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 &lt;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."
  

