East German Case Study Good for EU Crisis

Chancellor Angela Merkel said that European countries burdened by the fallout of the euro-area debt crisis can learn from East Germany’s experiences of economic overhaul after the fall of the Berlin Wall.

Merkel, Germany’s first chancellor from the former Communist east, said in a speech to regional professionals and trade-chambers representatives yesterday that her East German background had taught her there is no way around enacting reforms to become more competitive.

“When we became part of the Federal Republic of Germany we had to carry out massive reforms to restructure our economy, also with great upheaval,” Merkel said in the western city of Mainz. “But this was necessary to create a solid basis of small and medium-sized companies in the new states.” While the eastern German regions have since been eligible for special European Union funds and subsidies, “at the end of a structural reform there must be a competitive company,” she said.

Merkel, as the leader of Europe’s biggest economy, has been at the forefront of pressing euro states hurt by the debt crisis to overhaul their labor markets and carry out other reforms to better compete in a globalized world. She plans to present steps aimed at raising competitiveness with French President Francois Hollande that they will jointly propose to an EU summit in June.

In addition to her experiences in East Germany, Merkel cited a set of German reforms collectively known as Agenda 2010 that were pushed through by her Social Democratic Party predecessor, Chancellor Gerhard Schroeder, as an example to Europe of the need to raise competitiveness.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.