A Review after 20 Years

Prof. Dr. Ralph M. WrobelFaculty of EconomicsWestsaxon University of Applied SciencesPO Box 20 10 37, 08012 Zwickau

German Unification: a Disappointing Success? Benefits of Unification

◦ Political Benefits Recovery of Sovereignty International Political and Economic Importance One Nation in One State

◦ Economic and Social Benefits Simplified Institutional Choice in Transformation Immediate EU Membership Development of GDP per Capita Improvement of Infrastructure and Reconstruction of

Cultural Heritage Selected Social Indicators

Summary

GDP per Capita of East Germany“Neue Bundesländer” in Relation to “Alte Bundesländer” in %

„blühende Landschaften“ (Federal Chancellor Helmut Kohl 1990)

“same living conditions in East and West Germany”

estimated €1.3 trillion ($1.6 trillion) flow from West Germany over the last 20 years

per capita econo-mic output only at 71% of western level

relative small growth rates

gradual but slow catch-up process

Purchasing PowerGermany 2007

high unemploy-ment rates

population decline by 2 million people

proportion of household income derived from welfare payments 20 percent higher than in the west

UnemploymentGermany 2009

Castle in Zwickau, Saxony

Treaty on the Final Settlement With Respect to Germany (so called Two-plus-four-treaty) 1990

◦ Four Powers renounced all rights they formerly held in Germany

◦ All Soviet troops were to leave Germany by end of 1994

◦ Germany's confirmation of border with Poland

GDRFRG

e.g. Largest and Economically Strongest Country in the European Union

worth of itself that all Germans can live in one country together?

unification in 1990 inspired initial euphoria

Nowadays:◦ “Ossis” (East Germans) vs.

“Wessis” (West Germans)◦ “Ostalgie” (Ostalgia)

Goethe and Schiller Monument, Weimar

immediate introduc-tion of functioning…◦ currency (Deutschmark)◦ legal and administrative

system◦ social security system

stable expectations for investors and con-sumers

immediate access to European markets 1990

immediate access to European structural funds: 17.9 billion Euro

(1990 – 2006)

Germany, FRG East Ger. United Germany

East

Germ

any

Bulg

ari

a

Czech R

ep

.

Esto

nia

Hungary

Latv

ia

Lit

huania

Pola

nd

Rom

ania

Slo

vakia

Slo

venia

EU

15

17 infrastructure projects:

Highways (yellow)

Rail Network (black)

Costs ~ 38 billion Euro

FrauenkircheDresden

Old Town Erfurt

East Germany West Germany

Real Annual Working Time in Hours

Women West

Women East

Men East

Men West

high financial costs of unification

equalization of living conditions not attained

United Germany◦ sovereign nation since 1990

◦ large and economically powerful nation in Europe

East Germany◦ relative successful transformation “state”

◦ high welfare gains for East German population

◦ infrastructure and cultural heritage reconstructed