The Economics of German Unification

A. Ghanie Ghaussy, Wolf Schäfer

• Publisher: Routledge
• Year: 1993
• Print ISBN:
  9780415085922
• eBook ISBN:
  9781134884971
• Topic: Business
• Subtopic: Business General
• Index: Business

German unification is proving much more difficult than was originally envisaged. The integration of two national economies with different economic orders, different sectoral structures and divergent levels of development seems set to take a long time. This timely examination of the major issues involved emphasises the impact of unification on diffe

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NEGOTIATING THE UNIFICATION OF GERMANY: INTERNATIONAL DIMENSIONS

Manfred Knapp

INTERNAL AND EXTERNAL DIMENSIONS OF THE UNIFICATION PROCESS 1989-90

The peaceful unification of the two German states took place within the remarkably short period of time of less than twelve months. In October 1989, when the government of the German Democratic Republic (GDR) celebrated with a fanfare the fortieth anniversary of the ‘first workers’ and peasants’ state on German soil’, nobody could foresee the imminent collapse of the communist regime in East Germany. Certainly, during the preceding months a mounting wave of discontent and creeping opposition had turned against the dictatorial power structure within the GDR and its authorities, who stubbornly denied any need for long overdue far-reaching reforms. Moreover, the hundreds and thousands of (mainly) young East Germans, who fled their country via the embassies of the Federal Republic of Germany (FRG) in Prague, Warsaw, and above all, by way of Hungary, sounded the tocsin.

Yet only a few did realize that the completely unexpected opening of the Berlin Wall and of the borders between the two German states on 9 November 1989, already marked the end of the second post-World-War-II German state. The sweeping thorough-going reform processes within the socialist countries, keenly initiated and supported by Gorbachev since the mid-1980s, eventually seized also the GDR and in a revolutionary manner swept away the communist state once established in 1949 between the Elbe and Oder-Neisse rivers by the Soviet Union. While in all other states in Central and Eastern Europe the radical political and societal changes led to a more or less substantial transformation with an overthrow and replacement of the respective communist governments and the related political and economic systems, in the case of East Germany the revolutionary changes went much further: within only a few months they resulted in the entire disintegration and dissolution of the whole state. Thus, following the rapid succession of events, and surprisingly enough, the reunification of Germany had returned to the international agenda.

Helmut Kohl, Chancellor of the Federal Republic of Germany, immediately took the initiative, when on 28 November 1989, in a remarkable speech before the Federal Parliament he proposed in a ten-point programme, a linkage between the resolution of the German Question and pan-European evolutions, advocating for the time being confederate structures between the two German states, which eventually would lead to a reunited German federal state.¹ But this move was simply overtaken by events in a very short period of time.

Regarding the process of German unification, it is appropriate to distinguish between two different issue areas, or sets of dimensions: namely on the one hand the internal (or domestic) dimensions, and on the other hand the external (or international) dimensions. As concerns the domestic dimensions, the governments and representatives of the two German states paved the way for a rapid step-by-step merger of the two Germanies in terms of newly emerging all-German domestic and, in particular, constitutional politics. Within a few months it became evident that the vast majority of the people of East Germany strongly favoured a swift accession to and incorporation into the Federal Republic of Germany and not a unification on the basis of a gradual integration of two separate states. This at least was proved by the outcome of the first free parliamentary elections held in the GDR on 18 March 1990, at which the so-called ‘Alliance for Germany’ scored an impressive victory (48.15 per cent). This party grouping (Christian Democratic Union (CDU), German Social Union (DSU), Democratic Awakening (DA)) advocated an immediate accession of the GDR to the FRG according to Article 23 of the Basic Law.

