The truth about Germany’s levelling up (2023)

Whenever Britain starts talking about decentralisation, Germany is reliably trotted out as a shining example of how to do it right. In 2004, for instance, the Guardian’s Matthew Tempest called Germany “perhaps the most advanced example of decentralised government”. And last week, Andy Burnham, mayor of Greater Manchester, made the unoriginal suggestion that German methods should be deployed to address Britain’s crippling regional inequality. “This is what real levelling up looks like,” Burnham gushed, again in the (formerly Manchester) Guardian: “a basic law in the German constitution requiring equality between the 16 states.”

His words echo those of Germany’s minister of state for eastern Germany, who had just been to visit. Joining Burnham at the Conference of the North, Carsten Schneider said: “The goal of creating equal living conditions everywhere in Germany can even be found in our constitution. There are good reasons for it. If regions are drifting apart, it is bad for everyone. If a variety of regions flourish, the whole country will prosper.”

“When you visit Germany,” Burnham wrote, “you can see and feel the success of this policy wherever you go in the high standards of transport infrastructure and the public realm.” Obviously, Burnham has never taken Deutsche Bahn. Thanks to ageing infrastructure and a huge investment backlog, Germany’s railways just are no longer very punctual. An investigation by ARD in September, found the rail network was on the “brink of collapse”. And, as in the UK, it is a symbol of Germany’s failure to invest equally in all its regions.

The truth about Germany’s levelling up (1)

The policy lionised by centre-Left politicians like Schneider and Burnham is the mammoth project known as Aufbau Ost, the rebuilding of the former communist East over the last 30 years. When the two were reunified, the West’s GDP was 50% higher than the East’s; visiting the latter when I was a teenager felt like travelling back in time to a vaguely dystopian past with tiny, sputtering plastic cars, the ubiquitous whiff of coal smoke, and a vast shortage of house paint and non-scratchy toilet paper. Chancellor Helmut Kohl promised “blossoming landscapes” in the East when the Berlin Wall fell. The opposite happened. Industrial production fell by 70%. A third of eastern factories were shuttered; many were sold for a pittance to westerners. Joblessness exploded. The investment flowing in couldn’t stem the haemorrhage. By 1995, the alarmed Kohl government had forged a plan to properly fund the Aufbau, which he named the Solidarpakt: the “solidarity pact”. The plan was designed to honour the constitutional clause vaunted by Burnham, which makes the federal government responsible for the “creation of equivalent living conditions” across the land.

What constitutes equivalent conditions is, of course, open to interpretation. Conservatives usually understand it to mean equality of public infrastructure — roads, railways, telecommunications. But the Left often stress that it should also mean similar wage and pension levels. Periodically, the state governments bicker over the details of the formulas, with suggestions of tweaks that would work in their favour. Nonetheless, the principle of federal redistribution has remained robust.

The truth about Germany’s levelling up (2)

After all, the Solidarpakt turbocharged a system that had actually been in place since 1949, when the Federal Republic was created under the watchful eyes of the occupying Allies. That system is known as the Länderfinanzausgleich (literally: “State Financial Equalisation”), and grew out of another article in the constitution, which states that “it shall be ensured by law… that the different financial strength of the Länder is adequately compensated for”. Essentially, it regulates the transfer of tax revenue from richer Länder (states) to poorer ones.

The truth about Germany’s levelling up (4)

But in the Nineties, the Länderfinanzausgleich didn’t provide nearly enough money to prevent total economic meltdown in the East. For this, hundreds of billions were needed. A new temporary “solidarity surcharge” to fund the East appeared on wage slips as 7.5% of Germans’ income tax. Petrol taxes were raised. In addition, large special funds were set up to finance culture, police and infrastructure in Berlin, commensurate with the city’s status as the new-old capital of the reunified country. Additional hundreds of billions of euros flowed into the East, in the form of state pensions that recognised the working lives of easterners, even if they’d been working in a system that had collapsed and whose currency was almost worthless.

Nobody knows exactly how much reunification “cost”, because there are so many different ways of calculating it, but it’s certainly well over a trillion euros. Aufbau Ost was a huge burden on the economy, but it meant that the “new federal states” soon received smooth autobahns and glittering train stations. Town centres and castles from the Baltic to the Czech border were impeccably renovated. Gradually, the solidarity tax was lowered. Today, only high earners pay the surcharge.

(Video) Level up(The Third Reich of Germany)

Would the English ever accept such a burden? Despite complaints in the press, West Germans generally saw it as a duty towards their brethren who suffered under communism. The fall of the Berlin Wall gave the project an unprecedented historical urgency. There simply was no alternative. Can one really imagine London and the Home Countries taking one for the North? For as long as it really takes to make a difference?

And how inspired should we be by Germany anyway? Länderfinanzausgleich is complicated in a way that only Germany can do complicated: Sueddeutsche Zeitung once wrote that only a few dozen people actually understand how it works — which shouldn’t be the case in a democracy.

The truth about Germany’s levelling up (5)

The truth about Germany’s levelling up (6)

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And though the work of “levelling up” Germany has come a very long way, it is by no means finished. Many cities in the East — Leipzig, Dresden, Berlin — are more prosperous than some of their western equivalents. The country’s unemployment deadbeat is no longer the capital, but Bremen, in the North-West. But income levels in the East remain stubbornly lower: in 2020, the average gross salary, at €36,499, was still €7,440 lower than in the West.

Other vectors point to inequality as well. According to a study by the Friedrich Ebert Foundation, a think tank linked to the centre-Left SPD, most rural areas in the East are in a “lasting structural crisis” — thanks to depopulation, low wages and not enough broadband. Many smaller Western cities also struggle with deindustrialisation and rising poverty — not unlike the North of England. Levelling up hasn’t prevented their decline. Nevertheless, most of the net recipients of Länderfinanzausgleich are still in the East.

The truth about Germany’s levelling up (8)

Then there is the capital —that strange spawn of East and West —which, although it now displays above-average growth, still receives the largest helping out of the pot: €3.6 billion from a total of €17 billion in 2021. It receives additional billions, too, from a separate federal fund for troubled regions, because otherwise the city wouldn’t be able to service its €60 billion in debt. This has been met with grumbling in certain parts of the nation. Though Berlin has rebounded, it is still considered run-down, decrepit and lawless by the rest of the country. When, on New Year’s Eve, youths attacked and injured police and first responders with fireworks in war-like scenes on the streets of Berlin, Bavarian leaders railed against the “chaotic” capital. Once a poor rural kingdom populated by Lederhosen-wearing yokels, Bavaria was a net recipient of financial transfers until the late Eighties. Now, it leads Germany in everything from tourism to tech to education.

Why, Bavarians asked, should they fund the “failed state” of Berlin, which can’t even maintain order —and has to re-do a local election next month because of rampant irregularities?

Likewise, when Berlin decided to become the first and only German state to offer free day-care a few years ago, the protest coming out of Munich was loud: why should we pay for something those loser Berliners, with their €60 billion in debt, can scarcely afford? On such occasions, politicians from richer states inevitably demand reform: a kind of anti-levelling-up. Last week Bavarian finance minister Albert Füracker said he no longer wanted to fund Berlin’s “feel-good programmes” and announced Bavaria would challenge the Länderfinanzausgleich in the constitutional court. Should someone tell Andy Burnham?

Just like in Britain, Germany’s capital indubitably gets more than its fair share. Can we, then, really be holding the nation up as a model for levelling up? And, perhaps more to the point: is the Herculean challenge of grafting a bankrupt former communist country onto a modern capitalist economy in any way comparable to the task of tackling industrial decline and a lack of investment in regions like North Eastern England or Wales? Can Britain learn from Germany, or is the German solution too, well, German?

To fully answer this question, we need to look beyond the birth of the Länderfinanzausgleich to the history the policy grew out of. That history is radically different from England’s. Until Prussia bundled together most of the German-speaking lands into an empire (the Second Reich) in 1871, the place we call Germany comprised dozens of kingdoms and dukedoms. No single metropolis lorded over the rest. England, on the other hand, became a country in the year 927. The monarch’s government has been collecting tax from its perch in London for more than a millennium. Only with the Third Reich did Germany truly centralise power (and finances) in Berlin. We know how that went.

After the war, the country was purposefully re-crafted to have no strong centre. Although Berlin is beginning to flourish economically again — it attracts more start-up capital than any other German city — it will never be a London, generating the bulk of the nation’s wealth then distributing it like a whimsical king. To disrupt structures so deep-rooted takes a catastrophe, or else decades of slow change. German “devolution” was originally imposed by the force of a few words in a constitution, dictated by occupying powers, the country having been at the stage of some of the 20th century’s most harrowing dramas. The collapse of two dictatorships demanded drastic measures. England has not seen such severe upheavals in modern times.

An awareness of history and a deep desire for stability means the German state has been willing to take on huge tasks — and throw real money at them — in a way that might seem foreign and exaggerated to some in Westminster. I’m not sure Andy Burnham realises the scale of change required to transform England’s system into something like Germany’s. One might dream of transforming the United Kingdom of Great Britain and Northern Ireland into a federation. Maybe that’s what it really takes to achieve more equality. But would London ever agree to such a radical move? Muddling through, having the provinces beg for crumbs, probably suits the capital just fine.

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How is Germany broken up? ›

A Divided Germany

After the Potsdam conference, Germany was divided into four occupied zones: Great Britain in the northwest, France in the southwest, the United States in the south and the Soviet Union in the east. Berlin, the capital city situated in Soviet territory, was also divided into four occupied zones.

What was the economic impact of German reunification? ›

After German unification in October 1990, the economic performance of western Germany was initially strong. However, it deteriorated by 1992 and remained dismal for the remainder of the 1990s. During this time, the unemployment rate nearly doubled, as GDP growth averaged a meager 1.5 percent per year.

How much did Germany spend on East Germany? ›

Economy of East Germany
Revenues$123.5 billion (1986)
Expenses$123.2 billion, including capital expenditures of $33 billion (1986)
Economic aid$4.0 billion extended bilaterally to non-Communist and less developed countries (1956-1988)
All values, unless otherwise stated, are in US dollars.
19 more rows

What was the East German economic miracle? ›

The German economic miracle refers to Germany's rebirth as a global economic power after the devastation of World War II.

What is the biggest problem in Germany? ›

Germany's domestic intelligence agency put the Alternative für Deutschland (AfD) party under formal surveillance for potential extremist links in February 2021. The agency's chief identified far-right extremism as the biggest threat to democracy in Germany.

What was Germany's biggest mistake? ›

Operation Barbarossa: why Hitler's invasion of the Soviet Union was his greatest mistake. Launched on 22 June 1941 and named after the 12th-century Holy Roman emperor Frederick Barbarossa, the German invasion of the Soviet Union represented a decisive breaking of the 1939 Nazi-Soviet pact.

Did Germany ever pay back reparations? ›

In 1995, following reunification, Germany began making the final payments towards the loans. A final installment of US$94 million was made on 3 October 2010, settling German loan debts in regard to reparations.

How much does Germany still owe in reparations? ›

Germany owes Poland over $850 billion in WW2 reparations: senior lawmaker. WARSAW (Reuters) - Germany could owe Poland more than $850 billion in reparations for damages it incurred during World War Two and the brutal Nazi occupation, a senior ruling party lawmaker said.

What problems did Germany face after reunification? ›

Instead, there were a number of problems, of which the most severe were the comparatively poor productivity of the former East German economy and its links to the economies of the Soviet Union and Eastern Europe, which were rapidly contracting.

Does Germany still owe money from ww2? ›

Germany was finally able to repay the monetary reparations decided in this treaty in 2010 after making payments over a long period of time.

Which was richer East or West Germany? ›

Jaap Sleifer's book, Planning Ahead and Falling Behind, points out that the eastern part of Germany was actually richer than the western part prior to World War II. The entire country's economy was then destroyed by the war. What happened afterwards, though, shows the difference between socialism and free enterprise.

Did Germany pay ww2 money? ›

World War II Germany

After World War II, according to the Potsdam conference held between July 17 and August 2, 1945, Germany was to pay the Allies US$23 billion mainly in machinery and manufacturing plants. Dismantling in the west stopped in 1950. Reparations to the Soviet Union stopped in 1953.

How did Germany get so rich? ›

The German chemical industry became the most advanced in the world, and by 1914 the country was producing half the world's electrical equipment. The rapid advance to industrial maturity led to a drastic shift in Germany's economic situation – from a rural economy into a major exporter of finished goods.

When did money become worthless in Germany? ›

In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper. Most Germans were taken by surprise by the financial tornado.

Was East Germany poorer than West Germany? ›

While its per-capita productivity remains lower than that of West Germany, the former East Germany has made major gains since unification. In 1991, per-capita productivity in the former East was less than half (43%) of productivity in the former West.

