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| A leap worth taking: how Leipzig was saved from economic decline | A leap worth taking: how Leipzig was saved from economic decline |
| (7 months later) | |
| In today's eurozone crisis, it is little remarked upon that Germany has done financial bailouts before. | In today's eurozone crisis, it is little remarked upon that Germany has done financial bailouts before. |
| Nowhere is that more apparent than in Leipzig, one of the success stories of the former East Germany. Big companies such as Amazon and DHL, BMW and Porsche, have created thousands of jobs by moving operations to what is now an attractive business and cultural centre. New roads, rail links and a redeveloped airport have acted like magnets for investment. The population has increased by 10% to 530,000 over the past 10 years. | Nowhere is that more apparent than in Leipzig, one of the success stories of the former East Germany. Big companies such as Amazon and DHL, BMW and Porsche, have created thousands of jobs by moving operations to what is now an attractive business and cultural centre. New roads, rail links and a redeveloped airport have acted like magnets for investment. The population has increased by 10% to 530,000 over the past 10 years. |
| But Uwe Albrecht, the city's deputy mayor, is under no illusions about who needs thanking for the sudden renaissance. "Without the financial boost from the transfers from the west, it would not have been possible," he says, referring to approximately €1.3 tn (£1tn), which has flowed from west to east since reunification. | But Uwe Albrecht, the city's deputy mayor, is under no illusions about who needs thanking for the sudden renaissance. "Without the financial boost from the transfers from the west, it would not have been possible," he says, referring to approximately €1.3 tn (£1tn), which has flowed from west to east since reunification. |
| The enormous costs that the country has shouldered since the Berlin Wall fell in 1989 have pushed many to the limits of their generosity. Richer regions are complaining about constantly having to fork out for poorer states via the federal system of equalisation payments, and Bavaria has even filed a complaint with the constitutional court. | The enormous costs that the country has shouldered since the Berlin Wall fell in 1989 have pushed many to the limits of their generosity. Richer regions are complaining about constantly having to fork out for poorer states via the federal system of equalisation payments, and Bavaria has even filed a complaint with the constitutional court. |
| This has implications far beyond eastern Germany as it shows how German attitudes to fiscal transfers have hardened – just as the country is being called on to contribute the lion's share of the bailouts to the eurozone's struggling members. | This has implications far beyond eastern Germany as it shows how German attitudes to fiscal transfers have hardened – just as the country is being called on to contribute the lion's share of the bailouts to the eurozone's struggling members. |
| They see that even thriving cities such as Leipzig require time and investment to claw their way back to prosperity, while other parts of the east continue to stagnate. | They see that even thriving cities such as Leipzig require time and investment to claw their way back to prosperity, while other parts of the east continue to stagnate. |
| Leipzig suffered a huge slump after the wall fell. An important trade, financial and industrial centre before the second world war, during communist times it had become a city of heavy industry and manufacturing. Once the planned economy collapsed, most of Leipzig's factories couldn't compete with the west. "Within six months 96% of industrial jobs had disappeared," says Albrecht. | Leipzig suffered a huge slump after the wall fell. An important trade, financial and industrial centre before the second world war, during communist times it had become a city of heavy industry and manufacturing. Once the planned economy collapsed, most of Leipzig's factories couldn't compete with the west. "Within six months 96% of industrial jobs had disappeared," says Albrecht. |
| It had been Leipzig where the movement that brought the end of the German Democratic Republic began, its people taking to the streets in Monday night marches that challenged the communist regime's legitimacy. | It had been Leipzig where the movement that brought the end of the German Democratic Republic began, its people taking to the streets in Monday night marches that challenged the communist regime's legitimacy. |
| Gerhild Minnemann, a 53-year-old librarian, took part in those marches in the hope of changing the political system. "Economically things weren't that difficult before," she says. "Then after the fall of the wall everything became much tougher for us." | Gerhild Minnemann, a 53-year-old librarian, took part in those marches in the hope of changing the political system. "Economically things weren't that difficult before," she says. "Then after the fall of the wall everything became much tougher for us." |
