'Black triangle' seeks gold as EU expands

A corner where Germany, Poland, and the Czech Republic meet works to lure investment.

The low industrial buildings at the edge of this former East German city are nothing to look at. But to Holger Knüpfer, they're treasures.

In a city that next year will find itself at the center of an expanded European Union, the firms inside the newly built production halls are signs that this depressed former industrial player is beginning to revive. "The industrial presence is still too small, we know that," says Mr. Knüpfer, Zittau's economic development coordinator. "But we can at least now say that Zittau is once again an industrial center."

The rebirth here embodies Europe's post-cold war vision of bringing prosperity and stability to the entire Continent, east and west.

Bordered on two sides by Poland and the Czech Republic, who will join the EU next year, the German city is making a comeback from its days as part of this "black triangle" of unemployment. Once a textile and car manufacturing center, Zittau languished after the Berlin Wall fell in 1989 and German reunification made workers here redundant.

Beginning in 1990, Knüpfer, a former professor, began gradually luring business to Zittau, with the total now at 27 firms. Last year, new companies brought 50 million euros worth of investment to the city. Still, since 1990 the 500 new jobs created have not been enough to reduce unemployment below about 24 percent.

Zittau has signed a cooperation pact with the Polish town of Bogatynia - where unemployment is at 15 percent - and the Czech town of Hrádek nad Nisou, each just a 15-minute drive from Zittau's center. Together, the three hope to make their region attractive to Western investors.

In the works are a cross-border development park offering land to companies and a road that will connect the three cities, making it easier for traffic and trucks to flow past the borders. Knüpfer hopes to strengthen the ties that have long existed between residents of the region into profitable research and business relationships.

The local economies of the three towns have already benefited from their close geography. Czechs and Poles cross into Germany to load up on groceries or browse a bigger selection of shoes at clothing stores. Zittauers cross the border to tank up on cheap Polish gas, or to buy inexpensive Czech construction materials.

Hrádek Mayor Martin Puda says he is optimistic after the arrival of Western companies like German steel giant Thyssen Krupp and automotive supplier Metzeler. The two created hundreds of jobs in the small town - at a cheaper wage than in Germany.

"The Eastern Europeans see [expansion] more positively," says economist Heinz Schmalholz, of the Ifo Institute for Economic Research in nearby Dresden. "They see more chances for themselves because of their lower labor costs." Economists predict that lower labor costs will soon cease to be an incentive, however, as wage levels in the new EU members rise to reach those of the West.

Another challenge to business development in the triangle, says Knüpfer, is retaining the talent nurtured by the region's concentration of universities. A quarter of Zittau's residents left after the Berlin Wall came down - most of them young people moving to Stuttgart and Munich to find jobs. The city now has a population of about 27,000.

The triangle's hope is to develop as an innovative, high-tech center that will attract companies, jobs and, eventually, homesick young workers. Companies like Techno-Coat, a chemical coating firm that set up shop in Zittau in 1996, have already begun joint research projects with technical universities in Liberec, Czech Republic, and Wroclaw, Poland. They are also mining the graduating classes of the regional university in Zittau and neighboring Görlitz.

Arkansas-based car-part maker CloyesCK opened its European headquarters in Zittau in 2002. "The quality of the German labor is still very, very good," says general manager David Schaefer.

Cloyes's vast production hall hums as machines stamp powdered metal into gears that are then baked and sent on to the factories of carmakers like Skoda and Opel, just across the border in Poland and the Czech Republic. Working among the machines is Torsten Goldberg, an industrial mechanic who had been looking for work since completing his industrial mechanic's traineeship 10 years ago. "I'm very happy to finally have a job," he says.

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