The Economic Strategy for German Unification
Abstract
German unification occurred at midnight on 2 October 1990 with the hope for a fully integrated and developed social and economic union between the former East Germany and West Germany. The two countries developed with basic political ideological differences that profoundly impacted on each country's economic, social and cultural systems. The government coalition headed by the Christian Democratic Union party with Chancellor Kohl as Federal Chancellor was required to develop both a vision and a supporting strategy to facilitate the union. Political motivation and pressure, however, led Kohl to develop a short sighted but politically acceptable short term program that adversely impacted on the economic development in the east. As implemented, the plan produced high government debt, high interest rates, and a resultant prolonged recession within the united country. Secondly, investors disappeared and high unemployment plagued the east. More important to its European trading partners who are tied to Germany's currency through the European Exchange Rate Mechanism (ERM), a conservative German monetary policy exported recession throughout the European Community. Non European countries including the United States and Japan found they were also restricted in dealing with their own sluggish economies because of Germany's internal economic policies. This study examines Kohl's plan from a macro economic vantage point. It shows that today's world economies are interdependent and that unilateral government actions by one major power can adversely impact the entire world economic system. The paper recommends a course of action Germany must follow to benefit unification and economic integration, to support the basic goals of the Maastricht Treaty, and to support an interdependent world economy.
Document Details
- Document Type
- Technical Report
- Publication Date
- Feb 19, 1993
- Accession Number
- ADA264036
Entities
People
- Roy A. Brooks
Organizations
- United States Army War College