What are the main problems in East Germany?
East Germany has a very fully staffed public service, which is being continually reduced. No other European country has this problem. This places a continuous burden on the economy because it raises unemployment and reduces demand. The other element from reunification is the short, very strong boom in the construction industry, which was not sustainable. It was created by enormous tax breaks. Since the mid-1990s, the overcapacity has been in the process of falling back to normal levels, but this process will last two or three more years. Reunification was financed — and this was a fundamental mistake — by means of the social security system. The transfers from West to East corresponded to 1.5% of gross domestic product. Nonwage costs would be a lot lower [without this burden], and it creates an obstacle to employment. It’s not something you can get rid of overnight. The last point is the high debt. That means high interest payments. It limits government’s ability to invest in the fut