| Some cities, such as Jena and Dresden, fared better as they had developed industries – optics and microelectronics respectively – that survived reunification. But by the mid-90s, Leipzig was firmly in the economic doldrums, with one of the highest levels of unemployment in the country. | Some cities, such as Jena and Dresden, fared better as they had developed industries – optics and microelectronics respectively – that survived reunification. But by the mid-90s, Leipzig was firmly in the economic doldrums, with one of the highest levels of unemployment in the country. |
| A decade ago things began to improve. Money from the west funded an infrastructure splurge that brought new autobahns, rail links, a trade show centre and the development of Leipzig-Halle airport. DHL moved its European hub from Brussels and Amazon and Future Electronics of Canada both established logistics centres, while carmakers Porsche and BMW created thousands of jobs by establishing big production facilities in the city. | A decade ago things began to improve. Money from the west funded an infrastructure splurge that brought new autobahns, rail links, a trade show centre and the development of Leipzig-Halle airport. DHL moved its European hub from Brussels and Amazon and Future Electronics of Canada both established logistics centres, while carmakers Porsche and BMW created thousands of jobs by establishing big production facilities in the city. |
| "The infrastructure has been an essential requirement for investment," says Albrecht. | "The infrastructure has been an essential requirement for investment," says Albrecht. |
| Martin Rosenfeld of the Halle Institute of Economic Research says that efforts to rebuild the east should be viewed positively. It is like a miracle, he argues. "Really an incredible amount was achieved." | Martin Rosenfeld of the Halle Institute of Economic Research says that efforts to rebuild the east should be viewed positively. It is like a miracle, he argues. "Really an incredible amount was achieved." |
| But for all the success of cities such as Dresden and Leipzig, much of eastern Germany is still struggling to catch up. Living standards are stuck at about 70% of the average in the west, with lower wages and unemployment twice as high. Some regions, such as Mecklenburg Western-Pomerania, continue to be marred by depopulation and little economic activity. | But for all the success of cities such as Dresden and Leipzig, much of eastern Germany is still struggling to catch up. Living standards are stuck at about 70% of the average in the west, with lower wages and unemployment twice as high. Some regions, such as Mecklenburg Western-Pomerania, continue to be marred by depopulation and little economic activity. |
| "The perception in the population is that we have spent a lot of money on east Germany and the results are not that good," says Sebastian Dullien of the European Council on Foreign Relations. | "The perception in the population is that we have spent a lot of money on east Germany and the results are not that good," says Sebastian Dullien of the European Council on Foreign Relations. |
| Rosenfeld says every country has regional disparities, giving Liverpool and Detroit as examples. "One naturally cannot expect that every region and every city in the east can reach the same level as the west." | Rosenfeld says every country has regional disparities, giving Liverpool and Detroit as examples. "One naturally cannot expect that every region and every city in the east can reach the same level as the west." |
| Nevertheless, the patchy results have led to doubts about the effectiveness of massive fiscal transfers. | Nevertheless, the patchy results have led to doubts about the effectiveness of massive fiscal transfers. |
| At first, most Germans in the west felt they had a duty to help their eastern compatriots who, it was felt, had borne most of the punishment for the second world war by ending up in the Soviet zone. Few could have envisaged how much they would have to pay and for how long. "People feel these transfers will never stop, that the money will just keep flowing," says Matthias Kullas of the Centre for European Policy in Freiburg, southern Germany. | At first, most Germans in the west felt they had a duty to help their eastern compatriots who, it was felt, had borne most of the punishment for the second world war by ending up in the Soviet zone. Few could have envisaged how much they would have to pay and for how long. "People feel these transfers will never stop, that the money will just keep flowing," says Matthias Kullas of the Centre for European Policy in Freiburg, southern Germany. |
| This has coloured the way people view the bailouts to the rest of Europe, he argues, making them anxious about the true duration and costs involved. "People are pretty sure that it will constantly be a one-way street." | This has coloured the way people view the bailouts to the rest of Europe, he argues, making them anxious about the true duration and costs involved. "People are pretty sure that it will constantly be a one-way street." |
| "Germans are quite allergic when you mention a transfer union," Dullien agrees. "They say, maybe we were willing to do this for other Germans, but we are not willing to do this on a much larger scale in a European context." | "Germans are quite allergic when you mention a transfer union," Dullien agrees. "They say, maybe we were willing to do this for other Germans, but we are not willing to do this on a much larger scale in a European context." |
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