GERMAN unity based on democracy, a market economy, and the rule of law represents the achievement of long-standing US goals. It is also a testament to the courage and tenacity of the German people. Unification has been endorsed by all of Germany's neighbors, but old fears live on, especially in Eastern Europe. Germany's policies will be watched closely: Unification has enormous implications for Europe and the world.
Economic Implications: The new Germany, with a population of 78 million, has an economy over one-fourth the size of the US economy - the largest and most dynamic in Europe. Germany vies with the US as the world's leading trading nation. The Deutschmark is second only to the dollar as a reserve currency.
Germany will be preoccupied with the problem of bringing the eastern part of the country up to Western standards. Estimated costs are upwards of $65 billion per year for a decade. Germany will need to finance these costs through some combination of higher interest rates, taxes, or inflation. A policy which raises interest rates will increase costs for big borrowers, including the US. Unification also offers opportunities: Pent-up demand in the east is creating new markets for investment and consumer goods.
Security Implications: German unification, together with the collapse of communism and the rise of new democracies in the former East bloc, has transformed the security situation in Europe. As a key member of NATO and the European Community (EC), a united Germany will play a central role in redefining European security arrangements in the post-cold war world.
Germany will have a special status in NATO for the next several years. Soviet troops will be stationed on former East German territory until 1994, and limitations on NATO activities in the east will continue thereafter. With the exception of a small territorial force in the east, German troops will remain under NATO command. Germany has reaffirmed its pledge not to manufacture or stockpile nuclear, chemical, or biological weapons.
The number of NATO troops in Germany will decline. Germany has pledged to reduce its total forces by nearly one-third, to 370,000 troops. Several NATO allies are already cutting forces in Germany in response to budgetary pressures and the reduced threat. US forces in Germany - 246,000 earlier this year - are being trimmed and may be reduced to symbolic levels by mid-decade. In the long term, public opinion in Germany may come to question a foreign troop presence as an infringement on sovereignty.
Another point of friction is the future presence of nuclear weapons on German soil. NATO supports talks to reduce short-range nuclear missiles in Europe, but also supports a continued nuclear deterrent. NATO nuclear strategy has been a contentious issue in the past. With the inclusion of an East German public that supports a nuclear-free policy, and a new security climate in Europe, public opinion in Germany may come to favor the total withdrawal of nuclear weapons.
Political Implications: A united Germany will shape the course of European integration. Helmut Kohl has placed Germany firmly behind EC plans for political and monetary union. Increased German support for EC integration has offset fears in Europe of unification.
Germany will also play a pivotal role in the East. It is the major Western trading partner of the Soviet Union and every state in Eastern Europe. Proximity plus the strength of the German economy ensures that the region will continue to look to Bonn. Germany considers European stability linked to stability in the Soviet Union, and has taken the lead in providing assistance to Moscow. It will pay $10 billion for the withdrawal of Soviet troops from the eastern part of the country and close to $10 billion in loans, export credits, and debt rescheduling. The German government is sending over $800 million in food aid to the Soviet Union, and private groups in Germany are also shipping food.
A united Germany will have to shed its reluctance to play a more active role in global security affairs. The Gulf crisis has highlighted allied expectations of German military cooperation in foreign conflicts. Chancellor Kohl recognizes that Germany needs to do more, and he and the Social Democratic opposition have agreed to amend Germany's constitution to allow German participation in UN peacekeeping operations. But it is unlikely Germany will soon participate in military operations outside of NATO.
Germany's record on weapons proliferation has been poor. German firms played roles in Libya's Rabta chemical weapons plant and Iraq's acquisition of deadly technologies. The government recently adopted strict controls to limit weapons transfers and chemical, biological, nuclear, and missile technology exports.
Although new export control laws meet international standards, the test for Germany will be to enforce those laws and cooperate with others to curb proliferation.
US-German Relations: For the past 45 years, the US-German relationship has been the crucial one in Europe. We have shared a strong commitment to democracy, European stability, and an open world economy. US support in 1989-90 played an important role in spurring unification, and this experience deepened already strong US-German ties. Recently, President Bush called on Germany to join the US as ``partners in leadership'' on behalf of western interests and values. Over the next few years, Germany will play an important role in resolving US-EC tensions, particularly those concerning trade.
While policies on troop levels and nuclear weapons in Europe, support for the US in the Gulf, and weapons proliferation are potential problems, our close relations provide a sound basis for addressing the challenges.