Political Union

A Changed Germany, 25 Years Later

reunification 1 dpa
It has been nearly a quarter century since the signing of the reunification treaty on October 3, 1990, which formally sealed the legal fusion of East and West Germany.
  • Why it matters

    Why it matters

    The legal marriage of Germany 25 years ago on October 3, 1990, created Europe’s largest economy, which has assumed an increasingly significant economic and political role on the Continent and globally.

  • Facts

    Facts

    • Targeted for removal by the elites of his own political party only a short time earlier, Mr. Kohl proved to be the right man at the right time, guiding Germany through a chaotic, challenging period with his trademark optimism and single-mindedness.
    • While eastern Germany continues to lag the west in overall economic terms, the joining together in 1990 has benefitted the country at large and achieved the success Mr. Kohl always envisioned.
    • Scenes of grateful arrivals at railroad stations throughout Germany in the 1990s are being repeated as thousands of refugees stream into the country from the war torn Middle East, but this time there is more a feeling of fear than optimism in the air.
  • Audio

    Audio

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It was one of the most heavily guarded lines of demarcation between East and West, between the Communist and non-Communist world: the border between Hungary and the neutral country of Austria. But on May 2, 1989, something unheard-of and totally unexpected occurred. The Hungarians dismantled the barriers along the border.

The message was understood by all as word spread around the world. The Iron Curtain had come to an end, replaced by a conventional national border.

By opening its border, Hungary — which today clamors loudly for borders, walls and barbed wire — made it possible for anyone fleeing the German Democratic Republic to make their way to the West, following a route that went from Budapest through Austria to Munich. The walls fell under the steady onslaught of those dissatisfied with the material catastrophe of the socialist countries.

 

Paying for Germany's Unification-01

 

That began the chain of events leading to German unity and the great era of Chancellor Helmut Kohl, the Christian Democratic Union leader who only a short time before had been targeted for overthrow by the upper echelon of his party. For him, reunification was an act of political will, a fulfillment of a vision he scarcely believed in any longer. The economy was forced to adapt to the grand political scheme, whatever the cost.

A quarter of a century later, younger economists are amazed that a unity dictated by politics achieved even economic success, albeit much later than Mr. Kohl had imagined.

Almost a generation after the official start of German Reunification on October 3, 1990, a nation that is both economically and politically strong has emerged and is slowly but surely assuming a leadership role in the European Union. The East did not turn into a “Southern Italy without the Mafia,” as former Social Democratic Party of Germany Chancellor Helmut Schmidt once feared.

The equation East equals poor and West equals rich is no longer unambiguously true. Flourishing regions around Erfurt and Leipzig in the East contrast with sites of decline such as Gelsenkirchen in the West, even if economically “blooming landscapes” did not arise everywhere, as Mr. Kohl promised in 1990.

The economic power of the East continues to be a third below that of the West. Unified Germany reached its economic nadir after five years. At the time, the media spoke of the “demolition of the East” and not its reconstruction. After the euphoria following the fall of the Berlin Wall, the introduction of the German mark in summer 1990 at an exchange rate of one-to-one was a shock. Overnight, GDR industry lost its markets in Eastern Europe, while wages rose dramatically because the differences with those in the West were to disappear as quickly as possible.

A quarter of a century later, younger economists are amazed that a unity dictated by politics achieved even economic success, albeit much later than Mr. Kohl had imagined.

By the end of 1994, only 1.5 million jobs remained in companies privatized and sold by the Treuhand state holding company, comparison to 4.1 million in 1990. Few new firms had been created.

When Mr. Kohl visited the eastern German chemical and manufacturing district to open the Leuna 2000 refinery and a wallpaper glue facility of Bayer in Bitterfield during the 1994 election campaign, his optimism seemed almost grotesque. He described a blooming economic landscape in the East –“I see it sprouting everywhere”— even as defunct factories across a huge industrial expanse were being demolished by workers paid by the German Labor Office in a job-creating effort.

In this sulfurous-smelling wasteland, a handful of high-tech facilities were scarcely visible. The sale of the old state chemical combines Buna and Leuna, as well as the olefin plant Böhlen a year later to Dow Chemical, with a government subsidy of 10 billion marks, went down in history as the most expensive privatization in the world.

Mr. Kohl wasn’t interested in those issues. As an absolute “homo politicus,” he sought to bend reality to fit his ideas. This economic disinterest had a price. In the privatization process, large sums were wasted on incompetent and sometimes crooked buyers. With losses of almost 200 billion marks, Treuhand concluded its often disreputable and scandal-clouded work in 1994. Just four years earlier, Truehand had predicted profits of 600 billion marks.

 

elisabeth luedders haus government building source dpa picture alliance
The pockmarked center of Berlin a quarter century ago has given way to a new landscape of modern architecture, including the Elisabeth Lüders Haus, a government office building, along the banks of the Spree River across from the renovated Reichstag. Source: DPA Picture Alliance

 

Chronic underestimations of financial need persisted through the first ten years of the reunified country. From the beginning, there was a lack of political and social willingness to raise taxes in this emergency situation. The solidarity surcharge was introduced much later. Unity was financed by borrowing.

The government doled out enormous sums to preserve the industrial core. At the time, this seemed absurdly expensive, but 20 years later, the success of the strategy is apparent. Germany’s most stable industrial structures are found where factories have stood since the 1920s.

Today, many dream of molding refugees into trained workers, but this can be accomplished only if the number of immigrants remains manageable. There are indications financial incentives are being offered to Eastern Europe countries unwilling to take in refugees. The Kohl system lives on.

Many Germans remember what happened in 1989, when aid was offered to Hungary, a financially desolate country in the Eastern Bloc. While the first hundred citizens to leave the GDR were arriving at the train stations in Frankfurt or Munich, Germany’s Chancellor Helmut Kohl and Foreign Minister Hans-Dietrich Genscher already had cut a deal with Hungarian Prime Minister Miklos Nemeth and Foreign Minister Gyula Horn. The agreement called for Hungary to leave its borders open until mid-September. In return, Germany would offer generous economic aid in the form of massive credit guarantees. The slogan was, “We can do it!”

 

The German Divide-01

 

The German republic became a different country. After the fortifications were torn down along the Hungarian-Austrian border, scenes at the train stations in Munich, Frankfurt and Berlin were similar to those occurring today in Munich. Back then, there were looks of optimism, a belief it would be possible to build a new life.

Things are different today. The faces are fearful.

Video: From the fall of the Berlin Wall to German Unity.

Donata Riedel and Rüdiger Scheidges are Handelsblatt editors in Berlin. To reach the authors: riedel@handelsblatt.com and scheidges@handelsblatt.com

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