recent years surpluses have followed, except for a deficit in 1970. Imbalances in transactions with the East European countries have been small and have been quickly adjusted, apart from the effect of several sizable commodity credits, notably one of $100 million to Poland. The account with the industrial West showed surpluses with West Germany and deficits with other countries in the early 1960's, when East Germany was trying to demonstrate its independence of Bonn. Since the mid-1960's, deficits have risen sharply, both with West Germany and with other industrial countries, mainly reflecting a strenuous effort to stimulate technological change and growth. At the same time, East Germany has been running surpluses with the less developed countries, both in the Communist area (Cuba, North Korea, and North Vietnam) and the non-Communist area, as a result of aid programs and credit extensions.

Substantial trade deficits with the U.S.S.R. in 1959-62 were almost offset by earnings from goods and services furnished to Soviet forces in East Germany, which ran over $140 million a year. In 1963-69 those earnings more than offset the small trade deficits with the U.S.S.R. In 1970 East Germany ran a net deficit on Soviet account, but experienced a surplus again in 1971-72.

Small annual deficits on current account with the industrial West first appeared in the late 1950's, as the leadership began pushing output to "overtake" its arch rival. In the early 1960's, as East Germany was forced into painful readjustments as a result of this campaign, surpluses with West Germany were offset by growing deficits with other industrial countries. In the mid-1960's, larger deficits began to show up, both with West Germany and with other Western industrial countries, and they rose to a peak in 1970-72. Mounting shortages of key materials in CEMA, together with a growing demand for Western machinery and equipment, led to raid increases in imports and to estimated deficits averaging perhaps $150 million a year in those years.

East Germany's surpluses with less developed countries (LDC's) have mounted, especially since the mid-1960's. Cumulative trade surpluses with Cuba, North Korea, and North Vietnam (chiefly the last named) came to about $250 million by the end of 1971. Surpluses with non-Communist LDC's were of approximately the same magnitude; exports went mainly to the Middle Eastern countries and to several small countries, mostly in Asia, which were ready to grant official recognition to East Germany.

Commodity trade is the only element of the current account that is adequately covered (for balance-of-payments purposes) in official statistics. East German statistics in the 1960's appear to cover total payments made and received for commodities by major trading areas, with two exceptions: first, Soviet deliveries of military end-items were not included until 1966, and second, trade with West Germany (and therefore total trade) was not fully represented. In the 1960's East Germany persisted in converting this trade on a basis of 1 East German mark = 1 West German mark, even though the parity achieved in the late 1950's (at 1 mark = $0.238) had been upset by the successive upward valuation of the West German mark to $0.25 (1960) and $0.273 (1969). Beginning in 1972 statistics, the nominal value of the East German mark was once again pegged at the value of the West German mark, and this nominal correspondence will probably be maintained.

Statistics on invisible transactions are fragmentary. East Germany runs a substantial deficit on transport with the Communist countries, notably with Poland. On tourism (and movements of official delegations), balances with the Communist countries were probably small until 1972, when East Germany had a large surplus with Poland (roughly $100 million) as a result of the opening of borders and easing of foreign exchange restrictions. The other major item in accounts with the Communist countries is the annual Soviet payment of over $140 million for goods and services furnished to Soviet forces in East Germany. This payment has been made since the beginning of 1959. Other payments—interest on debts, private transfers, licenses and copyrights, and the like—have yielded very small balances in either direction.

Invisible transactions with the industrial West began with substantial net earnings from tourism (rising from a few million dollars in 1960 to $50 million in 1972). Another source of income is charges for transport, postal, and telecommunications services between West Germany and West Berlin, running at over $50 million a year in 1971, plus some payments for transit of Soviet and Polish goods across East Germany. In addition West Germany has made two payments of 250 million marks each on clearing accounts, one in 1971 and one in 1972, in consideration of East German claims on transport and communications services to West Berlin in the postwar period through 1966. Major outlays include

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APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110021-0