GERMAN FINANCIAL POLICY MAKERS IN RARE DISSENSION Karl Otto Poehl, head of West Germany's central bank, and Finance Minister Gerhard Stoltenberg are normally so much in agreement that some foreigners doubt the central bank's independence. But a rare public row between the ebullient Poehl, president of the Bundesbank, and Stoltenberg, over a controversial investment tax proposal, has added to the woes of the country's already nervous financial markets, bankers said. Poehl told an investment symposium in Frankfurt last Thursday he feared the tax would raise borrowing costs and interest rates Stoltenberg quickly issued a statement rebutting Poehl's criticism, saying West Germany would remain an attractive place for foreign investors. "The obvious lack of coordination between the Bundesbank and Finance Ministry does not instil confidence in foreign investors," said one economist for a London broker, who asked not to be identified. Bankers here expressed confidence the two top financial policy-makers would quickly patch up their relationship to steer the economy through a particularly difficult time. "There are plenty of objective pressures which will result in things getting back to normal again after a period of ill feeling," said Commerzbank AG chief economist Juergen Pfister. News on October 9 that the government was planning a 10 pct withholding tax wiped billions of marks off shares and bonds in a market already reeling from rising interest rates at home and abroad. Bankers said the Bundesbank was angered by the way the finance ministry announced the plan -- without consulting the Bundesbank adequately, and allowing apparently conflicting details to dribble out into an unprepared and uncertain market. Both Poehl, 57, and Stoltenberg, 59, have been under extraordinary pressures lately. Poehl has had to switch to the hard line promoted by his deputy, Helmut Schlesinger, jacking up interest rates to fight inflationary fears and abandoning the pragmatic policies he had pursued so far this year to promote currency stability. In recent statements Poehl has sounded more like Schlesinger. For years the softly-spoken economist has been warning in speech after speech that excessive money supply growth would eventually lead to rising prices. Schlesinger now has a majority of support in the Bundesbank council, and since late summer Poehl has had to represent his views, bankers said. "Poehl is in a minority in his own house," said Commerzbank's Pfister. "Poehl is in a dilemma. He must follow a policy that is not entirely his own," said another economist. The dilemma is that if German interest rates rise too far, they will attract funds into the country, pushing up the mark and hurting West German exporters. The dollar has now shed some seven pfennigs since the Bundesbank's new tack became clear in early October. Since last Thursday, United States Treasury Secretary James Baker has criticized the Bundesbank rate increases. Bankers said this could foreshadow a revival of the 1986 war of words between the U.S. And West Germany, in which U.S. Officials talked down the dollar to force West Germany to stimulate its economy and thus suck in more U.S. Exports. One way West Germany agreed to do this was making a round of tax cuts worth 39 billion marks from 1990. But financing these tax cuts has proved more difficult for Stoltenberg than he had bargained for. The cool, unflappable northerner, who was regularly voted most popular government politician last year, had to face resistance from local barons in the government coalition parties and from trade unions to his planned subsidy cuts. The withholding tax was intended to plug one gap by raising 4.3 billion marks. But it has caused an outcry among bankers, who say it will push up borrowing costs. The extra amount this costs the government could wipe out the revenue the tax brings in. Meanwhile Stoltenberg is dealing with a local political row which has turned into the country's worst political scandal. Stoltenberg had to leave monetary talks in Washington last month early to sort out a row in the northern state of Schleswig-Holstein, where he heads the ruling CDU party. The state's CDU premier, Uwe Barschel, had to resign after allegations of a "dirty tricks" election campaign led to heavy losses for the CDU in state elections. Barschel was found dead in a hotel bath in Geneva last weekend. Police say the death appears to have been suicide. Cooperation between Poehl and Stoltenberg is all the more remarkable as Poehl is in the opposition Social Democrats, and was appointed by former chancellor Helmut Schmidt. When Poehl's contract came up for renewal earlier this year, Chancellor Helmut Kohl's CDU-led coalition government gave Poehl another eight-year term. Werner Chrobok, managing partner at Bethmann Bank, said he hoped the two men would soon be of one opinion again. But when Poehl criticized Stoltenberg's tax plans he was not only voicing what many bankers felt but demonstrating the Bundesbank's independence of government, Chrobok said.