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Global Economics

The 20-Year Miracle

Welded together from unequal parts, modern Germany has overcome historic challenges and matured into Europe's economic powerhouse. Scenes from a marriage that's a little short on romance—and long on success

There won't be many birthday parties for Berlin this year. The city's main thoroughfare, Unter den Linden, is still jammed with tourists, and the Prussian-era museums, destroyed by Allied bombs during World War II, have been restored to their former glory. The cafés and bars of Mitte, in what used to be East Berlin, overflow with polyglot congregations of artists and hipsters. But Berliners are staying stoic about Oct. 3, 2010—the 20th anniversary of German unification, an event that ended four decades of German division and closed the books on the Cold War. Last November the commemoration of the fall of the Berlin Wall brought 35 heads of state to the German capital. Only a handful are expected this time. Even German Chancellor Angela Merkel plans to be out of town. "We're all still exhausted from last November," says Constanze Stelzenmüller, a senior fellow at the German Marshall Fund in Berlin. "I don't find myself getting excited about Oct. 3 the way I did last year."

Most Germans identify Nov. 9, 1989—the night the Wall came down—as the date on which the nation reclaimed its destiny. The images of East Berliners running through the Wall and into the arms of strangers on the other side, of ordinary people hammering concrete and drinking champagne at the Brandenburg Gate, remain indelible. Few of the East Germans who streamed into West Berlin on that November night in 1989 would have predicted that the two Germanys could become a single, free, and democratic state within a year—or that the Iron Curtain would crumble. That the unimaginable did occur in the heart of Europe two decades ago made the world a better, safer place. And so even in the absence of conspicuous revelry, the events that culminated in the peaceful unification of Germany are still worth celebrating. When you ask Germans today to describe, 20 years later, what unification meant to them, one word invariably recurs: To them, it was a "miracle." Perhaps a bigger miracle is that the next two decades turned out as well as they did.

Today, Germany is the most important country in Europe. Its export-driven economy is the envy of the developed world. Second-quarter gross domestic product rose 9 percent, the fastest pace in two decades. German business confidence hit its highest level in more than three years in September, suggesting that German companies can withstand weaker demand for exports should the global economy slow.

The rest of Europe has become dependent on Germany's size, industry, and frugality, and many of the country's business leaders—and largest exporters—are reconciled to the need to support weaker nations. "A single European market is a blessing for all," says Wolfgang Mayrhuber, chairman and chief executive officer of Deutsche Lufthansa.

Executives may bask in Germany's status as Europe's economic engine, but ordinary Germans are still ambivalent. The Merkel government's reluctant $11billion contribution to the EU fund that stabilized the Greek debt crisis last spring has fueled widespread euro-skepticism. According to research firm Forsa, more than half of Germans say the Greek bailout was a bad idea, and close to two-thirds believe the euro is a weak currency.

The public's reluctance to use German strength on behalf of the rest of the Continent reflects the fact that the debate over the costs and sacrifices of unification is still fresh. West Germans have spent more than $1trillion to rebuild the crumbling factories and cities of the East, with inconsistent results. Without tax breaks, infrastructure investment, and fast-track approvals, "most companies in the former East Germany would have stood no chance of survival," says Jürgen Hambrecht, chairman of BASF's management board. Hambrecht adds that BASF wouldn't have invested €1.3billion in its Schwarzeide industrial site in East Germany without these incentives.

Eckhard Cordes, CEO of retailer Metro Group, says the "overall economic impact of reunification was positive." An economy of scarcity was replaced by a modern, thriving retail sector whose total space devoted to sales tripled in the six years following unification. Yet for many of the 18million citizens of the former GDR, life in the new Germany has meant joblessness, dislocation, and the collapse of the bland security that typified life under communism. Public opinion surveys show that Germans are more willing than ever to say they are proud of their country, but soaring deficits and an aging population temper their enthusiasm. Two decades since unification, the national mood betrays as much anxiety as it does confidence. "The outside world sees a new German giant: prosperous, self-sustaining, assertive," says Ulrike Guérot, a Berlin-based senior research fellow at the European Council on Foreign Relations. "But if you look in greater detail, you see an ever more fragmented political system and society. And so there's this intuitive dissatisfaction here, a sense that something is going wrong in Germany."

Such discontent is largely unwarranted. Germany's problems pale in comparison to those faced by other industrialized nations. As Germans grapple with the implications of their growing power, it's instructive to look back on the remarkable, challenging, and sometimes painful journey that led them here. The rebirth of a united Germany was "the most moving experience in our lifetimes," in the words of former West German President Richard von Weizsäcker, but it was also the start of a period during which Germans struggled to adjust—not just to each other but also to their role in Europe and their place in the world order. "It's like a marriage," says Carl von Hohenthal, a former political correspondent for the German daily Die Welt. "When you start out, you are very much in love, and even though you might have fears and you aren't sure about everything, you decide to do it. But eventually reality sets in."

"Screaming for Unification"

The fall of the Berlin Wall did not make unification inevitable. Although nominally self-governed, the two German states had for 40 years existed under the controlling authority of the four victorious World War II powers: the U.S., Great Britain, France, and the Soviet Union. As of 1989, hundreds of thousands of foreign troops, including close to half a million members of the Red Army, were still stationed on German soil. In the weeks leading up to Nov. 9, discontent with the Communist regime in East Germany produced huge street demonstrations and a seemingly unstoppable exodus of Germans fleeing to the West. Soviet leader Mikhail Gorbachev had told officials in the GDR that if East German citizens attempted to breach the Berlin Wall, Soviet troops would not intervene to stop them. But Gorbachev was adamant that Germany remain divided into separate states, a position shared by British Prime Minister Margaret Thatcher and French President François Mitterrand. "They were worried that history might repeat itself—that a unified Germany in the heart of Europe would lead to another conflagration," says James Baker III, Secretary of State under then-President George H. W. Bush. "We were the only ones besides the West Germans who were seriously interested in moving this thing."

The West Germans had doubts of their own. Helmut Kohl, the conservative Chancellor of the Federal Republic, told aides unification would take at least five years, if it happened at all. Other West German politicians were even more skeptical. "A big part of the political class here did not believe in unification," says Michael Mertes, a former aide and speechwriter for Kohl. In the halls of the West German government at the height of the Cold War, the word "unification" was rarely, if ever, mentioned. By the 1980s, "the West had pretty much forgotten about the East," says von Hohenthal. "No one really spoke about East Germany anymore. Most young people didn't even know where some cities in the East were."

What few West Germans appreciated, or even knew about, was the sudden clamor for change among East Germans who had glimpsed freedom when the Wall came down. They had no intention of turning back. A month after the Wall's opening, Kohl made a trip to Dresden, the bombed-out city that was still a part of the East. Throngs came out to cheer him and plead for German unity. "Kohl was not a great speaker, but he had a tremendous feeling for the people," says von Hohenthal, who covered Kohl's trip for Frankfurter Allgemeine Zeitung, Germany's largest newspaper. "I remember looking at the faces of the people—they all were wearing black, red, and gold and chanting,

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