The economic impact of the unification of Germany

The economic effects on companies

after the German Reunification

The economic impact of the reunification of Germany

Positive or negative effects for the population and its capitalistic companies?

- Overview of the economic

situation (east/west)

- Problems and Accomplishment

- Effects for the population

- Effects on companies

- Conclusion

East and West Germany before the Economic Reunification

Problems of the Economic Reunification and how it was carried out

Effects of the economic reunification of Germany on the population

after the reunification

problems

The fusion of two completely dissimilar

economic systems

After World war II

after fall of the wall

There was a big difference in standards between West and East

Eastern companies weren't competitive

Political system of GDR had constantly controlled the eastern economy

• due to high unemployment rate, many people moved to the "Old States"

• unemployment rate of "New States" compares with those of the "Old States"

• they thought that their income would become higher

Unexpected change

combinations

In 1970's big combinations were formed

- Until 1990 there were 257 combinations

During the times of separation the GDR was part of the RGW

Finances

Carle Zeiss in Jena

- 1980's = 25 firms = 70.000 employees

After the reunification these contacts broke down

Property and Companies

1980's = 75.7 % GDR // 39.3 % FRG

East Germany's Export = Decrease of 79% (1990-1993)

"New States"

14.8%

17.1%

18.7%

9.5%

Year

1994

2000

2005

2013

"Old States"

8.1%

7.6%

9.9%

5.8%

Lay under control of government

East ---> West

229,200

125,500

136,500

West ---> East

63,800

100,600

85,500

Total loss for "New States

165,400

24,900

51,000

Year

1991

1996

2008

West Germany's Export = Increase of 40%

(1990-1993)

• Reparations in Germany
• East was occupied by Soviets
• GDR governed by SED

Shortly after reunification all combinations were split up and vanished

• Cooperation began 2 weeks after Wall Fall
• Social and Economic Unions formed
• Currency agreements
• West supported East with 2 trillion Euros in 20 years

• GDR firms were owned by state
• Treuhandanstalt was established in March 1st, 1990

-Its aim was to privatize former GDR

firms

• Wage negotiations lead to higher salaries for eastern workers

- did not match the low productivity

- caused western firms not to invest in

the eastern market

- many workers moved to the west to

find a job

• Citizens of GDR desired immigration into FRG

Detlev Rohwedder

• First chairman of the Treuhand

• Assasinated by RAF terrorist

* 16. Oktober 1932 † 1. April 1991

• Currency exchange rate from 1:5 to 1:1

• debt overload statistic shows NO difference between "Old" and "New States"

More unknown effect on the people who lived in the "New States:

• people had to adjust their "way of living"

• Marshall Plan 1948-1952 in Germany
• American's helped rebuild Europe

• July 1st 1990 international German Mark was created
• West laws took affect in East
• Unification on Oct. 3 1990

Companies that have survived

2007

• eg. there suddenly was a whole new variety of food availible, the things they knew vanished from the market

2012

• 2 Million property claims made by Dec. 31, 1992
• Scarred off potential investors

Difference

0.91%

0.78%

0.23%

0.12%

Year

2004

2007

2008

2012

"Old States"

9.59%

10.72%

10.07%

9.63%

"New States"

10.50%

11.50%

10.30%

9.75%

• Solidaritätszuschlag introduced in 1991 (original percentage 7,5)
• Since 1998 5,5%
• Used for the reunification
• Nowadays extra financial aid for the government

• the Trabanten ("Trabis") disappeared

Very prosperous during separation - lots of exports to West

1988 - 15 Million bottles sold

Reunification brought heavy losses

1990 - 1.8 Million bottles sold

Since 1993 they have recovered at an incredible rate

- 50% Market share // 2012 - 240 Million bottles sold

CONCLUSION

The economic reunification of West and East Germany carried many hopes and illusions that were never fulfilled. West Germany had established a strong economic system which was used to competing in a global market. The former GDR had suffered under the circumstances of the centrally planned economy and therefore never reached western standards. Many people lost their jobs while numerous East German companies disappeared amongst the competitive market. The economic disaster shortly after the reunification was completed.

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Thank you for listening!

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