On 18 May 1990, the next major step in the process of unification was taken upon concluding the treaty establishing a monetary, economic, and social union between the FRG and the GDR. By this treaty, which entered into force on 1 July 1990, the deutschmark was also introduced to East Germany, thus supplying the hard currency that the East Germans had been longing for. Eventually, the internal unification of the two Germanies—at least in formal legal terms—had been achieved by the signing of the Unification Treaty on 31 August 1990, a broad legal framework providing a host of agreements and binding regulations covering almost all fields of domestic politics. By 3 October 1990, the official reunification and the formal foundation of the enlarged FRG was celebrated. Already on 2 December 1990, general elections were held, in the greater FRG, in which for the first time the electorate of the five so-called new federal states (neue Bundesländer, established in the former GDR) was also entitled to vote. From these all-German elections the Christian Democrats (CDU/Christian Social Union (CSU)) emerged as the strongest party, thus enabling Chancellor Kohl (CDU) to continue his coalition government with the Free Democrats, i.e. the (smaller) Free Democratic Party (Liberals), to which the then Foreign Minister Genscher belongs.

At the same time as the internal legal and administrative framework for the German unification had to be tackled, the so-called ‘external aspects’ of the reunification of Germany also had to be negotiated and resolved. In an unprecedented effort of international co-operation, rightly characterized by one observer as ‘one of the greatest triumphs of professional diplomacy in modern times’,² the chief diplomats and government officials of the four former victorious and occupying powers, i.e. the United States (US), the Soviet Union, the United Kingdom (UK) and France, together with their counterparts from the two German states, succeeded in resolving most of the highly complex and intricate problems comprising the international dimensions of the reunification of Germany. These manifold international dealings, leading to the final settlements with regard to a united Germany and, moreover, some basic questions about its future international role mark the central points of this essay.

THE STRUCTURE AND MAIN ISSUES OF THE INTERNATIONAL NEGOTIATIONS

The entire matter usually referred to as the ‘external aspects’ of the unification of Germany embodies in reality a bulk of highly complicated political issues. Among them are on the one hand the whole international framework and the external preconditions that shaped the negotiations regarding the emergence of a reunited sovereign German state. On the other hand, the so-called ‘external aspects’ point also to a number of important questions with respect to the future status and role a united Germany may have in relation to its neighbours, and in world politics at large.

To begin with, at least five points deserve special attention if one tries to delineate briefly the scope of the international negotiations, which eventually paved the way for a swift reunification of the two Germanies and the specific agreements for coping with the related security problems. First, the negotiations needed to address the basic questions concerning the termination of the rights and responsibilities with respect to Germany and Berlin as a whole hitherto reserved by the Four Powers, thus restoring to a united Germany full sovereignty. Second, it was necessary to confirm the definitive borders of the united Germany, especially the Polish-German border, understandably a crucial point for Poland. Third, agreement had to be reached on the delicate subject of the temporary stationing of Soviet troops in Germany and their ultimate withdrawal, and the no less sensitive question regarding the right of the united Germany to belong to alliances, both of which apparently called for substantial concessions on the part of the Soviet Union. Fourth, provisions to tackle the size of German armed forces and other limitations regarding the military power status of the united Germany also had to be worked out. Finally, in a fifth point, the German negotiators had to meet some wishes and expectations advanced mainly by the Soviet Union and Poland for financial and economic support to overcome at least some of the most urgent needs associated with the new situation.

In the overall negotiation process which brought about the international settlement of the reunification of Germany, several bargaining levels, bilateral as well as multilateral, had to be distinguished. With regard to the multilateral negotiations, the single most important forum was what became known as the ‘Two-plus-Four’ negotiations in which the foreign ministers of the Two Germanies and the Four Powers participated. The talks and deliberations of the Bonn Government with its foreign partners, in the European Community (EC) and in the North Atlantic Treaty Organization (NATO), greatly facilitated and supported the negotiations regarding the unification of Germany. Due to the fact that from its very beginning the achievement of the political unification of Germany was considered a subject of utmost importance to all other European states, agreement was reached to the extent that the Conference on Security and Co-operation in Europe (CSCE) should also in some way be brought in to finally approve the results arrived at.

