Germanys Unite through Treuhandanstalt

How did the two Germanys unite economically after the fall of the Wall? Through a Treuhandanstalt. West Germany was built on a free market system. East Germany was based on a state planned economy. In order for the two Germanys to reunite after the collapse of East Germany in 1989, a common system had to be created.

Creation of a Treuhandanstalt

In mid-1990, East Germany’s legislature created a trust agency, called Treuhandanstalt, which was to become the legal owner of all state-owned property of the former East Germany. On 3 October 1990, the date of the formal German Unification, this holding company was put in charge of privatizing and restructuring around 14,000 state-owned companies, agricultural lands and forests, public housing, property of the former Ministry for State Security (Stasi), and holdings of the former National People’s Army.

Problems facing the Treuhandanstalt

Most of the factories in East Germany had never been modernized so that their productivity was on par with that of developing countries. Following unification, East Germany products simply were no longer in demand. Only high tech enterprises, such as Jenoptik in Jena, Opel in Eisenach, the steelworks EKO, and the Baltic shipyards were considered profitable enough to be restructured. (www.kalenderblatt.de)

Treuhandanstalt is criticized

The operations of the Treuhandanstalt quickly drew criticism. The agency was accused of unnecessarily closing profitable businesses, misusing or wasting funds, and unnecessarily laying off workers (approximately two-and-a-half million employees in state-owned enterprises were laid off in the early 1990s). Affected workforces protested. Supporters of Treuhandanstalt operations argued that not placing these former state-owned enterprises into private hands would cause the loss of even more jobs and slow down economic recovery.

Treuhandanstalt is disbanded

In the end, the trust agency left debts amounting to 137 billion Euros. On this day in history, on 31 December 1994 the Treuhandanstalt was disbanded.

 

For a sneak peek at the first 20+ pages of my memoir, Walled-In: A West Berlin Girl’s Journey to Freedom, click “Download a free excerpt” on the home page of http://www.walled-in-berlin.com. Walled-In is a story of growing up in Berlin during the Cold War.

 

 

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