The economic unification of Germany : Germany

Conversion of the economy of the former GDR, structured as it was on planned economy lines, into a functioning system based on the principles of the social market economy was and remains a challenge which is unique in history to date. It requires a massive transfer of finances from western to eastern Germany. By the end of 1996, public spending had reached a volume of DM 750 billion.

A key role was played in the restructuring of the economy in the new federal states by the Treuhandanstalt (Trust Agency). By the time it ceased operations at the end of 1994, the Trust Agency had privatized about 15,000 enterprises, yielding proceeds of approximately DM 66 billion, and had secured DM 211 billion in investment pledges. In addition, it had obtained commitments to retain or create around 1.5 million jobs. The latter was an especially significant result of the Agency’s work because the conversion of the economy has required particularly painful intervention in terms of employment; many jobs have been lost in the course of restoring competitiveness. Since unification the Federal Government has therefore expended considerable financial resources to further the creation of new jobs.