Former East Germany weathering recession better than the west

Two decades after the fall of the Berlin Wall, states that belonged to former East Germany are surviving the financial crisis better than those in the former West, a research institute said Friday.

Former East Germany weathering recession better than the west
Photo: DPA

In the face of economic turmoil, industrial production levels in the western part of the country have fallen considerably more than in the five reestablished states in the once communist east.

“The main reason lies in the fact that the east continues to be less dependent on exports than the west,” economist Udo Ludwig from the Halle Institute for Economic Research (IWH) told AFP.

Ludwig also forecast that Germany’s key metalworking industry in the east would fall four percent, while the west may have to reckon with a slump of up to 10 percent this year.

The IWH also estimates that the gross domestic product in the east will decrease by two percent in 2009, roughly one percentage point less than in the west of the country.

Vast differences in lifestyle, culture and political views still exist between the two parts of the country 20 years after the Wall fell, and economic differences tend to aggravate east-west tensions.

In the west, assets rose almost 11 percent between 2002 and 2007, but in the east they fell by just under 10 percent. Adjusted for inflation the fall was 17 percent, according to a study by DIW Berlin economic institute in January.

Last year, a study by the Berlin-Brandenburg Institute for Social Sciences found that almost two-thirds of former East Germans still do not think of themselves as citizens of the reunited Federal Republic.

President Horst Köhler warned at the time that nostalgia for East Germany risked deepening political divides further.

The full study by the IWH is due to appear next week.


Worst of crisis now behind us, says Germany’s chief banker

Germany has turned the corner on the worst of an economic crisis sparked by the coronavirus pandemic and is now on the path to recovery, the central bank chief of Europe's biggest economy said Sunday.

Worst of crisis now behind us, says Germany's chief banker
Jens Weidmann. Photo: DPA

“We experienced in the last months the deepest economic slump in Germany's (post-war) history,” Jens Weidmann told Sunday's edition of the daily Frankfurter Allgemeine Zeitung.

“The good news is: the trough should be behind us by now, and things are looking up again. But the deep slump is being followed only by a comparatively gradual recovery.”

Weidmann, who has never minced his words against expansionary policies ramped through in the past by the European Central Bank, on Sunday also voiced support for the unprecedented economic rescue and stimulus packages unleashed by Berlin to shield German companies and jobs.

Chancellor Angela Merkel's government had stunned observers in March when it unveiled a rescue package worth 1.1 trillion euros, smashing through a long-held no new debt dogma to fund the measures.

Earlier this month, it said it would plough another 130 billion euros into various schemes, including a cut in VAT, to stimulate the economy.


Reacting to comments that Germany, once known as a “frugal” nation, was now dramatically loosening its purse strings, Weidmann said: “The image of the Swabish housewife is often wrongly portrayed.

“She is not saving for the sake of saving, but so that there is money that can be spent sensibly and in case there are difficult times. And that is precisely the case here.”

Like nations across Europe, Germany shut schools, shops and sent workers home from mid-March to halt transmission of the coronavirus.

The impact of the health crisis has pushed the economy into a deep recession believed to be the worst since World War II.

After the rate of new infections dropped sharply, Europe's biggest economy began easing restrictions in early May although social distancing rules are still in place and huge events banned.

Nevertheless, the improved health situation and the huge government support have helped lift sentiment, with a closely-watched survey showing confidence among investors surging to its highest level since before the financial crisis.