REUNIFICATION between East and West Germany will bring economic
benefits much faster than many Germans have anticipated, say West
German officials and economists.
Bucking projections that West Germany will face substantially
higher unemployment and accelerated inflation, they see only
short-term "budgetary strains" from bankrolling East German labor
and industry into a market-driven system. The East will soon develop
into a productive part of the overall German economy, the country
itself emerging as the leader of the 12-nation European Community
In short, says West German Finance Minister Theodor Waigel,
"economically speaking, the restructuring and modernizing of the GDR
(German Democratic Republic) economy is an investment project." He
intends to turn a good profit.
"The financial consequences of monetary union are clear. There
will be no need for tax increases or special levies to finance
German reunification, nor will the process make demands on the
German economy or on the capital markets," he says.
West Germany's deficit, 3 percent of gross national product (GNP)
this year, is expected to hit 3.5 percent in 1991, due to Bonn's
financial outlays for an economic and social union with East
"This must be corrected," says Norbert Walter, the chief
economist of Germany's largest commercial bank. "Next year, 1991,
will be the most severe year," he says, adding that "tax revenues
from the GDR will decelerate this deficit."
Bonn's costs will soar, says expert
But Sol Sanders, a political analyst whose upcoming book examines
the dimensions of the German-Soviet economic relations, offers a
different assessment. "There is no doubt that the West German
government has underestimated the cost of reunification, and the
time it will take. They've already doubled the fund for its
infrastructure development," he says.
West German financial outlays will undoubtedly increase, Mr.
Sanders says, despite the official estimates made by "those swept up
Bonn's burden will keep climbing, he warns. Among less obvious
costs, he says, is its recent commitment to the Soviet Union "to
pick up the cost of all Soviet troops in East Germany for the next
three years, at least. It will run West Germany $730 million a year
to feed and house those troops, and the Soviets are in no hurry to
move them home from the Eastern zone."
Mr. Walter recently tried to dispel German "fears of disaster"
that come largely from a misunderstanding about the necessary
closure of inefficient East German industries and the $300
billion-plus required to resuscitate its infrastructure. Housing,
sorely needed on both sides of the border, is not included in that
East Germany's industrial output, produced by huge and grossly
inefficient conglomerates, accounts for two-thirds of its GNP. …