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Germany's Reunification Woes


Article # : 11153 

Section : CURRENT ISSUES
Issue Date : 10 / 1993  2,293 Words
Author : Peter Neckermann
Peter Neckermann is vice president of National Insurance Enteprise for Economic and Investment Services.

       On October 3, 1990, East and West Germany celebrated unification. The celebration was rather subdued, perhaps in anticipation of the difficulties that lay ahead--difficulties that have proved far worse than anyone could have imagined.

       Then again, unification defied expectations right from the start. Three years ago, east German communists and west German Social Democrats (SPD) were astounded by how easily East Germany had ceased to exist and how willingly east Germans accepted western Germany's social system.

       The SPD had wanted to preserve two German states and have them grow together slowly. This way, it hoped to preserve the so-called socialistic accomplishments and to weaken through accommodation the capitalistic structure of western Germany. It was certain that in this process it would become the strongest party and would gain power for a long period.

       The SPD never forgot that its model for unification was rejected. It continued to oppose Chancellor Helmut Kohl--whose model and ideas prevailed--even at times when a concerted effort was desperately needed. Kohl, representing the Christian Democratic (CDU/CSU) and the liberal (FDP) forces, was convinced that the communist east did not have much to offer and simply wanted to absorb the 16 million east Germans into the west German community. Accordingly, East Germany dissolved, and west German laws and institutions were extended into the east.

       Kohl had promised a unification without cost. The start-up costs would be borrowed, thus not burdening the west Germans; and the economic explosion would alleviate the differences in the living standard in relatively few years. By 1991, one year after unification, Kohl was forced to admit his miscalculation. He made a political U-turn and requested a 7.5 percent income-tax surcharge for one year and a hefty permanent rise in the gasoline tax.

       The time limitation on the income-tax surcharge was a second mistake. Beginning on January 1, 1995, a new 7.5 percent surcharge will be levied on all west Germans. They will have to pay for many years to come to prevent an economic collapse in the east and to contribute to a gradual equalization of income and wealth in both parts of the country. West Germans are unhappy about this drain of their resources.

       The east Germans were disappointed when introduction of the deutsche mark (DM) did not bring instant prosperity. They failed to realize and therefore do not appreciate how much work has been necessary to create the west's high standard of living. They simply demand that the west share and resent any resistance to that request; many east Germans regard full parity with the west as their right. ... Read Full Article


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