DORTMUND, Germany — More than two decades before Germany helped bail out Greece, it started on a rescue of another desperately poor, crisis-stricken region: its own ex-Communist eastern half.
The aid is still coming, $2 trillion later, but the results have been mixed at best, with eastern Germany’s economy trailing far behind the rest of the country, instilling a deep skepticism among many Germans about the power of cash alone to fix financial ailments. Here in the western city of Dortmund, a former steel powerhouse with problems of its own, officials recently called for an end to the eastbound payments, saying that they in the west were being dragged down, instead of easterners climbing up.
Now, residents are looking toward Greece and other countries that have needed bailouts and worrying that history may be repeating itself.
Across Europe, calls have been growing for Germany to abandon its adherence to the doctrine that countries can only get back on track through austerity. Instead, many politicians and economists are saying, the focus needs to be on reinvigorating economic growth. But Germany – Europe’s powerhouse economy – has remained very cautious about committing any more money to help the struggling neighbors that share its currency, the euro.
“German unification shows how incredibly costly it is to support a poorer part of a country within a currency union through just fiscal transfers,” said Clemens Fuest, an economist at the University of Oxford and an adviser to the German finance ministry. “The German situation is really a warning.”
When Germany reunified in 1990, the west — a country of sleek BMWs, rebuilt cities and robust exports — was suddenly grafted together with a country that had a weak currency, uncompetitive industries and infrastructure that had been neglected since World War II. Millions of workers who were guaranteed employment by the East German state were suddenly out of jobs, and entire industries went bust in a matter of months. To avoid economic armageddon, the rest of the country trained a firehose of cash toward rebuilding the east.
The results: The east has a brand-new network of roads, beautifully renovated buildings and an unemployment rate that, at 11.3 percent, is nearly double the rest of the country. Some eastern cities, like Dresden and Leipzig, are bustling with new economic activity. But entire regions have emptied out, and private investment has been spotty, while eastern workers are 80 percent as productive as their western counterparts. The price tag is mounting, and Germans see it on their paychecks, where a “solidarity” tax of up to 2.5 percent will be taken from their earnings until 2019.
Other parts of Germany, meanwhile, have felt neglected, and they are increasingly speaking out. Late last month, a group of mayors in the struggling Ruhr Valley area of western Germany called for an end to the solidarity programs that they say are driving their cities into deeper debt.
“We’ve increased our problem when we’ve been trying to get rid of it,” said Joerg Stuedemann, the city manager of Dortmund, a former steel city of 580,000 that is $1.7 billion in debt and has 13 percent unemployment. Though channeling resources eastward was once necessary, now it’s more complicated, since areas of the west are now struggling just as much, he said. “We have to discuss the future of the solidarity pact.”
“It was necessary to have a solidarity program. There’s no question. But some money was spent stupidly,” he said.
Some eastern cities boast grand building projects that draw interest and investment, like Dresden’s newly reopened Military History Museum, where a striking addition by architect Daniel Libeskind has drawn international attention. On the other side of Germany, meanwhile, Dortmund and nearby cities are struggling to come up with the money to maintain roads and playgrounds, and some have been forced to close swimming pools and shut other amenities.
Money should be distributed “in all directions of the compass, wherever the need is most urgent,” said Klaus Wehling, the mayor of Oberhausen, a city of 210,000 near Dortmund, who has also called for changes to the reconstruction program.
Critics of the officials’ calls to end the eastbound payments say many of the economic problems are of the cities’ own making, not a result of the program to rebuild the east. And they say that while the east still lags behind the west, and many of its gains since 1990 appear to have stalled, the alternative without the payments would likely have been far worse.
That’s little comfort to Dortmund’s residents, where in ragged-edged neighborhoods, fastidious old women sweep their front stoops clean, but trash and debris litters the streets, the result of city services that are spread thin. Those who live there say they’re skeptical of calls to send money elsewhere when so much needs to be done at home.
“Is this a nice playground? Look around,” said Ahmedi, 36, a stay-at-home mother whose two boys were clambering over a graffiti-covered swing-set on a recent afternoon.
“Germany should help its own people first. Then it can worry about others,” said Ahmedi, who declined to give her last name because she said she feared the consequences of criticizing government services. “Schools are getting worse. Parks are getting worse.”
That’s a common sentiment in Germany, where the bailouts of Greece, Portugal and Ireland remain unpopular and politicians are cautious about committing more money to the cause, even though pressure to do so has been increasing from France, the International Monetary Fund and others. Last week, European finance ministers agreed to increase the resources available for bailouts, but because of Chancellor Angela Merkel’s opposition, it was less money and for a shorter time period than most other countries had hoped.
The bailouts, which have been structured as emergency loans to help troubled countries pay their debts, have been different from Germany’s program to reconstruct its eastern half, which involved more direct spending and social subsidies. But the reconstruction experience has left deep impressions on the country.
For Greece, “we must not discuss money. Greece needs a strategy for economic recovery,” said Karl Brenke, a researcher at the German Institute for Economic Research who has studied both the German reunification and Greece’s economy. “This strategy must come from the politicians in Greece, not from the European Union. I don’t see a debate about this. I only hear, ‘we need money.’ In some cases, money is counterproductive.”
In Dortmund, many residents say their money has been squandered.
“A couple of years ago I was in east Germany, and I saw a beautiful new stretch of road without any houses in sight,” said shoemaker Franco Valesso, who pointed at the unfixed potholes on the street outside his shop. “And now the German people are paying so much money to Greece, and dead people there are earning pensions.”
Special correspondent Petra Krischok in Berlin contributed to this report.