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Germany has made considerable headway to raise the standard of living and beef up infrastructure in former East Germany, according to a new study. But, some factors hinder development - and are unlikely to change.
Former German Chancellor Helmut Kohl, who would become known as the chancellor of reunification, said the five eastern German states joining the western Federal Republic of Germany would develop into "blooming landscapes" after decades of disrepair under Communist rule.
Rather than blooming, the region was initially struck by a wave of bankrupt companies, high unemployment and the flight of young people choosing to live in the former West Germany. Twenty-three years later, has much changed in what was once the German Democratic Republic? Has Kohl's promise become reality?
"The 'blossoming landscapes' have been achieved to a certain degree," Klaus-Heiner Röhl of the Cologne Institute for Economic Research (IW) told DW. "Unemployment in the east is dropping, infrastructure looks goods, and companies are not doing worse than comparable companies in the west."
Röhl added that the work of "Aufbau Ost," the reconstruction and revitalization program instituted after reunification by West Germany to pay for development in the East, has largely been accomplished. Unemployment in September in eastern Germany was 9.6 percent - 3 percent more than the rest of the country. In comparison, that's down from when easterners experienced double the unemployment of the west.
Eastern German companies at the top of the world
Several eastern German companies have also achieved world renown, including long-standing companies Carl Zeiss and Jenoptik as well as other businesses founded after reunification, such as Roth & Rau and the Mitec Group auto supply company. German automakers, including VW, Daimler and BMW; have also invested heavily in eastern Germany.
"That has attracted auto supply companies to the region," Röhl said. "The auto industry has created a lot of jobs there."
Firms specializing in solar and wind energy have also settled in eastern Germany and played a role in the state of Saxony, which has seen its population grow, while fewer people are also leaving other states of the former East Germany, Röhl said.
While saying that the "Aufbau Ost" program was largely a success, he added that "it did not lead to equal per capita economic performance, which was actually the goal." An IW study showed workers' economic performance was two-thirds that of workers in the west.
Big companies still at large
Structural differences are at the root of the discrepancy, according to Röhl. "A deciding factor is the lack of big companies: businesses, banks and insurance providers." He said. "Those are the companies that provide a high degree of added value. They are all in western Germany."
It's a situation that is unlikely to change soon, Röhl said, adding, "Why would Siemens want to leave Munich or Deutsche Bank leave Frankfurt?"
Despite the shortfall in economic performance, income parity has advanced to 80 percent of levels recorded in the west with the levels of wages paid to state employees approaching 97 percent, Röhl said.
Western German states have so far transfered about 2 trillion euros in subsidies for the development of the east. The "Aufbau Ost" program is set to expire in 2019, when, as experts say, both parts of reunified Germany will be on equal financial footing.