Eastern German economy grows faster than expected

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3 Nov, 2009 Updated Tue 3 Nov 2009 15:02 CEST
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Germany's formerly communist eastern states need just 10 more years to match the economic output of the poorest western states, according to a new study released by the IW economic institute in Cologne on Tuesday.

The study, released just one week ahead of the 20th anniversary of the fall of the Berlin Wall, found that the economy in the eastern states grew twice as quickly as other places dealing with similar factors after the end of the Cold War. It also estimated the eastern states were soon set to catch the poorest western states of Lower Saxony and Schleswig-Holstein.

“This year the gross domestic product will reach 70 percent of the western German levels – and according to economic convergence theory this goal should have first been reached in 2028,” the IW said in a statement.

The surprisingly speedy growth comes thanks to heavy industry, which now makes up one-fifth of the economy in the east compared to one-fourth in the west, the study said.

Leading the pack is Thuringia, which has seen manufacturing grow by 10 percent each year for the last two decades. Meanwhile the state of Brandenburg, which surrounds Berlin, has seen its manufacturing base increase by eight percent each year.

Once the economic performance of the former East German states matches that of western states, special aid reconstruction programmes such as the Soli, or 5.5 percent income tax “solidarity surcharge,” should be phased out, according to the study.



2009/11/03 15:02

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