Germany's 25 Years of East and West Reunited: Four Charts

Who is Angel Merkel? In Three Minutes

  • Reunification shows economic convergence `cannot be rushed'
  • Schaeuble recalls `most incredible time' of his political life

For success stories since East and West Germany reunited, look no further than Angela Merkel.

Germany’s first chancellor from the formerly communist east is the most prominent symbol of unity since the two countries merged 25 years ago Saturday, ending Europe’s east-west division since World War II. Though the east still lags in prosperity, Germany’s revival as the region’s biggest economy over the last decade is lifting all boats, powering everything from share prices to immigration and affording Merkel international leverage denied her predecessors.

Germany now “is a country where you can live well in both the east and the west, a country that takes on global responsibilities alongside its partners,” Merkel said in a speech Thursday marking the anniversary.

That’s easier to say today than in the 1990s, when unification quickly led to the collapse of East Germany’s uncompetitive state-run companies. As unemployment in united Germany rose to more than 5 million, changes in labor and welfare laws under Gerhard Schroeder helped lift the economy out of the doldrums. Merkel praised the reforms just last month.

For all the improvements, fewer eastern residents are around to enjoy them. While the massive population flight, most of it to western Germany, ebbed to a trickle of 3,300 by 2014, it’s deprived the region of a generation who could have helped rebuild. Per-capita gross domestic product in the east was only 67 percent of the western level last year.

Some of the hurdles proved too big after the east missed out on West Germany’s boom years before the fall of the Berlin Wall in 1989. None of the 30 companies in Deutsche Boerse AG’s DAX stock index is based in the east and the nation’s 10 most populous cities are in the west.

Growth in the east has focused on cities such as Dresden and Leipzig, the cradle of East Germany’s peaceful revolution against communist rule, where companies led by Deutsche Post AG, Amazon.com Inc. and Bayerische Motoren Werke AG have invested billions.

With the wave of refugees that is straining government institutions this year, Germany is being tested as it was during reunification, Federal President Joachim Gauck said Saturday. “As in 1990, we’re facing a challenge that will occupy generations,” he said at a ceremony in Frankfurt.

About 1.9 trillion euros ($2.1 trillion) in federal aid has flowed to the east since reunification on Oct. 3, 1990, according to German state lender KfW. Eastern Germans are gaining but only so much: wages, household wealth, retirement benefits and the number of unionized workplaces remain lower than in the west, even as the jobs gap narrowed during Germany’s recovery from the financial crisis.

There’s a lesson here for European integration, according to Berenberg Bank senior economist Joern Quitzau. “Reunification is yet more proof that economic convergence takes a very long time and can’t be forced with haste,” he said in a research note.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE