In October 1990, East Germany was incorporated into the Federal Republic of Germany. The German people, these changes awarded architect, Helmut Kohl, with increased majority in national elections. But only two years later, it was hard to remember those heady times. Foreign and domestic economic situation Re-united Germany were out of balance. The current account fell from large surplus in deficit. Inflation, as the German government had mounting deficit financing reconstruction. In June 1992, the Bundesbank board, interest rate-setting body of the central bank of Germany, raised interest rates to combat the inflation. Other members of the EMS were less likely to raise interest rates, because they fear a recession, not overheating. Within a few months, Italy and the United Kingdom devalued dropped out of EMS. If Kohl's reunification strategy caused a crisis EMS? What this means is the crisis of their hopes of closer European integration? "Hide
by George C. Lodge, James W. Ragsdale Source: Harvard Business School 24 pages. Publication Date: September 17, 1992. Prod. #: 793033-PDF-ENG
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