BONN, SEPT. 18 -- After months of promising that no new taxes will be required to pay for German unification, Chancellor Helmut Kohl has changed his mind.

Riding high in the polls 10 weeks before the first all-German elections in 57 years, Kohl conceded publicly what his staff has admitted privately all summer and his challenger has argued all year -- that restructuring the East German economy will cost far more than expected.

Strategists in the chancellor's Christian Democratic Union said today that Kohl read the lips of a public that never believed his "no new taxes" promise, but is prepared to reelect him anyway.

Christian Democratic leader Volker Ruehe said his party still opposes a tax increase, but admitted that the country has run into unforeseeable costs as Bonn tries to dismantle the centrally planned East German economy.

For months, Kohl has contended that Bonn could pay for unification by tapping its reserves, tightening other spending and issuing bonds. But the central Bundesbank now estimates that Bonn will have to borrow more than $65 billion this year to pay for reunification.

West German Finance Minister Theo Waigel said a unification tax increase can no longer be ruled out, in part because of the commitments Bonn has made to support Soviet troops in East Germany ($8 billion) and to participate in the international effort against Iraq ($2 billion.) "Tax increases must be the last resort when all other measures have been exhausted," Waigel said.

Kohl's major opponent in his Dec. 2 bid for a third full term, Social Democrat Oskar Lafontaine, has gone nowhere but down in opinion polls since he began accusing Kohl of trying to hide the need for higher taxes to pay for German unity.

The Social Democrats welcomed the chancellor's about-face, arguing that it means both major parties are now broadcasting the same bad news about the cost of unification.

Kohl's party "could not deny the truth any longer," said Joseph Dolezal, the Social Democrats' domestic policy specialist. "They must prepare the people for the hardships to come. They cannot hide anymore behind the idea that they don't know the true economic situation in East Germany. Because after Oct. 3, East Germany is ours, and we will get all the statistics we need about the problems there."

Kohl's coalition would win 53 percent of the vote if the election were held this week, according to a television poll, while the Social Democrats would get 36 percent of the vote in a united Germany.

Even more encouraging to Kohl, 76 percent of those polled said they expect him to be reelected. And although campaign strategists here always take into account the traditional German voter antipathy toward higher taxes, Kohl thus far has managed to beat the odds: 81 percent of those polled said a tax increase will be needed to pay for unification, yet Kohl retains his wide lead.

Although the mark has remained strong this summer, reaching new highs against the dollar, and inflation has eased after a brief surge sparked by the two Germanys' July 1 economic merger, voters still express great uneasiness about the short-term health of the German economy. And shares on the Frankfurt stock exchange dropped today to their lowest point this year; dealers said investors are worried about both the Persian Gulf crisis and the cost of German unification.

Yet those concerns have not produced a move toward Lafontaine, the flashy young prime minister of the state of Saarland.

"It is indeed a problem for us that the bearer of bad news often loses," Dolezal said. "But now our candidate can say, 'I was right all along, they are finally following me.' "

Although he has carved out an image as a more intellectual and less formal figure than Kohl, Lafontaine has found it difficult to capture public attention since a nearly successful attempt on his life last spring.

While Kohl appears on television almost nightly, consummating historic deals with Mikhail Gorbachev and asserting West German control over the political and economic mess in East Germany, Lafontaine has had to struggle for notice, breaking through the country's preoccupation with its reunification only by visiting President Bush at the White House and by submitting to a frothy TV profile in which he gave his recipe for pesto and giggled and flirted with the female interviewer.

Kohl's strong position is not a result of personal popularity; he has never been among West Germany's most popular politicians, and his personal standing among East Germans has declined in the weeks since mass unemployment and industrial closings have plagued the dying nation.

Rather, analysts say, Kohl has managed to appeal to Germans in both parts of the country as the chancellor of unity, the man whose party is most closely associated with the institutions Germans count on to make unification go smoothly -- the medium-sized, entrepreneurial manufacturers that are the backbone of West German affluence, the big industrial conglomerates and the powerful banks.