Twenty-five years of German unity - a success story? [25 Jahre Deutsche Einheit: eine Erfolgsgeschichte?].

Abstract

Twenty­five years after reunification, economic fundamentals between East Germany and West Germany continue to differ. Massive financial transfers could not close the significant "prosperity gap" between the two former countries, but they did reduce it noticeably. This is most obvious with respect to indicators such as GDP per capita and unemployment. Fast convergence is unlikely to occur, as economic development is strongly driven by technology that might generate economies of scale, thereby favouring regions which are already well developed. Therefore, economic policy should no longer aim at convergence but rather at economic growth. Despite considerable progress, more structural change will be necessary for further convergence. Furthermore, the decades­long division generated fundamental political and psychological differences, which continue to be felt. One important factor in the continued economic disparity between the two is that East Germany has had to follow the West German development path, which only makes the catching up process more difficult.