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25 years of German Unification:
Challenges to overcome and lessons
learned
Prof. Dr.-Ing. Gebhard Hafer
Managing Director | Rector bbw Hochschule
08.09.2016
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Planned Economy in GDR untill 1989/90
•
The Soviet Union established a statedirected economy.
•
The free market system and private
property were abolished.
•
Prices, salaries and resources were
centrally determined via five-year
plans.
•
In 1950, the GDR joined the Council
for Mutual Economic Assistance and
split further from the West.
[2]
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Economic Situation of GDR in 1989/90
•
The planned economy had reduced the GDR’s international competitiveness.
•
Labour productivity was around 20 – 25% to that of the West.
•
Industrial systems were antiquated and often unusable. Approximately 70% of
the equipment in the construction industry was ready for scrap.
•
The demand for industrial investment could not be met.
•
Inferior production processes had negatively impacted product quality.
Consequently, goods were not competitive, and imports exceeded exports.
•
The lack of exports was compensated by loans from West Germany.
•
The poor economic situation had contributed to significant environmental
pollution.
•
The GDP was about €208 billion. Comparatively, the GDP in the Federal
Republic of Germany (FRG) was about €1.4 trillion.
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Employment Structure of GDR states in 1989/90 and 1994
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Employment Structure of GDR states in 1989/90 and 1994
•
Focused on heavy industry to gain independence from FRG.
•
Increased production of consumer goods to improve the standard of living.
•
Exports to be increased at the same time.
•
Important economic areas:
Competitive industries:
o Agriculture, Forestry, Fishing
 Optics (Jena)
o Energy and fuel industry
 Steel production (Hennigsdorf)
o Chemical industry
 Precision engineering
o Metallurgy
o Machine and vehicle construction
o Electromechanical device
construction
o Light industry
o Textile industry
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Share of Gross Value Added in the GDR and the FRG (in percent)
FRG
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Social Market Economy in the Federal Republic of Germany
•
The social market economy was
established by Ludwig Erhard, FRG’s
Minister of Economics between 1949
and 1963.
•
Konrad Adenauer, the first Chancellor
of FRG from 1949 to 1963, pushed for
closer integration with the West.
•
Important aspects of the period were
the development of the European Coal
and Steel Community (1952) and the
European Economic Community (1957).
[4]
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Employment Structure of the Federal Republic of Germany (FRG) in
1989/90 and 1994
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Overall objectives of reunification after 1989
Establishment of a
Monetary,
Economic and
Social Union
 Self-sustaining economic growth
 Income adjustment
 Reduce transfer payments
 Reduce unemployment
 Halt migration
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Economic measures of reunification after 1989
•
Introduction of the social market economy, with the D-Mark as the official currency in
the new federal states.
•
High economic and social pressure to incorporate East German companies.
•
The “Treuhandanstalt” (Trust Agency) privatised 12,000 East German companies and
oversaw the restructuring of approximately 30,000 retail stores, hotels and restaurants,
2.4 million hectares of agricultural land and was responsible for more than 4 million
employees.
•
Financial aid:
•FRG assumed about €172 billion of GDR debt.
•Various investments, including the program “Aufbau Ost”,
allocate about €100 billion for economic development in the
former East.
