NCPA - National Center for Policy Analysis


July 23, 2004

Germany has poured $1.5 trillion to rev up eastern Germany's stagnant economy since its reunification with the west in 1990. Unfortunately, say observers, young people in the east are abandoning their cities in favor of better opportunities in western Germany.

  • The unemployment rate in many eastern cities now tops 20 percent.
  • Dresden has closed 43 schools due to lack of children.
  • The population of the five eastern states has declined from 16.7 million in 1990 to 15.1 million in 2000.

Observers argue that much of the $110 billion per year spent on eastern Germany has been primarily for public works projects such as roads and bridges, or for renovating housing from the communist era, when what the region really needs is support for companies looking to provide employment and educational opportunities.

Moreover, the goal to spread the wealth evenly in eastern Germany is failing. The aid should go to specific areas that have shown they can support business, such as Leipzig, where BMW is building a new manufacturing plant.

Realistically, the government may have to accept the fact that some remote towns in eastern Germany will remain poor, and instead focus on growing the private sector in cities and towns that show promise, say observers.

Source: Mark Landler, "East Germany Swallows Billions, and Still Stagnates," New York Times, July 21, 2004.


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