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Privatization 'hindered growth' in post-Wall eastern Germany

The eastern half of Germany is still struggling to catch up with the west economically. According to a new study, growth was hindered by the break up and privatization of the communist state's industrial assets.

A severe lack of large companies has stopped eastern Germany from catching up with the western parts some 25 years after the nation reunited, a fresh study by the German Institute for Economic Research (DIW) revealed Thursday.

"Big companies and corporate headquarters are largely absent in eastern Germany," the report said.

"There's not a single DAX blue-chip company in the region, including Berlin," the Economy Ministry said in response to the study.

It acknowledged that

the catching-up process had stalled

.

Irreversible damage?

"The reasons for this are not just factors such as wage and rent levels, infrastructure and availability of commercial land," the ministry noted, pointing to the way state-owned East German conglomerates had been carved up and privatized following reunification.

The DIW study concluded that the fragmentation of the eastern German economy resulting from that policy was now standing in the way of stronger growth, innovation and exports.

It added the bulk of small companies in eastern Germany rarely had the means to introduce new production methods and products on a regular basis, leading to lower productivity and problems conquering markets beyond the local region.

hg/bk (dpa, AFP)

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