However, first and foremost, several bilateral talks and basic arrangements between the respective parties proved decisive and were instrumental for the successful conclusion of the negotiations at an early date. In the first place, continuous and close contacts between the Bonn government and the Bush administration were extremely helpful during the negotiations, which President Bush himself and Secretary of State James Baker firmly took an active part in. Without the unflagging and determined backing of the Bush administration (and its diplomatic efforts urging the other parties to take the necessary steps to a final agreement), the unification of Germany could hardly have been achieved so smoothly and so rapidly. Moreover, the talks between Chancellor Kohl and President Gorbachev were indeed extremely important. Last but not least, the ongoing discussions between Bonn and the Polish government formed a substantial part of the overall deliberations because the definitive settlement of the border question and the evolution of the still sensitive relationship between Germany and Poland necessarily had to be regarded as part and parcel of any stable solution for German unification. Seen as a whole, the different multilateral and bilateral negotiations constituted a rather complex network, from which in the following only the main issue areas and the central topics can be dealt with.

For the whole international negotiation process, it proved very helpful that already on 13 February 1990, as a result of the agreement to the ‘Twoplus-Four’ platform, the stage was set for settlement of the open questions with respect to the unification of Germany. According to a suggestion put forward by US Secretary of State Baker and his German colleague, Genscher, on the occasion of the Ottawa meeting (12-14 February 1990) of the foreign ministers of NATO and the Warsaw Pact to discuss the proposal for ‘open skies’, basic agreement was reached to deal with the external aspects of German unification only within the small circle of the two post-war German states and the former four victorious powers. Thus, from the outset it was intended to demonstrate the participation of the two German states as equal partners. The early commencing of the negotiations had been facilitated by a preceding statement made by President Gorbachev at his meeting with Chancellor Kohl in Moscow on 10 February 1990, indicating, ‘that the Germans themselves must resolve the question of the unity of the German nation, and that they themselves must make their choice in regard to the types of government, the time schedules, the pace and under what conditions they would like to realize that unity’.³

The six foreign ministers met four times in the ensuing months, on 5 May in Bonn, on 22 June in (East-)Berlin, on 17 July in Paris (with the Minister for Foreign Affairs of the Republic of Poland participating to deal with the Polish-German border issue) and on 12 September in Moscow.⁴ The result of the Two-plus-Four negotiations, the Treaty on the Final Settlement with Respect to Germany,⁵ was signed in Moscow on 12 September 1990, at the concluding ministerial meeting of the six signatories.

From a German point of view, an essential feature of the treaty is the provision that the Four Powers terminate their rights and responsibilities relating to Berlin and Germany as a whole. Accordingly, all corresponding related quadripartite agreements and practices are also terminated and all Four-Power institutions are dissolved. Thus, united Germany has full sovereignty over its internal and external affairs (Article 7). This also includes the right to belong to alliances with all the rights and responsibilities arising therefrom (Article 6).

Altogether, the Treaty on the Final Settlement embodies 10 articles, beginning in Article 1 with the confirmation of the definitive nature of the external borders of united Germany. It is stated that united Germany has no territorial claims whatsoever against other states and shall not assert any in the future.

Article 2 contains general pledges and assurances from the then two German states ‘that only peace will emanate from German soil’. Among these assurances for peaceful conduct is also a reaffirmation of their renunciation of the manufacture and possession of and control over nuclear, biological and chemical weapons and a declaration that united Germany will also abide by these commitments, including the adherence to the rights and obligations arising from the Treaty on the Non-Proliferation of Nuclear Weapons of 1 July 1968 (Article 3). Article 3 also takes note of a statement made earlier (on 30 August 1990) in Vienna at the Negotiations on Conventional Armed Forces in Europe (CFE) by the Federal Republic of Germany, acting with the concurrence of the Government of the GDR, that the armed forces of united Germany shall be reduced to 370,000 men (ground, air and naval forces) within three to four years, commencing on the entry into force of the first CFE Agreement. This undertaking means a substantial reduction (both German armies combined) of roughly 40 per cent.

