Germany, 15 Years After the Wall

Today, Germans remember the fall of the Berlin wall - an ecstatic night of pure joy when the communist East German government allowed its citizens unhindered access to the bright lights, well-stocked department stores, and warmhearted greetings of democratic West Berlin.

The event triggered the end of four decades of divided Germans, a people at the forefront of the cold war and separated by barbed wire and ideology.

Yet 15 years later, the euphoria is nowhere to be found. Germany, while reunited legally, remains split in body and soul. Eastern Germany has an unemployment rate of 20 percent, about twice the national average. Easterners are angry that their economy has not flourished, as promised, while western Germans resent the government's cash infusions to easterners they see as ungrateful. A September Stern magazine poll found 20 percent of Germans feel the country would be better off if the wall were back.

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What's needed from all Germans, including political leaders, is the kind of civil courage East Germans displayed through mass protests that forced the end of communist rule. This time, though, the aim should be the reform of an entrenched welfare and regulatory system that hinders job growth and threatens the vibrancy of Europe's most populous country - and thus Europe itself.

East Germans got a very generous deal at the time of reunification in 1990, especially compared with their ex-communist neighbors. Unlike Poles, Hungarians, or Czechs, they had a rich uncle who cleaned up their damaged environment, restored their historic architectural treasures, and built them new highways and shopping malls.

An industry privatization program was carried out, but unfortunately, because the easterners also received their uncle's costly welfare system, high wages, and rigid labor laws, their economy is not competitive with Eastern Europe. This west German model hampered business investment in the east and strained the government's treasury.

By 2003, 57 percent of German government spending went to social outlays, compared with 48 percent at the end of the 1980s. The economy that used to be known as Europe's locomotive contracted last year.

While Germany's welfare and labor systems were affordable in a post-World War II economy, they act as a drag in the global era of cheap labor and tax competition. German Chancellor Gerhard Schröder recognizes this and is chipping away at the welfare state. Taxes were overhauled in 2000, and next year the government will means-test long-term jobless benefits.

But nothing short of a Thatcher-esque overhaul of the German economy is in order. Welfare reform must continue, and serious inroads must be made against Germany's restrictive labor laws and wage negotiating practices. The East Germans needed 40 years for their rebellion; let's hope all Germans face this challenge in less time.

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