SEIPP SAYS GERMAN INTEREST RATES SHOULD FALL
The Bundesbank should take further
steps to reduce German interest rates to protect the mark from
further appreciation and to persuade investors to bring
long-term yields lower, Commerzbank AG <CBKG.F> management
board chairman Walter Seipp said.
    But he told the bank's annual news conference this did not
mean a cut in leading interest rates, rather a reduction in
money market rates through bringing the allocation rates down
for Bundesbank securities repurchase agreements.
    "Leading interest rates are not the decisive rates," he said.
"The money market rates are the important ones."
    Seipp said the Bundesbank should move away from allocating
money market liquidity at a fixed 3.8 pct as it has in recent
tender allocations.
    An easier monetary policy would not mean a loss of
credibility for the Bundesbank in its containment of monetary
growth. A fall in short rates would make the public aware of
the high yields in bonds and lead to a longer-term capital
formation, braking the expansion of money supply.
    "Thus, you can have lower rates and also a normalisation of
monetary growth both at the same time," he added.
    Seipp said there were no grounds to paint too black a
picture of the German economy, since company profitability had
improved over recent years and domestic oriented firms were
profiting from cheaper imports because of the rise in the mark.
    Growth this year should be at least one pct, he said,
describing the downturn in production in the first months as a
false start, unrepresentative of the rest of the year.
    After an economic contraction in the first quarter, the
economy should show an uptrend in the last three. "We don't
believe that the economy has tipped over, but see it more as a
'growth dip,'" Seipp said.
    But Seipp also called for support for growth from fiscal
policy, saying the top rate of income and corporate tax should
be brought down to 49 pct. The current peak rate is 56 pct.
    The additional tax cuts brought forward to next January
were no substitute for support for growth.
    Seipp added the federal government should make "further
courageous steps to decrease the state's proportion of the
German economy and to increase its flexibility."
 Reuter
