1989-2014: (Eastern) Germany After Almost a Quarter Century of Monetary Union

October 6th, 2014
in econ_news

by Dirk Ehnts, Econoblog101

Today is Tag der Einheit (day of reunification), and while many positive things stand out, it should also be mentioned that in terms of macroeconomics it has been difficult for Germany’s east. Having joined a currency union with West Germany in 1990, unemployment was higher in the east than in the west from the start because of a ‘lack of competitiveness’. A large fiscal program (Solidarpakt) transferred about €100 billion to the eastern Bundesländer from 1995 until 2004 (plus taking over some debts), and still until 2019 there will be fiscal support.

Follow up:

This year it amounts to about €6 billion. Nevertheless, the unemployment rate has never been close to that of Western Bundesländer, as this graph from Sozialpolitik Aktuell shows (unemployment in Eastern states – blue line – and Western states – black line, average = red line):

AL-deutsch

As things go in the euro zone, with member countries having joined a common currency but no fiscal mechanism in place, it should not be surprising to see high unemployment in many countries. The lesson of Eastern Germany seems to be that these countries should not expect their unemployment rates to return to normal. Also, they should expect emigration of the young and able, which is what happened to Eastern Bundesländer as well.









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved