GERMANY: The reconstruction of eastern Germany has been a €1.25 trillion failure that is dragging down the rest of the country with it, according to a government report.
The report, leaked to Der Spiegel magazine, says that yearly transfers to eastern states worth €90 billion - twice what Germany spends on education - are largely squandered.
A 13-member "Eastern Reconstruction Committee", the government-appointed authors of the report, reached the conclusion that the cash transfers may be actually doing more harm than good for the region, and for Germany as a whole.
The authors call for the current reconstruction plan to be discarded and the introduction of a new radical plan with low-tax "special economic zones" for companies to encourage economic development.
"The ongoing internal west-east transfer of cash and other consequences of German unification are directly or indirectly responsible for about two-thirds of the country's economic weakness," according to extracts from the report in Der Spiegel. "Western cities like Gelsenkirchen, itself plagued by unemployment, today appear more cheerless than some eastern communities."
The report says that, of the 15 million Germans living in the eastern states, only 40 per cent have a job while most young people move to the west in search of work and a higher standard of living.
"A dramatic accelerated ageing of the society in eastern Germany is imminent, as well as a dangerous loss of well-educated people and creative minds," the report's authors find.
Over €130 billion has been spent in the last 13 years in job creation schemes, the report notes, yet the eastern city of Halle still has a 27 per cent unemployment rate, one of the highest rates in the EU.
Eastern states have never emerged from stagnation and, without money transfers from the west, would have a per capita GDP lower than Portugal, the authors note.
The difficult economic situation in the east was compounded by the 1:1 currency conversion rate, wage parity agreements and the disappearance of markets in neighbouring eastern European states.
The leaked report contains many unvarnished truths about the politics of eastern reconstruction. The authors of the report note "it is frightening that these are not reflected in federal politics".
Yesterday, the Transport Minister, Mr Stolpe, who is also responsible for rebuilding eastern states, said the the government needed to look again at funding for the east and make necessary "readjustments".
Chancellor Gerhard Schröder promised in 1998 when he took office that rebuilding the eastern states would be a top priority for his coalition of Social Democrats and environmentalist Greens.
Successfully wooing the votes of east Germans has played a key role in general elections since 1990, and has led policy makers to eschew more painful economic reforms.
Recently, opposition politicians, including Christian Democrat leader Angela Merkel, an east German, have accused Mr Schröder of ignoring the east's woes as wider economic reforms, terrorism and other issues have taken centre stage.