Former Communist Leads Berlin Economy

Late this week Chancellor Gerhard Schröder’s ruling Social Democrats (SPD) forged an alliance with the reformed communist Party of Democratic Socialists (PDS) to jointly govern Berlin. It is the first time the two parties have come together to rule such an important municipality. And many observers are already doubting the coalition’s effectiveness, especially when it comes to the position of the city’s new economics minister, Gregor Gysi.

During coalition negotiations, the PDS insisted on appointing Gysi to head up Berlin’s economic ministry, a position the party representative and former communist eagerly accepted.

Although Gysi is a strong advocate of healing past wounds and modernizing the German capital, opposition leaders and members of the SPD are uneasy about his taking over such an important position. They question his background in connection with the former ruling party of East Germany and his connection to the secret police. Business leaders are especially skeptical about his designs for investment and improved economic opportunities.

The managing director for the association of businesses in Berlin and Brandenburg, Christian Amsinck, said Gysi must distance himself radically from the political agenda of the PDS. The PDS has a deep-seated mistrust of anything related to business, Amsinck said in a radio interview with Deutschlandfunk.

"It is an extremely sad signal when a long believer in the planned economy –one whose party platform recalls Havana and Pyongyang more than (ex-chancellor) Ludwig Erhard – becomes economy minister," Hans-Olaf Henkel, former director of the German industry lobby stated in the populist Bild newspaper.

Financial difficulties

Compounding the uncertain situation in Berlin politics is the city’s mounting debt. At last count it was around $35 million and growing.

The current red-red government was stuck with the hefty price tag after the former conservative-led city government collapsed in June over a financial scandal. In addition, Berlin has the slowest economic growth among Germany’s 16 federal states. Part of this is the result of the city’s divided history and the subsequent need for subsidizing the eastern side, but most of the debt can be attributed to poor finance management.

And this is where supporters of Gysi say he can make a difference. They say his charismatic leadership will help turn Berlin around and attract new investment and create new jobs.

In his platform, Gysi said he wants to cut bureaucracy, redirect subsides from individual firms to infrastructure and seek to lure companies through sharing state-financed research.

"I accept that some people have reservations, that is a result of history," Reiner Strutz, Gysi’s campaign advisor said. "But I think Gysi will succeed in convincing people that they should not have any angst. It will take some time."

Planned versus market economy

"It is not the case that the PDS wants to dismantle capitalism including private property and are against entrepreneurs; that is not true," Strutz said in response to criticism that Gysi would lead Berlin’s economy in the wrong direction.

In an interview with Reuters TV, Gysi said good economic conditions, not the socio-political ideologies of the government, would attract investors.

"All this ideological stuff is nonsense. Take a look at China. The Communist Party rules there, and all by themselves. Yet Siemens and American investors have invested there."

Gysi said he could understand the criticism if investors were lining up to pour money into Berlin and his appointment drove them away. "But there are no investors," he reminded his critics.

"There is all this nonsense concerning me as a person," Gysi told Reuters.

Reminders of the past

Gysi is one of the main reasons the PDS has managed to remain a force in German politics. With his charismatic personality and rhetoric skill, he has been a frequent guest on political talk shows, charming people of various persuasions. Yet he has been unable to shake off questions about his past.

One of the most frequent accusations, is that Gysi had connections to East Germany’s notorious secret state police or Stasi.

The agency in charge of archiving the Stasi’s files in Berlin has said that Gysi supplied information about dissident clients to the secret police when he worked as a lawyer before unification. Gysi has denied being an informer.

International response

American investors don’t seem to be too worried about a former communist standing at the helm of Germany’s largest city. According to Jürgen Reuning, vice president of the German-American Chamber of Commerce, foreign investors are waiting to judge Gysi on the basis of his actions.

In an interview with Berlin’s Business Radio, Reuning said that "the investor will examine which conditions preside in Berlin and how the red carpet is rolled out for him" before he shells out money.

Reuning said that Gysi may have "talent" as an economics minister, but he has to prove himself first. And he has to balance the needs of the economy with the interests of his party, which in many cases contradict the expectations of investors.