The Helsinki Pact (46 page)

“The bugger was smirking at me!”
he said as the man left. “He did that deliberately.”

“Perhaps he resents Wessies
turning up, looking stylish in well-cut suits!” Thomas said,
laughing. “We’ll have to watch out that we don’t get served rat
instead of pork.”

Stephan took a long draught of
his beer. “Mmm, good. Wish I hadn’t lost so much on my trousers,
though.” He glanced round the restaurant, taking in the mixing of
flat colour on the walls with the Art Deco influenced lighting and
the rather staid oil paintings scattered around in display. He
turned back to Thomas.

“So, the latest on unification
and money … Well, it’s all pretty incredible, isn't it, even though
there's still a lot of uncertainty? The market exchange rate is now
down to five to one and that’s probably broadly correct from a
purchasing parity point of view. But I hear some people talking
about a unification rate of two to one, maybe even parity. That
would be pretty incredible if it happened. The Bundesbank doesn't
like that talk one bit but of course it's under a lot of political
pressure and so can't move as much as it would like. But tThe real
problem is that there's really no reliable hard data around on
which to base decisions. Even the Bundesbank hasn't aNo clue about
what cash in circulation plus deposits amounts to, monetary mass,
as you know.." He laughed. "If you hurry and finish your thesis
you'll be able to give them the answers! We need to wait for the
elections in March but if Kohl wins - and even now a landslide
looks pretty likely - it'll be parity and the Bundesbank will just
have to lump it."

The waiter arrived with their
dishes. Stephan eyed him warily, moving his chair well back from
the table, but this time there was no incident. He served them
carefully, commented briefly on the dishes and asked them
courteously if they needed anything. They glanced at each other and
began eating.

“Damned good rat.” said Stephan.
“I expect the ones by the river wharves are the biggest and
juiciest so maybe I should take a few back to Camille, ask for the
recipe and get her to cook them for us.”

“Damn it, Stephan, I’m eating!”
Thomas grabbed his water glass and drank, tears streaming down his
face as he coughed repeatedly and tried to banish the image of the
notoriously elegant and fastidious Camille skinning and cooking
rats for supper.

“Anyway, BuBa has been sending
staff over in order to do its own estimates. Apparently the East
German central bank keeps on printing money at full tilt. BuBa
wants to impose some controls on that, of course, given the
possibility of unification, but they're not having much luck.
Basically they're probably being fooled."

“What about the financial
metrics, though, you know, things like cash, M1, the wider
definitions. Wouldn’t that give the information that the bank
needs?”

“Ordinarily yes, but that's not
how East Germany works. It's a command economy, remember, and so it
doesn't see the relevance of distinguishing such metrics as you'd
need to in a market one. I can see their point."

"And when West German banks began
moving east" Stephan continued "the first thing BuBa did was to
take regulatory action to ensure that when Ost Marks were converted
to DM any inflationary effect would be minimised. That's good for
the country, of course, but it limits hugely what banks can do and
so basically they're just sitting there waiting for people to open
accounts and deposit money. Bo-ring!"

“Yes, I can see that.
Fascinating.” said Thomas slowly. He was beginning to get a glimmer
of what Phoenix might be up to.

“Now, here’s the other snag. The
Bundesbank wants to impose an upper limit on the amount that each
individual can exchange into Deutsche Marks at the preferential
exchange rate. That’s another way, although a crude one, to try to
control monetary mass. They can’t tell how much money is really out
there in the East so they’re using a proxy which is based on a
calculation of the only figure they can be certain of, the East
German population.”

“But maybe the population figures
all wrong now, given so many have come over the West!”

“You’re probably right but even
if they’re in the West most will still want to change their money
and get the benefit of the good exchange rate. Remember that
everyone counts, children and even babies as well, so that’s around
sixteen million people. Let’s say they put the ceiling at 3,000 Ost
Marks. If the exchange rate is set at one to one then that means 48
million billion Ost Marks could turn into the same number of
Deutsche Marks. But what they’re counting on is imperfect wealth
distribution. Many people, particularly families with kids, won’t
have anything like 3,000 Ost Marks a head available while those who
are wealthier are going to get hit by the 3,000 ceiling. That’s why
BuBa expects the total Ost Mark exchange at the preferential
exchange rate to be much lower than the theoretical maximum, maybe
only 320 million instead of 48 million. Any other conversions will
be at less favourable rates, maybe two or three to one. That limits
the inflation impact and possible damage considerably.”

“So those with more than three
thousand Ost Marks will come out of it badly, having to make do
with a poor exchange rate for anything over the
ceiling?”

“Yes and no. There may be some
differential terms allowed. Older people might be given a higher
ceiling, for instance. And what a lot of wealthier people are
already doing is investing their money, buying land and houses for
instance. And although BuBa won’t admit it I’m certain a lot of
wealthy individuals will get their poorer relatives to exchange the
money for them, probably paying them a commission to do
that.”

Thomas sat staring into space,
thinking about what Stephan had just said. You could do this on a
national scale through a network of local agents, paying them small
commissions for everyone they got to exchange money up to the
limits. And if you'd already bought up Ost Marks at good rates
you'd make a killing. So that's what Phoenix was up to. That's why
they wanted to know family numbers. That's why they didn't care
about credit worthiness. It all made sense now. It wasn’t a loan
service at all. It was a money laundering scheme.

“What's up? Everything all
right?” Stephan asked, looking at Thomas curiously.

“Uh, sure.” he said, as he picked
up his fork and again began eating. “But can’t the Bundesbank do
anything to stop this illicit lending?”

“BuBa has regulatory power over
banks but no control over individuals. Any person can lend money to
someone else. There’s nothing illegal about that so unless they
draft a specific law against lending it to convert there’s nothing
can be done.”

