$Unique_ID{bob00194}
$Pretitle{}
$Title{Unified Germany
Chapter 2.    Provisions Concerning Monetary Union}
$Subtitle{}
$Author{Press and Information Office}
$Affiliation{German Embassy, Washington DC}
$Subject{republic
german
democratic
deutsche
currency
monetary
mark
bundesbank
area
entire}
$Date{1990}
$Log{}
Title:       Unified Germany
Book:        The Unity of Germany and Peace in Europe
Author:      Press and Information Office
Affiliation: German Embassy, Washington DC
Date:        1990

Chapter 2.    Provisions Concerning Monetary Union

ARTICLE 10__________

Prerequisites and Principles

     (1) Through the establishment of a monetary union between the Contracting
Parties, the Deutsche Mark shall be the means of payment, unit of account and
means of deposit in the entire currency area. To this end, the monetary
responsibility of the Deutsche Bundesbank as the sole issuing bank for this
currency shall be extended to the entire currency area. The issuance of coin
shall be the exclusive right of the Federal Republic of Germany.

     (2) Enjoyment of the advantages of monetary union presupposes a stable
monetary value for the economy of the German Democratic Republic, while
currency stability must be maintained in the Federal Republic of Germany. The
Contracting Parties shall therefore choose conversion modalities which do not
cause any inflationary tendencies in the entire area of the monetary union and
which at the same time increase the competitiveness of enterprises in the
German Democratic Republic.

     (3) The Deutsche Bundesbank, by deploying its instruments on its own
responsibility and, pursuant to Section 12 of the Bundesbank Act, independent
of instructions from the Governments of the Contracting Parties, shall
regulate the circulation of money and credit supply in the entire currency
area with the aim of safeguarding the currency.

     (4) Monetary control presupposes that the German Democratic Republic
establishes a free-market credit system. This shall include a system of
commercial banks operating according to private-sector principles, with
competing private, cooperative and public-law banks, as well as free money and
a free capital market and non-regulated interest-rate fixing on financial
markets.

     (5) To achieve the aims described in paragraphs 1 to 4 above, the
Contracting Parties shall, in accordance with the provisions laid down in
Annex I, agree on the following principles for monetary union:

     - With effect from 1 July 1990 the Deutsche Mark shall be introduced as
currency in the German Democratic Republic. The banknotes issued by the
Deutsche Bundesbank and denominated in Deutsche Mark, and the federal coins
issued by the Federal Republic of Germany and denominated in Deutsche Mark or
Pfennig, shall be sole legal tender from 1 July 1990.

     - Wages, salaries, grants, pensions, rents and leases as well as other
recurring payments shall be converted at a rate of one to one.

     - All other claims and liabilities denominated in Mark of the German
Democratic Republic shall be converted to Deutsche Mark at the rate of two to
one.

     - The conversion of bank notes and coin denominated in Mark of the German
Democratic Republic shall only be possible for persons or agencies domiciled
in the German Democratic Republic via accounts with financial institutions in
the German Democratic Republic into which the cash amounts to be converted
may be paid.

     - Deposits with financial institutions held by individuals domiciled in
the German Democratic Republic shall be converted upon application at a rate
of one to one up to certain limits, there being a differentiation according to
the age of the beneficiaries.

     - Special regulations shall apply to deposits of persons domiciled
outside the German Democratic Republic.

     - Action shall be taken against abuse.

     (6) Following an inventory of publicly owned assets and their earning
power and following their primary use for the structural adaptation of the
economy and for the recapitalization of the budget, the German Democratic
Republic shall ensure where possible that a vested right to a share in
publicly owned assets can be granted to savers at a later date for the amount
reduced following conversion at a rate of two to one.

     (7) The Deutsche Bundesbank shall exercise the powers accorded it by this
Treaty and by the Deutsche Bundesbank Act in the entire currency area. It
shall establish for this purpose a provisional office in Berlin with up to
fifteen branches in the German Democratic Republic, which shall be located in
the premises of the State Bank of the German Democratic Republic.