Great Expectations…Unfulfilled | Business| Economy and finance news from a German perspective | DW | 08.11.2004
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Great Expectations…Unfulfilled

When the Berlin Wall fell in 1989, great things were predicted for the city that had been scarred by the barrier for nearly three decades. But 15 years later, Berlin is still far from meeting the rosy business forecasts.

In Berlin, all that glitters is not gold

In Berlin, all that glitters is not gold

On November 9, 1989, Berlin's seemingly impenetrable barrier of concrete and barbed wire was breeched. Throngs of East Germans rushed into West Berlin and revelers began picking apart the hated structure with sledgehammers and pickaxes.

Television pictures beamed images of Germans from both sides of the city joined together around and on top of the wall celebrating the historic moment. In late 1989, the eyes of the world were on Berlin, a once and future capital whose future seemed bright.

Bahnhof Potsdamer Platz in Berlin

Potsdamer Platz

But 15 years later, Berlin has failed to live up to a lot of the -- admittedly unrealistic -- expectations that formed in those heady days after the fall of the Wall.

Many envisioned a reunited Berlin would blossom into a metropolis comparable to London or Paris. The potential was there, experts argued: Tearing down the artificial barrier, moving the government back to its original home and pumping millions of euros into high-profile construction projects would begin a snowball effect that would end up turning the city into an economic and cultural dynamo.

At least that's how the thinking went.

"There was an initial euphoria about Berlin and what it could become," Karl Brenke, a researcher at Berlin's German Institute for Economic Research (DIW), told DW-WORLD. "But then it started going downhill, more quickly than anyone expected."

Schering Logo

Schering, the only major industrial group headquartered in Berlin

While several areas of Berlin today literally sparkle with vigor and possibility, such as the glass and chrome towers of Potsdamer Platz or the splashy facades of boutiques on Friedrichstraße, under the surface lurks a serious case of economic malaise. The boutiques on Friedrichstraße are usually empty, the landlords of Potsdamer Platz's skyscrapers cannot find tenants.

Few in Berlin can afford to shop in the high-end stores. Figures from September show 17.4 percent of Berliners are unemployed and more than 171,000 receive some kind of welfare check.

Industry staying away

Instead of the bloom experts predicted once the Wall was gone, the city has lost around 22,000 industrial sector jobs since reunification in 1990. Total job losses for the city have been estimated at as high as 150,000.

According to the DIW's Brenke, it is understandable that companies have been reluctant to set up shop in Berlin, since the last time the city had a sizeable industrial base was before WWII. When Berlin became politically isolated from the rest of West Germany, many large companies moved their operations west.

Engineering giant Siemens left Berlin after the war, opting to move its base to Munich. Although it still employees thousands in Berlin, it will keep its headquarters in Munich since like many, it sees no economic justification for a move.

Walk of Fashion 2004 in Berlin

"Walk of Fashion 2004" in Berlin featured Berlin labels and designers

Pharmaceuticals company Schering is the only major industrial group to have its headquarters in the capital.

Smaller industries in West Berlin largely depended on subsidies from the then-capital Bonn. When those supports fell away, many firms went under.

East Berlin was never a very important industrial location for the GDR and most of those companies which did have headquarters in Berlin did not survive the transition to capitalism.

"Why should industry move to Berlin, when the infrastructure isn't there?" said Brenke. He added that unlike Paris or London, all important economic sectors are not concentrated in one city. For example, many media companies are headquartered in Cologne; much of publishing is in Hamburg; Munich and Stuttgart are strongholds of the car industry.

Gleaming office blocks, any takers?

Those overly optimistic predictions about Berlin's post-reunification population and job development led to a massive building boom of both apartment and office space that stretched into the late 1990s.

"But the expected development didn't happen and we were left with a lot of empty buildings," Hiltrud Sprungala, manager of the Federal Association of Real Estate Companies, told DW-WORLD.

According to her, around 250,000 were built in Berlin and the immediate environs, enough for some 500,000 people. Yet between 1994 and 2000, 93,000 residents left the city.

Despite rock-bottom rents for office space in many areas of Berlin, the vacancy rate now stands at around 10 percent, a worrying percentage for the real estate market, given that no increase in demand is in sight.

Creative environment

While its track record bringing in industry and entrepreneurs isn't stellar, Berlin has been far more successful in attracting artists and others working in creative fields.

They have been flocking to Berlin since reunification and have turned the city into a Mecca of new art, cutting-edge fashion design and music.

The media sector has become more important. Universal Music built a new headquarters on the city's Spree river, the Axel Spring press group building sits next to where the wall used to run and MTV Germany has moved to Berlin from Munich.

Tourism has also been booming, with the city's tourist board reporting record numbers of visitors to the city in 2004. Ironically, the former path of the Berlin Wall is major attraction. Part of the Wall around Checkpoint Charlie has been rebuilt. "There have been a few sectors that have done well and whose prospects for the future looks good," said researcher Brenke. "But as an engine to get the economy moving, they just aren't enough."

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