From Chapter 2—An Economic Flop
At the first signs in 1990 that Germany might become united, many Europeans began quaking in their boots at the thought of a new superstate astride the center of the continent. They imagined the capitalist economic giant of West Germany integrated with the most successful East Bloc economic power, East Germany. They thought nervously of the supposed qualities of Teutonic thoroughness and industriousness, plus the German tendency toward political extremism, and, in their mind’s eye, they pictured a snarling, fire-breathing monster, ready to turn on its neighbors. Memories of two world wars in the twentieth century are never far from European thinking.
The fears were at least partly based on one myth. East Germany was reputed to be one of the world’s top ten economies. Western observers often overrated its economic performance. One wrote in 1985 that “this state (East Germany) is now richer than Britain, Italy, or the big power Soviet Union if Gross Domestic Product, output per head, is used as the yardstick.”
Far from being in the top anything, East Germany was a junkyard that had for long been teetering on the edge of ruin. Its factories were dilapidated, smoke-belching nineteenth century industrial slums.
When, in March 1990, Lothar de Maizičre waved to acknowledge the applause after winning the general election as head of a conservative-oriented coalition to become East Germany’s first noncommunist head of government, he kept one piece of crucial information to himself. The country was bankrupt. The State Bank had just welcomed the new leader with the news that his country owed more than 500 billion East marks, and the cash available was not enough to cover the 160 billion East marks in personal savings accounts. If de Maizičre had admitted this, people would have rushed to the banks to withdraw their money, but there would not have been enough to pay them. He was afraid the streets would have run with blood.
De Maizičre later wrote, “One of the strangest delusions in the history of German unification was the widespread idea of an economically strong DDR which supposedly was ‘the 10th industrialised state in the world.’”
But senior officials working in the economic sector knew¬ better. Guenter Mittag, head of East Berlin’s economic planning, admitted in 1992 that the country had been on the rocks and said that, without unification, “an economic catastrophe with unimaginable social consequences” would have taken place. “The situation at the beginning of the 1980s was on a razor’s edge. Resources were ever thinner, more had to be paid for the same amount—but the growth of private consumption had to be maintained in the interests of political stability.”