In Article 4 the governments of the two German states and the Soviet Union state that united Germany and the USSR will arrange by treaty the conditions for and the duration of the presence of the Soviet armed forces in the former GDR and Berlin, as well as the procedure of their complete withdrawal by the end of 1994.

Article 5 of the Treaty regulates the stationing of troops and military activity on the territory of the former GDR and Berlin both during and after the Soviet withdrawal from that territory. It provides that, until the withdrawal of the Soviet armed forces is completed, only German territorial defence units which are not integrated into the alliance structures (of NATO) will be stationed on that territory. During that period, armed forces of other states will not be stationed on that territory or carry out any other military activity there. Also pursuant to Article 5, it is stated that the government of united Germany will reach agreement with the Western powers on the continued stationing of the forces of the United States, United Kingdom and France in Berlin for the period of the Soviet military presence in Germany. Following the completion of the withdrawal of Soviet troops, units of German armed forces assigned to any alliance structure to which Germany is a member may also be stationed in that part of Germany, but without nuclear-weapon carriers. Foreign armed forces and nuclear weapons or their carriers will not be stationed in that part of Germany or deployed there after the Soviet departure.⁶

It should also be mentioned that several letters were exchanged on issues arising in the context of the Two-plus-Four negotiations.⁷ In their letter of 12 September 1990, to the foreign ministers of the Four Powers, Foreign Minister Genscher of the FRG and Prime Minister and Foreign Minister de Maizière of the GDR conveyed several additional statements and assurances with regard to (a) the former expropriations effected on the basis of occupational law in the former Soviet zone of occupation, (b) the preservation of foreign war memorials on German soil, (c) the constitutional protection of the free democratic order and the prohibition of parties and associations with National Socialist aims, and (d) the treatment of the GDR’s external treaty obligations. In reply to previous letters of Secretary of State Baker to Foreign Minister Genscher, the latter in his note, dated 18 September 1990, to Secretary Baker declared that the government of united Germany is prepared, shortly after unification to resolve the claims aga...

Table of contents

• COVER PAGE
• TITLE PAGE
• COPYRIGHT PAGE
• FIGURES
• TABLES
• CONTRIBUTORS
• PREFACE
• 1: NEGOTIATING THE UNIFICATION OF GERMANY: INTERNATIONAL DIMENSIONS
• 2: THE TRANSFORMATION OF ECONOMIC SYSTEMS: THE GERMAN EXAMPLE
• 3: GERMAN-GERMAN MONETARY UNION: MAIN OPTIONS, COSTS AND REPERCUSSIONS
• 4: WAGES, PRODUCTIVITY AND EMPLOYMENT IN EASTERN GERMANY
• 5: TAXES AND TRANSFERS: FINANCING GERMAN UNIFICATION
• 6: THE SOCIAL ASPECTS OF GERMAN REUNIFICATION
• 7: GERMAN UNIFICATION AND THE EUROPEAN COMMUNITY TRADE ASPECTS
• 8: GERMAN UNIFICATION AND THE EXTERNAL VALUE OF THE DEUTSCHMARK
• 9: ENERGY POLICY IN EASTERN GERMANY
• 10: TRANSPORT POLICY IN EASTERN GERMANY
• 11: THE SERVICES SECTOR IN EASTERN GERMANY: AN ENGINE FOR GROWTH AND EMPLOYMENT?
• 12: AGRICULTURAL SECTOR IN EASTERN GERMANY
• 13: ECOLOGICAL TRANSFORMATION IN EASTERN GERMANY
• 14: SECURITY AFTER GERMAN UNIFICATION: THEORETICAL ANALYSIS AND ECONOMIC CONSEQUENCES