FRANKFURT, FEB. 5 -- The United States and its western partners can avoid a recession if financial markets are convinced that "the United States is willing to defend its currency," central bank president Karl Otto Poehl said in an interview today.

Poehl said he believes "there is a chance" of exchange rate stability in the wake of Black Monday, both because the Oct. 19 market plunge dampened fears of inflation and because more progress than is realized has been made in reducing global trade imbalances.

But he warned that discussions such as the Washington meeting Thursday between West German Finance Minister Gerhard Stoltenberg and Treasury Secretary James A. Baker III have limited value. "I am not against close cooperation, but {these discussions} should be kept on a low-profile basis," Poehl said. "We don't want to create too many expectations."

{In Washington, Stoltenberg told reporters that the close coordination between finance ministers and central bank chiefs produced a "more promising" outlook for the world economy this year than most had thought possible in the immediate aftermath of the global market collapse. He said this coordination led to the joint statement issued just before Christmas, as well as "not secret but open market intervention in January" to stop the sharp fall of the dollar.

{As a result, he said, there is a "more stable" situation with exchange rates, the dollar has recovered some strength and there is a change in the expectations of currency traders, who had been pushing the dollar down.

{Stoltenberg said his talks this week with Baker and Federal Reserve Board Chairman Alan Greenspan "confirmed and strengthened" his conviction that Western Europe, the United States and Japan now believe in good international cooperation to get through a year "of problems and some risks" in the international economy.

{This represents a sharp change from the situation before the market crash, which was blamed in part on Baker's public criticism of West Germany's economic policies and a threat that the United States would let the value of the dollar fall, hurting Bonn's export-oriented industries, if the government refused to stimulate its economic growth. Stoltenberg said West German growth would be about 1 1/2 percent to 2 percent this year "if there is no major volatility in exchange rates."}

Poehl acknowledged that there is widespread fear in Europe of a recession this year or next, triggered by the appreciation of European currencies that will sharply reduce export-related growth. Such a prospect would be enhanced by a further decline of the dollar. "One can't predict the repercussions {of a further} sharp drop in the dollar. We saw what happened on Oct. 19. The markets are very sensitive," he said.

Although he declined to be specific on how the United States should "defend" the dollar, recent reports that the Federal Reserve might ease monetary policy clearly cause concern within the West German government.

Government sources here said they are inclined to believe the Fed might ease monetary policy, and they believe that could send the wrong signal to the markets.

Poehl would not endorse former Japanese prime minister Yasuhiro Nakasone's suggestion in Davos, Switzerland, last week that the United States bolster the dollar by issuing bonds denominated in foreign currencies, although Poehl said "that would add to the credibility" of the U.S. administration.

"I'm not sure {a foreign-denominated bond} is really necessary," he said. "The dollar is still the world's most important currency. About 80 percent of all international assets are denominated in dollars. What is necessary is to create enough confidence in financial markets to convince dollar holders and potential dollar holders to remain invested in dollars."

The implication of Poehl's comments was that American monetary policy might best be left unchanged, with administration officials exerting "leadership" in stressing a commitment to keep the dollar strong.

"I'm very positive on the prospects for the U.S. economy," Poehl said. "Things are not all bad. The United States is a very vital and dynamic economy. Its interest rates are high, and the exchange rate is now more realistic. It has enormous long-term growth potential."