Politicions & to merge the two economies

Politicions soon had to rethink their earlier optimisim over the ease to merge the two economies. And more importantly their promise to voters that the cost of unification and reconstruction of the East could be borne without any increase in taxation. In an interview with the Financial Times in April of 1990 – election year, Chancellor Kohl was cheerfully optimistic. "We will not have to increase taxes. This is not a reasonable policy. We will have to spread our expenditure over a longer period". Only 30. 8% of Germans actually believed this.

By mid 1991 the FRG had already spent DM150 billion on unification and reconstruction in the East and new taxes had to be introduced. Kohl lost considerable popolus support by this miscalculation and in the regional elections in his homeland of Rhineland-Palatinate a 44 year association with the CDU was broken by a victory by the Social Democrats. Tempted by the ads that they had seen whilst watching West German T. V. , the East German shoppers much prefered western goods, which was bad news for the flagging Eastern economy.

After the initial exitement of being able to buy what they wanted, and having spent the DM4000 (paid to them on the abolition of the Ostmark) which was seen by the Ossis as a welcome gift, rather than any final payment, most Easterners began to experience a sense of dissapointment. In February 1990, a private holding company, the Treuhandanstalt was formed, to try to reconstruct Eastern Germany's ailing economy. Under the leadership of its chairman, the SPD Western Economist Detlev Rohwedder it embarked on a quite ruthless programme of privatising East Germany's industries in an effort to combine profits and full employment.

The plan was that a third of East Germany's 8,000 larger companies would be privatised as soon as possible, a further third would be privatised after a period of heavy investment and restructuring. It was assumed that the rest would become casualties and close down. With tens of thousands of East German workers finding themselves out of a job, with little prospect of finding another The Treuhand soon became known as a job killer. After Rohwedder's assasination by terrorists, Birgit Breull, Lower Saxony's finance minister, tookover as Chairman.

Under her guidence the Treuhand's plan changed subtly but importantly, it now recognised the importance of preserving East Germany's four main industries,- Chemicals, Textiles, Shipbuilding, and Micro Electronics to provide crucial employment within the five new Lander. Emphasis now shifted to reconstruction and West Germany had to face up to the cost of this, which some estimates have put in the region of DM 400 – DM 600 Billion. Coupled with these problems was the difference in attitude to work.

The East Germans were so used to being told what to do, that they were virtually incapable of thinking for themselves, or taking responsibility for their actions. They had a very laissez – faire attitude to work, with many workers taking Mondays and Fridays off as sick days. This infuriated the West Germans who had developed a completely different attitude to work. The higher cost of food was not compensated by cheaper tobacco, coffee, or alcohol. If buidings were to be repaired and maintained, the previously nominal rents would have to be raised considerably.

On receiving their first pay cheque after Unification, workers were shocked to find that their net income had actually dropped by 15% after tax, insurance, and pension contributions had been deducted. As Easterners began with less, they became increasingly disatisfied with their earnings and there was friction between the Ossies who felt that they were owed a standard of living and the Wessies, who begrudged subsidising them. Eastern German agriculture began to suffer as consumers turned to cheaper and better EC products.

During the Soviet period, farms had been forced into collectives, and were either animal producing , or produce growing units. Both faced harsh times now as neither could meet EC rules. The East German pig farmers, who had for years been subsidised for over production, now had a huge pork mountain. There was a large pollution problem. Soil had been degraded by years of monoculture. There was contamination both of ground and drinking water, mainly from vast quantities of pig exrement getting into the water system but also from chemical waste being dumped in lakes and rivers.

In 1990 Eastern Germany's GNP was already declining by 13. 4% and fell by another 20% in 1991. Industrial production fell by two thirds in just two years, but prices rose by 12%. The labour market disintergrated, with 1m unemployed and a further 1. 6m on reduced hours the Eastern economy lost almost 2m more jobs. Particularly vunerable were the older workers who were forced to take early retirement and women. Rejoining the West was a 'gigantic social experiment' for the East. Virtually every area of life was affected.

Decades of communist rules and structures needed to be overturned to enable a return to common patterns. A one party dictatorship had to metamorphosise into a pluralistic parliamentary democracy – which was difficult as few political figures in the East had any experience of this. A puppet judicary and corrupt legal system had to become a defender of civil rights. And an indoctrination apparatus had to evolve in to a system of free and politically unbiased education. To the people already trying to cope with economic problems, this 'liberation' was a shattering experience.

Whilst most Easterners welcomed reform, they resented being 'reconstructed' by far off bureaucrats and Wessi outsiders. The transformations in the workplace were especially unsetteling, as Easterners defined themselves through their jobs. Practically everyone had their comfortable routines and social ties disrupted by Unification. For those who did manage to hold onto their positions, work became much more demanding. The free market called for companies to be more competative and the old communist work ethic of 'the state pretends to pay me and I pretend to work' could no longer prevail.

Some individuals responded well to the challenge but the majority were just left feeling dazed and confused by this 'brave new world. ' The Old social structure based on a lower middle class pattern of wage equality coupled with party privelages, buckled under the weight of these changes, and a new political elite of dissedents emerged. Ideological hierarchies were overturned by this new competative market, and social inequality increased. Overnight East German's had to learn new rules and regulations for health care, child support, and other legal requirements.

Many Westerners failed to understand this difficult and painful process of realignment, and thought the Easterners lazy and work shy. With these changes came the difficult question of Germany's national identity, and with increased unemployed an upsurge in xenophic feeling. For many years Germany's Gastarbeiter had played an important part in reconstrcting Germany, these foreign workers now became easy targets to blame for taking 'German' jobs and housing.

In 1992, encouraged by cheering chauvenistic adults, and police 'blindness', racial attacks increased and 17 people died in violent skirmishes, After mass rallies against the Neo-Nazis, politicians and business leaders were shamed into condeming this attitude in order to improve Germany's image abroad. And with increased police prosecution the violence subsided. But many inside and outside Germany are still wary of a rise of the extreme right if unemployment remains unchecked.