Posted on 04/05/2004 8:24:37 AM PDT by kattracks
BERLIN (Reuters) - Germany's bid to modernise its former communist eastern states with 1.25 trillion euros (830 billion pounds) of transfers since 1990 has failed, and the region will remain a serious drag on the wider economy, according to a leaked report.The study, commissioned by Economy Minister Wolfgang Clement and Transport Minister Manfred Stolpe, concludes that the 90 billion euros Berlin spends annually on rebuilding the so-called new federal states is largely wasted, weekly news magazine Der Spiegel reported.
The 13 experts on eastern Germany charged with compiling the report, including former Hamburg Mayor Klaus von Dohnanyi, industry and union officials and economists, said the east has ground to a halt and the west is falling into ruin as a result.
"The ongoing internal west-east transfer of cash and other consequences of German unification are directly or indirectly responsible for about two thirds of the country's economic weakness," Der Spiegel quoted the report as saying.
Chancellor Gerhard Schroeder promised in 1998 when he took office that rebuilding the eastern states would be a top priority for his coalition of Social Democrats and environmentalist Greens.
Recently, however, opposition politicians including Christian Democrat leader Angela Merkel, an east German, have accused him of ignoring the east's woes as reforms to the wider economy, terrorism and other issues have taken centre stage.
Heinz Schmalholz, an economist specialising in structural change at the Ifo Institute's branch in Dresden, eastern Germany, said that while it is easier with hindsight to identify mistakes made after reunification, no politically viable alternatives have been put forward.
WESTWARDS MIGRATION
"One of the main criticisms has been that wages rose much too quickly after reunification," boosting unemployment, he told Reuters.
"But what would people then have done without that? They would of course have migrated to the west where there were higher wages," he added. "I don't know whether the politicians would have wanted to take responsibility for that."
Although east Germany makes up just a quarter of the total German labour force, it accounts for half the nation's unemployed, said Lehman Brothers' economist Sandra Petcov.
That meant that nearly half of the gross transfers to the east during the second half of the 1990s was spent on social security payments. Investment accounted for just 15 percent.
The leaked government report suggests some remedies to reverse damage caused to the east's economy in the last decade and officials in four working groups are currently evaluating which can feasibly be implemented, Der Spiegel said.
The suggestions include long-term tax relief for eastern German companies and cash incentives for guaranteed jobs; concentration of economic aid in specific growth centres; a new reconstruction master plan; and the inclusion of at least one eastern German firm in tenders for government contracts.
Some analysts, including Lehman's Petcov, are more upbeat about the process of reunification and suggest former Chancellor Helmut Kohl's goal of creating "blooming landscapes" in the east is gradually being achieved.
"It may well be that another 10 or 15 years are required until full convergence has been achieved, but the costs of getting there are likely to decline as the goal is approached," Petcov said.
"An optimist might even argue that if current structural reform plans are implemented, Germany may yet eventually emerge economically stronger than west Germany ever was," she added.
Minister Stolpe, who is also responsible for rebuilding east Germany, said on Monday that the government needed to re-think funding for the east and a "readjustment" was in order.
A dream of a life time. The other of mine is to take a dump on Lennin's tomb.
...one young man was digging and he was being advised by 3 other co-workers.
I see that all the time with out local utility company.
Poland, the Czech Republic, and East Germany's other neighbors transitioned nicely without trillions in handoutsSo what are you saying? That handouts don't work?
You know, we're joking about this but it's really pathetic when you think about it. Communism and socialism have a 100% failure rate since they started trying to organize societies back in the 1800s. 100% failure. 0% success.
And yet, like little leftist energizer bunnies with lots of battery and no brain, they just keep trying and trying and trying and trying...
It would be funny to watch the silly leftists spin their wheels... if they weren't harming real people at the same time.
Gee.......... sounds like the People's Republic of Chicago!!!
My guess is that it's nationalistic and free market. Just an uninformed guess, mind you.
No, he didn't call you a Nazi. Rather, I think he was suggesting to you that it might be a good idea to think through the implications of your approach.
Be a lot cheaper and more effective, of course, if they weren't trying to win the War on Poverty with Great Society programs . . . just think how expensive it would have been for the US to have tried to develop West Germany from the ruins of WWII to 2000 standards the Lyndon Johnson way!
Well, if your mother is as vehement as my neighbor, Gerlinde, formerly from near Nuremburg, I suggest we parachute drop the the two of them into eastern Germany and there won't be any Turks left after a week.:)
Well, Germany is famous for racists like good old Adolph - but West Germans are racists against East Germans?
</sarcasm> It's the culture, stupid!
After WWI and WW2, I really hope they try something different, although I'm not sure what that would be....
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