Ausgabe 36/2005

Germany's Eastern Burden The Price of a Failed Reunification

On the campaign trail, Germany's politicians are mostly silent about one of the country's most pressing problems. Former East Germany is a major liability costing the economy €100 billion annually. An eastern German report card 16 years after reunification.

By , and

A Volkswagen factory in Dresden. There has been lots of investment in the city, but the rest of former East Germany is suffering.

A Volkswagen factory in Dresden. There has been lots of investment in the city, but the rest of former East Germany is suffering.

Arnold Vaatz, 50, a native of the eastern German state of Saxony, is accustomed to conflict. When East Germany still existed, he was constantly at odds with the SED, the country's single political party. Ever since German reunification in October, 1990, he has been quarrelling with Christian Democrat (CDU) party leaders in eastern Germany. Now Vaatz, a CDU member himself, is fighting with the Wessis (a pejorative term for residents of the former West Germany) within his own party.

The chancellor had hardly announced his plans for early general elections when Vaatz, the spokesman for a parliamentary group made up of eastern German CDU lawmakers, began touring the country in an effort to put the issue of eastern Germany on his party's campaign platform. After all, the CDU is the party of German unity, at least in the words of former Chancellor Helmut Kohl who orchestrated reunification. Armed with a document from Georg Milbradt, the governor of Saxony, Vaatz made the rounds among other CDU governors of eastern German states, and then paid a visit to Volker Kauder, general secretary of the party. But Kauder had already taken the precautionary step of signalling to Vaatz that he shouldn't overstep the mark with excessive demands, and that it's important not to alienate the governors of Germany's western states.

But what mathematician Vaatz, considered a rebel, was demanding wasn't even all that outrageous. All he did, says Vaatz, was to demand "a little consideration for the unique conditions in the East," such as a few guarantees for brown coal mining.

Matthias Platzeck, a member of the Social Democratic Party (SPD) and governor of the eastern state of Brandenburg, also sees the negative reactions of many a western German in his own party whenever he touches upon the issue of problems in the East at party conventions. Fellow SPD members from the western state of North-Rhine Westphalia were still licking their wounds after a poor showing in the state parliamentary election when Platzeck began talking about eastern German special requests for the campaign platform: extension of aid for the East, for example, and adjustment of unemployment benefits in the East to match western German levels. As Platzeck relates, some of his fellow party members from the West could barely contain themselves after listening to his demands.

In recent weeks, people like Vaatz and Platzeck, but also Free Democratic Party (FDP) politician Cornelia Pieper, who is from the eastern German city of Halle, and Green Party chairwoman Katrin Göring-Eckardt, have managed to secure a small slot for the East in their respective party platforms -- platforms which are traditionally dominated by their compatriots from the West. But Joachim Ragnitz, an expert on the East at Halle's Institute for Economic Research, says that the eastern planks now embedded in the party platforms are hardly adequate to address the huge problems facing former East Germany. The program to reconstruct the East -- known as Aufbau Ost -- has always been treated as an afterthought, he says.

And in this campaign at least, it seems that Ragnitz is right. The Left Party, a new party formed out of the post communist Party of Democratic Socialism, is the only party explicitly addressing the concerns of the East. Germany's other major political parties -- including the SPD, CDU, FDP and the Greens -- scarcely manage to devote more than a few sentences to the issue. The FDP is non-committal in its 22-line statement, mentioning what it calls "total German solidarity" and, in keeping with Germany's constitution, calling for the "establishment of equal opportunities for all." The SPD, in its eleven-point laundry list of goals for the East, waxes poetic about the "long journey" on which it plans to embark to attain a true "inner unity." The CDU -- led by Angela Merkel who grew up in East Germany -- devotes eight paragraphs to the East, but much of it talks merely about creating "new opportunities for the East," although plans to resume "delayed or halted transportation infrastructure projects" are given a concrete mention. The Greens say they have recognized that the ongoing emigration of "young and qualified people" is making the East's problems even worse, and that "politicians cannot sweep this development under the table."

But that's exactly what they are doing.

Coal mining, once a major industry in the East, is slowly dying out.

Coal mining, once a major industry in the East, is slowly dying out.

The true outcome of an economic process that to this day continues to be candy-coated as "Development East" is devastating. Ironically, the East, in addition to having the power to decide the election, will also play a decisive role in shaping the entire country's short-term economic future. For many western politicians, the money pit of East German reconstruction has long since turned into a dangerous burden.

It should, of course, be mentioned that the political and administrative reforms made in the East have largely been successful. Reforming and rebuilding the judiciary in the East has worked well as has the reconstruction of government administration. The East's cultural heritage has been rescued, western environmental standards have been implemented in the East, police investigations in the eastern state of Mecklenburg are now not dissimilar to those in Bavaria, and the East has in many cases outpaced the West when it comes to the quality of higher education. But despite these advances, the East's social framework lacks an adequate economic base. To this day, the East is still unable to survive without government subsidies amounting to some €70 to €80 billion a year.

And it gets worse. According to the German Institute for Economic Research (DIW), economic aid for the eastern part of Germany is increasingly dragging down the economic cycle in western Germany. Experts warn of a growing risk that "development in the new federal states" could trigger a "self-fuelling recession."

It was only last year that a team of government consultants, headed by former Hamburg Mayor Klaus von Dohnanyi and the former head of the East German state bank and subsequent managing director of Deutsche Bank's Berlin office, Edgar Most, presented Manfred Stolpe (SPD), the cabinet minister charged with eastern reconstruction, with a 29-page report ("Recommendations for a Change in Direction for Development East") outlining the full scope of the problem. Experts complain that:

  • only about 60 percent of eastern Germans capable of gainful employment are in fact employed. The average unemployment rate in the region tops 18 percent. According to the Institute for Economic Research in Halle, eastern Germany is short of about 2 million jobs;

  • migration away from the East continues unabated, especially among young people. According to the Dohnanyi report, "eastern Germany is threatened by a dramatic aging of the population and a dangerous loss of especially well-trained workers and its creative force";

  • the economy in the new German states has been growing more slowly than in the West for years. The catch-up process has stalled, leading to an ever-widening gap between East and West;

  • the East lacks medium-sized businesses when compared with the western standard. Companies in the East are generally too small and short on capital;

  • the costs of reunification consume four percent of the gross domestic product annually. But because economic growth falls short of this figure, aid to the East is eroding the West's economic base;

  • billions in aid and subsidization policies are no longer effective. Without a "change in course," according to the report, the "need for West-East transfers of funds can even be expected to increase in the future."

Immediately after the report was issued, it actually looked as though action was going to be taken to address the problem. Minister of Economics and Labor Wolfgang Clement called for reforms, and even Manfred Stolpe, the cabinet minister responsible for development in the East, seemed impressed. This time, Stolpe didn't take his usual gruff approach in seeking to appease critics, and this time he openly conceded that Development East needs to be rethought. The debate came to a head, the governors of the eastern states held an emergency summit in Berlin and everyone tried to create the impression that something was actually happening. It seemed that the politicians had finally decided to take action.

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