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Concrete measures for encouraging private investment and
the activity of entrepreneuers
 Investment Grants
 Guarantees
 Interest Subsidies
 Tax Concessions/Subsidies
 Development of infrastructure (transport, telecommunications, commercial
areas)
 Promoted building of research and development capacity, including
university research institutions (e. g. Max Planck Gesellschaft, Blaue Liste
Institutes, Fraunhofer Gesellschaft)
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Solidarity Surcharge
•
Introduced in 1991 to finance the reunification:
 each employee pays a surcharge, currently 5.5 % of income tax (low-income
earners are excluded)
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Labour market policy measures of reunification after 1989
•
Adoption of labour law
•
Collective bargaining
•
The right to strike
•
The Works Constitution Act
•
Protection against unfair dismissal
•
Payment in case of illness
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Unemployment rates in Germany (percent)
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Labour market policy measures of reunification after 1989
1) Expenditures on Active Labor Market Policies (25 Bn. DM in 1998)
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Labour market policy measures of reunification after 1989
1) Incentives for new jobs
Work Procurement Measures untill 2011
• Up to 100 % of wage subsidy from the employment office
• Finance public work (e. g. social sector, environmental protection)
• Support long-term unemployed
Structural Adjustment Measures
• Wage subsidies for temporary period
• Worn by provinces, municipalities, the European Social Fund and
“Bundesanstalt fü r vereinigungsbedingte Sonderaufgaben (BvS)”
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Labour market policy measures of reunification after 1989
2) Assisted Education
Succesful Graduation of Vocational Training
• For promotion needed people, learning impairs and socially
impaired people
• Assistance for problems with the learning content, language
barriers, social issues, problems with the company and exams
Special measures for people with disabilities
• Support for rehabilitation
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Labour market policy measures of reunification after 1989
3) Continuing Professional Education
Short-time Working
• Form of temporary reduction of working hours to limit the output
and employment => Securing the qualification and prevention of
terminations
• In the early 1990s in the new federal states to compensate the
structural change in the East
• 2009 and 2010 in response to the financial and economic crisis
Qualification during Short-time Working
• Grant of up to 60 percent from the European Social fond
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Labour market policy measures of reunification after 1989
Short-time Working in East and West Germany
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Labour market policy measures of reunification after 1989
4) Taking up employment
Personal Service Agency
• Setting and temporary imparting of unemployment people to
companies
• goal is the long-term acquisition of temporary workers by
companies
• During idle phases further qualifications within the PSA are possible
• Companies do not have to make contracts and employees are able
to gain parctical experience
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Labour market policy measures of reunification after 1989
5) Employment-generating activities
Special Program „Jump Plus“
• Target are teenagers and young adults between 15 and 25 Years that
are unemployed for at least 6 months
• The state supports these people in their professional re-boarding
• Additional recruitment of agents and supervisors
• The program was expanded to include long-term unemployed
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Germany‘s current challenges
Development of applications for asylum in Germany (1990 - 2015)
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Germany‘s current challenges
Personal Characteristics of refugees in Germany
Education:
 Academic Degree (15%)
 Secondary School (51%)
Age:
 Under 40 (88,7%)
 Under 18 (30,9%)
Gender:
 Male (69,2%)
 Female (30,8%)
Origin:
 Syria (33,8%)
 Albania (13,3%)
 Kosovo (8,4%)
 Afghanistan (6,7%)
 Iraq (6,3%)
 Serbia (4,2%)
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Refugees as a future investment
Germany‘s current challenges
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In the long term consistent integration of refugees to meet
the needs of skilled labor
Distribute refugees according to their qualifications and
the labor demand within Germany
Refugees need support to be able to qualify individually
It is scientiffically proven that immigrants have no negative
effects on local people and the labor market
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Thank you for your attention!
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No.
URL
Date
1
http://www.mikkelkiilerich.dk/english/_Media/ddr_and_brd.jpeg
03.08.2016
2
https://www.zum.de/Faecher/Ek/BAY/mek/mek/lk12_1/culture/history/fr1949.htm
03.08.2016
3
http://www.bpb.de/cache/images/7/8477-st-article220.jpg?68623
04.08.2016
4
https://www.zum.de/Faecher/Ek/BAY/mek/mek/lk12_1/culture/history/fr1949.htm
08.08.2016
5
http://www.bpb.de/cache/images/5/209225-3x2-article620.jpg?EACED
09.08.2016
6
https://upload.wikimedia.org/wikipedia/commons/thumb/b/ba/Berlin_Alexanderplatz__Haus_der_Elektroindustrie.jpg/330px-Berlin_Alexanderplatz_-_Haus_der_Elektroindustrie.jpg
08.08.2016
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