“What if someone was doing it on
a large scale? A financial services company, maybe.”

“Most of them are regulated by
BuBa and so the main risk there is losing their licence. Also I
don’t know that BuBa could regulate activity occurring abroad and
right now the DDR is a foreign country. They might, might, be able
to impose sanctions but they're going to be pretty minimal. It
would be pretty low risk."

They sat in silence for some
minutes.

“The people at Phoenix have
planned this very, very well.” thought Thomas. “They’re set to make
millions and there’s nothing anyone can do about it. It’s the West
German public that’s going to pick up the bill because of all that
extra money in circulation and hence the higher inflation and
reduced value of the Deutsche Mark.”

“Have you heard of a company
called Phoenix, Phoenix Securities?” he asked.

There was a moment's silence and
Thomas thought he caught a fleeting wariness in Stephan's
expression before he resumed his usually impassivity.

“Phoenix What Securities?
Phoenix, did you say? Like the bird, or maybe the US city? ... no,
I don’t think so. Who are they? East Germans from Arizona?" He
laughed but seemed to be watching Thomas intently. "How did you
come across them? And what do they do?”

“I forget. Just something I read
about, I think. Or maybe Bettina mentioned them - she was talking
about new financial service companies springing up. Could Would
they companies have ways of exchanging more money at the
preferential rate, shareholders or something like that?”

"Well, yes, that’s another big
issue. Of course the big issue we've been discussing is wWhat to do
about the money held by corporations and organisations throughout
the country, things like government departments, the SED, whatever
it's called now, state-held corporations and, I suspect, others
like the secret services. That's pretty important given the sums
involved. The East German politicians argue that there can't be
limits imposed on these amounts. BuBa insists there have to be
limits. That's the more important issue and where the where the
biggest surprises could come from in terms of overall
numbers.”

Yet another piece of the jigsaw
fitted, Thomas thought. And he could see why Stephan looked a
little uncomfortable, even with him. This was high level, secret
even, and Stephan was probably close to the limit of what he could
reveal. Yet at the same time it was obvious, particularly now that
Stephan had spelled some things out. The mill privatisation and the
loss of the Stasi millions must be connected. Accounting standards
in the East were primitive and it would have been trivially easy to
cook the books to show that the mill had had a huge cash balance
which could be exchanged for DM. And with the forged document
showing the transfer some years earlier the nominal owners,
Roehrberg and whoever else was involved, owned it all. It was a
perfect loophole in the system. And this time it was the East
Germans who would be paying.

He felt uncomfortable in half
lying to Stephan about Phoenix. He wished he could take him into
his confidence more fully about both matters but it was impossible
at the moment. Yet he knew that Stephan would have been fascinated
by what he'd discovered and would have had some interesting
comments to make. Oh, well, time enough for that later.

A movement caught his eye and he
glanced towards the entrance. "Oh, here's Bettina. She's early!" he
said and stood as she approached.

Stephan followed in turn.
"Bettina! Great to see you again. You're looking well. I hear
you've been showing Thomas the sights." They embraced and he pulled
out a chair for her. "We've almost finished, just some coffee
maybe. What will you have to drink? Or would you like coffee
too?"

"Great to see you too, Stephan,
but nothing to drink, thanks." She sat down. "Thomas, I'm so sorry
but I've got a splitting headache. It's just been growing over the
past hour and I'd like to go straight back to the farm if you don't
mind." She turned to Stephan. "I'm sorry. I'd really have liked to
have chatted but I'm not very good company. I hope we can meet
properly soon, though."

"I’m sorry too but of course you
need to get back. Let's do that though. We were talking earlier
about making a social date soon. I want Camille to try a gourmet
recipe, a Dresden speciality that I have in mind." He winked at
Thomas. "Let's just get the bill. I can have coffee back at the
hotel. I've some work to do and a really early train to catch
tomorrow so leaving now suits me too."

Chapter 39

Thursday January 18
1990, evening and on past midnight

THOMAS was driving at full speed
down the two-lane concrete road, the numerous ruts and holes,
coupled with the imperfect fit between the slabs, making the
journey pretty uncomfortable. It was very late and they were
practically alone on the road but athe gibbous moon, declining and
now approaching a semicircle, was shining brightly and gave the
landscape a silvery beauty and a sense of mystery. He thought of
how differently it felt from when they had come to Dresden only a
few days ago, much of that trip having been passed in awkward
silence. Now, returning to Berlin, they had spent the first half
hour without speaking, but it was a companionable silence, each of
them happy in the other’s presence. Every so often Bettina would
caress Thomas’s hand or reach over to kiss his neck, on the first
such occasion causing him to swerve violently on the
road.

As the few lights of Ortrand
disappeared behind them Bettina, drawing back from another caress,
laid her hand on Thomas’s thigh. At first they linked fingers but
when Thomas returned his right hand to the wheel Bettina leaned
closer on his shoulder and began - it seemed by mutual intuition -
lightly and slowly, almost absent-mindedly, stroking his thigh with
the tips of her fingers. Initially this was just above his knee but
her hand almost imperceptibly made longer sweeps, moving higher and
deeper. He glanced at her, saw her mischievous grin and caught the
sparkle in her eyes. A finger, now probing behind buttons and
meeting stiffened flesh made Thomas swerve bumpily on to the verge
and bring the car to a shuddering halt, turn, press her hand
strongly against him and kiss passionately. Each longed to be back
in their bed in Dresden, away from Dieter and his missions, back in
the only world that now seemed to them to matter. For longer than
was sensible but for far less than they each desperately wanted
they clung to and explored each other's bodies as the freezing
night air seeped into the car, the chill wind urging itself through
the old rubber seals. Eventually, with much procrastination and
regret, they again set off down the highway.