Nov. 9 (Bloomberg) -- Leipzig was the scene of protests that spread to Berlin and toppled communist East Germany in 1989. Since then, it has added jobs faster than any German city, east or west, as governments and companies led by Bayerische Motoren Werke AG, Amazon.com Inc. and Deutsche Post AG invested more than $17.8 billion.

The city is now home to BMW’s most modern factory, Europe’s only growing cargo airport and a convention center with a 243- meter (800-foot) long glass hall, the world’s largest. At least 60 employers have added jobs in Leipzig in cars, car parts, biotechnology and logistics over the past decade.

“Leipzig has advantages that other eastern cities can’t match,” Volker Treier, chief economist at the German Chamber of Commerce and Industry in Berlin, said in an interview. “There’s an industrial tradition. Traffic-wise, you have everything you need. As a city of trade fairs, it has a history of business contacts. This is what lifts Leipzig above the others.”

Leipzig added 10,500 jobs between 2003 and 2008, a 7 percent increase that was higher than in any German city, a study by Cologne-based IW Consult said Oct. 9. Its productivity grew faster than in Munich, Stuttgart and Hamburg and the local economy is the second-most “dynamic” among major cities, beaten only by Hamburg. The study’s ranking combines data such as jobs, growth, investment and income.

Trade Routes

The rebirth since the fall of the Berlin Wall harks back to Leipzig’s history as one of the first centers of commerce in the 12th century, after Slavs settled along trade routes from Paris to Novgorod and from Rome to Bergen between the 7th and 9th centuries. The Leipzig Trade Fair, which started in the Middle Ages, is the oldest continuously operating trade fair in Europe.

Today’s Leipzig, which during communism hosted exhibitions of tractors and furniture, is home to the only production site for Munich-based BMW’s X1 compact sport-utility vehicle, which first rolled off the line in September.

The local government has developed the airport into an international cargo hub: Leipzig was the only European airport among the world’s top 30 to show an increase in international cargo traffic in the seven months through July, the most recent month available, according to data compiled by Airports Council International in Geneva.

Bonn-based Deutsche Post’s DHL delivery service moved its European hub from Brussels last year, opening a 300 million-euro ($445 million) distribution center to serve central Europe and Asia. Seattle-based Amazon, the largest online retailer, runs its main German warehouse a few minutes away.

Merkel’s University

Local subsidies have lured startup biotech companies to a research park downtown. The city also boasts a renovated campus for the 600-year-old university, where German Chancellor Angela Merkel studied physics in the 1970s, and a remodeled train station handling 1,000 trains and 135,000 travelers a day that ranks among Europe’s largest. A shopping mall there has 140 shops and cafés.

As the German economy slumped into its worst recession since World War II, Volkswagen AG’s Audi luxury division started work on a 10 million-euro showroom and distribution center in the north of Leipzig. Construction began on March 27, three weeks after the benchmark DAX Index fell to a 4 1/2-year low.

There’s “a new bourgeois elegance,” said Martin Jankowski, a democracy activist in Leipzig during the 1989 protests. “If you go to a restaurant, if you look how the students dress, you can see there is really a new style. In a way, Leipzig is back to its old golden times.”

Unemployment Rates

Not everyone shares the prosperity. City unemployment, down from 25 percent five years ago, was 14.8 percent in September, exceeding the national average of 8.1 percent in October. Twenty percent of Leipzig’s residents draw welfare benefits and the population is about 15,000 below its 1989 level of 530,000.

Eastern German productivity is about 75 percent of the western level, while average household income is 80 percent to 85 percent of the West’s, said a study published Oct. 28 by Klaus Schroeder, a political science professor at Berlin’s Free University.

Though then-West German Chancellor Helmut Kohl promised the east “blossoming landscapes” and won the first election in reunited Germany in 1990, the early years were marked by the collapse of markets in countries such as Poland and Hungary, as the switch to the West German deutsche mark brought down the east’s centrally planned economy.

Federal Subsidies

Nine out of 10 industrial jobs in Leipzig disappeared in the decade after unification, said Thomas Hofmann, executive director at the Chamber of Commerce and Industry, located downtown less than 200 meters (219 yards) from the former local headquarters of the Stasi secret police, as chemical makers, mining companies and manufacturers of electrical goods were unable to adapt to capitalism. About 20 percent of residents fled to the West in search of work.

West Germans have provided a net 1.6 trillion euros in aid to the east since 1990, according to Schroeder’s study. About half went for jobless, retirement and health-care benefits; the rest was for improving cities, roads and telecommunications as well as cleaning up the environment and aiding companies.

Leipzig’s Maedler Passage shopping mall boasts such stores as Mont Blanc and Swarovski, and a high-speed rail link has cut the travel time to Leipzig from Berlin, the capital, in half to one hour. The trade-fair center, designed by Ian Ritchie Architects, opened in 1996 with the largest glass hall in the world.

“Leipzig was the one location with a very ideal place in the middle of Europe with very good traffic connections, including to the up-and-coming markets in eastern Europe,” said BMW spokesman Michael Janssen.

Secret Police

BMW, the world’s largest maker of luxury cars, opened a 1.3 billion-euro plant in 2005 designed by Pritzker Prize-winning architect Zaha Hadid. It turns out compact models on 208 hectares (513 acres) on the outskirts of Leipzig. Its hub-and- spoke design around a central building is a new approach to car production and makes it BMW’s most modern site, Janssen said.

Modernization of the East’s highways, with federal aid, also helped persuade BMW to pick the site from among 250 bidders. The 4,700 jobs make it the city’s biggest employer. Porsche SE, the Stuttgart-based sports-car maker being bought by Volkswagen, builds Cayenne and Carrera GT models at a smaller plant.

Like the rest of the east, Leipzig remains dependent on federal aid. Buildings from the late 19th-century industrial boom lie empty. Some neighborhoods remain a patchwork of freshly painted exteriors and decaying, boarded-up apartments.

While former activist Jankowski, now a writer, knows the East’s troubles, he says he isn’t nostalgic. Reading his file in the archive of the Stasi secret police, he figured the regime would have thrown him in prison if it had survived.

“What we got is 10 times better than what we had before,” he said. “Looking back 20 years, I see all of this as a very lucky chapter in German history.”

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net.

Last Updated: November 8, 2009 19:01 EST