How Much Did The German Reunification Cost

Germany paid 187 Billion euros as solidarity tax since 1992 for its reunification?

The newspaper “Welt am Sonntag” wrote that the Germans paid for the unification of the country, a solidarity tax of 187 billion euros, starting in 1992.

There have been 20 years since signing the official reunification of Germany. On November 9^th 21 years after the fall, in 1989, of the Berlin Wall, will have gone by, an event that changed the map of Europe and the following economic developments. The challenge for the merger of the two parts of the country was the East German economic recovery and the ability to raise it to the level of the West German economy, without altering its state of health, an event considered a successful bet by 84% of Germans.

For several days, the German Chancellor Angela Merkel criticized the attitude of those who tend to retain only the financial aspect of the process of reunification of Germany, given that 84% of state residents believe that the reunification was a good thing. It’s true, though, that after 20 years there are still differences between the territories of the former GDR and FRG, but these are not likely to overshadow the general belief of success. The German “Renaissance” was by far not an easy race. The first signs that preceded the unification aroused a sense of success. Between 1990 and 1991, the German economic growth has simply exploded under the effect of the enlarging income residents of the eastern regions.

These peaked in 1990, with an advance of 5.7% and a notable performance next year by 5.1%. But since 1992 the situation has worsened: GDP growth to 1.5% braked violently, dropped to minus before, to -1.7% in 1993. This development was accompanied by an explosion of unemployment, which rose from 5.6% in 1991 to 8.4% in 1994, then to 9.8% in 1997. Raising the economic cost of the former East Germany’s industrial expensive. Accustomed to multi-year plans, vast sectors of East German competitors have succumbed to Western countries. With low productivity, a fantastic degree of debt and a misfit and outdated production equipment, East Germany proved unprepared for integration into the international market. Industrial units have affected the adaptation of the West German mark, which caused an increase in costs. Prices have jumped, making them inaccessible to customers.

Winners and losers

West has paid, in turn, a high price for reunification. Focusing on the restructuring of eastern Germany has seen his reduced trade surplus, the economy returning to its traditional valve: exporting. Moreover, numerous and costly transfers to the East, for the reorganization of the economy of this area, have entailed a huge leap of Germany’s debt and a destabilization of budgetary policies. In total, Eastern Länder have shed more than 1,400 billion euros in aid for the East. And the “pact” involving the tax transfers between West and East ends in 2019. But after the spectacular crash of the stabilization period, the German economy began to rebound in the mid-2000s. Currently, Germany is Europe’s undisputed leader, with the lowest unemployment rate in the continent. GDP per capita in the “new lands” has doubled, practically, from 1991 to 9751 euros to 19,500 euros in 2009, while the same indicator of progress in West Germany with only 12% in same period time. Life expectancy has gained about six years in the former GDR, which boasts 348 physicians per 100,000 residents, compared to 246 in the time of the disappearance of the GDR. Paradoxically, in 2009, accelerated the process of alignment on international financial and economic crisis. New provinces were less affected by the fall in. The crisis has hit the big exporting companies stronger, more numerous in the West, and to a lesser extent small and medium enterprises in the East.

Still four decades to go

But shadows darken the picture. None of the companies listed on Stock Exchange index of star German DAX, and is not located in the East, which remains, analysts said, as deindustrialized. Eastern Germany is supported by some very dynamic regions: Thuringia, Saxony and Brandenburg, which in the past two decades have shown growth rates close to 10% per year. Therefore, German economists estimated that in 10 years, these regions will play on an equal footing with western Länder. Instead, the agency draws Ulrich Blum, president of the Halle Institute of Economics, will be necessary for another four decades to reach the level of development east of the West.

The undisputed leader in Europe

* 2.2% was GDP growth displayed by Germany in the second quarter, its best performance in the European Union. In 2011, though growth will not exceed 1.5%, compared to 3.5% in 2010
* The number of unemployed fell in August to 7.6% of the active population, the lowest level since November 2008, given that unemployment in the euro area remained the same value, 10%