Economic and Fiscal Aspects of German Reunification and Lessons for European Integration

Abstract

The effects of the German economic reunification on important macroeconomic determinants of the economy will be analysed in view of the burden on and strain of the public budgets. It will be shown that — in comparison to other Western industrial countries — the consolidated financial situation of the public budgets in the “Old Länder”, and the superb conditions on the German capital market, form a solid base for a major temporary increase of public debt to finance the reunification. This is the reason that the german way of transforming a socialist economy into a market economy can’t be an example for eastern european countries and european integration as well.

I gratefully acknowledge the translation assistance of Bernd Hayo and Andrea Wölfel the most helpful data processing by Michael Betten and valuable comments by Barbara Wolfe and Matthias Wrede.