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East Germany Holds Opportunities and Challenges

ANALYSIS

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STITCHING together the two German economies will be the work of many hands. Most foreign assessments of the challenge facing West Germany as it tries to integrate the sick, polluted, inefficient economy of East Germany into its own vibrant one have emphasized the problems which must be overcome. But talk to some West Germans on the scene, and one comes away with a rather different impression. ``In general, economists have tended to emphasize the challenges we face and to underestimate the opportunity we have,'' said Ulrich Ramm, chief economist at Commerzbank. ``We are talking about a population that is one-quarter that of the Federal Republic and whose economy is one-seventh the size of ours.'' He likens the task more to what Americans would face if they had to pitch in and clear up the devastation of a large corner of the United States.

Various estimates are that between $600 billion and $1.2 trillion will need to be invested in East Germany to clean up its pollution, rebuild its infrastructure, and make its industrial sector fully competitive with West Germany's. Dr. Ramm did not himself care to quantify the figure. He said that the sources of funds for East Germany are numerous - first, from West German industry and the government, but also from other European, Japanese, and US investors who see new opportunities in both East Germany and the other East bloc countries.

Moreover, a cost in the East will result in a profit for someone in the West. ``Not only is East Germany polluted,'' said Dr. Ramm, ``but it is highly energy inefficient. There is little or no double-glazing in East Germany. This creates a big opportunity for window manufacturers. East Germany can continue to burn soft coal after the proper filters are added. We have three companies in West Germany who make the filters.''

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