What are Germany's weaknesses? ›

  • Declining working population from 2020 onwards, despite immigration.
  • Low bank profitability.
  • Strong dependence on international energy imports (e.g. 39% of all German gas imports come from Russia)
  • Prominence of the automotive and mechanical industries, particularly in exports (30% of total exports in 2020)

What is the number one cause of death in Germany? ›

Coronary Heart Disease

What human rights are being violated in Germany? ›

2021 Country Reports on Human Rights Practices: Germany
  • a. Arbitrary Deprivation of Life and Other Unlawful or Politically Motivated Killings.
  • Prison and Detention Center Conditions.
  • Arrest Procedures and Treatment of Detainees.
  • Trial Procedures. Political Prisoners and Detainees. Civil Judicial Procedures and Remedies.

How many German soldiers froze to death in Russia? ›

In the winter of 1942/43, Hitler sacrificed twenty-two divisions through his command to hold out at Stalingrad. More than 100,000 German soldiers fell, froze, or starved to death even before the surrender of the Sixth Army. Over 90,000 men ended up in Soviet prisoner-of-war camps—only around 6,000 of them survived.

Could Germany have defeated the Soviet Union? ›

Thus, if Hitler had allowed his generals to capture Moscow first, the Germans likely have won the war. Due to Hitler's rosy predictions for a swift Soviet collapse and an end to the war in the East by December 1941, Germany failed to produce winter clothing for his invading troops.

What were Hitler's fatal mistakes? ›

With the declaration of war on September 3rd, the fight would be long and bitter, and Hitler's decision to destroy his non aggression pact with Stalin was a fatal mistake that would cost him dearly.

What countries still owe money from ww2? ›

There are other countries that had to pay reparations as part of the Paris Peace Treaties agreement in 1947.
  • Italy ($360 million) Italy was one of the main Axis Powers alongside Germany and Japan. ...
  • Finland ($300 million) ...
  • Hungary ($300 million) ...
  • Romania ($300 million) ...
  • Bulgaria ($70 million)
Mar 18, 2015

How much money does Germany owe Poland? ›

Germany still owes Poland - according to vast documentation, detailed calculations and support of international law - more than USD 1.5 trillion for losses suffered at the hands of the German killers and plunderers during the Second World War.

Did the US pay reparations to Japan? ›

The United States would eventually pay reparations of $1.6 billion (or $3.5 billion in 2019 dollars) to 82,219 formerly interned Japanese Americans.

Did Russia ever pay back Lend Lease? ›

Similarly, the Soviet Union repaid $722 million in 1971, with the remainder of the debt written off. Reverse Lend-Lease to the United States totalled $7.8 billion.

How long would it take Germany to pay off the reparations? ›

After the Treaty of Versailles called for punishing reparations, economic collapse and another world war thwarted Germany's ability to pay.

Who paid for the rebuilding of Germany after ww2? ›

The Marshall Plan, also known as the European Recovery Program, was a U.S. program providing aid to Western Europe following the devastation of World War II. It was enacted in 1948 and provided more than $15 billion to help finance rebuilding efforts on the continent.

Is Germany completely unified today? ›

To commemorate the day that marks the official unification of the former East and West Germany in 1990, 3 October has since then been the official German national holiday, the Day of German Unity (Tag der deutschen Einheit).

What was Germany called before reunification? ›

Naming conventions

Before reunification, Germany was divided between the Bundesrepublik Deutschland (Federal Republic of Germany; commonly known as West Germany) and the Deutsche Demokratische Republik (German Democratic Republic; commonly known as East Germany).

Why did the German unification fail? ›

The Revolution of 1848 failed in its attempt to unify the German-speaking states because the Frankfurt Assembly reflected the many different interests of the German ruling classes. Its members were unable to form coalitions and push for specific goals. The first conflict arose over the goals of the assembly.

Did the US pay off ww2 debt? ›

In the years after World War II, the United States achieved a dramatic reduction in the level of the federal government's debt. The costs of financing the military had pushed the debt up sharply, from around 40 percent of GDP before the War to a peak of nearly 110 percent of GDP as the War ended.

Does Germany still pay reparations to Poland? ›

"According to the German government, the case of reparations and compensation for war damage remains closed," said the ministry in a press release. "The German government does not intend to open negotiations on this matter."

Did Japan have to pay reparations for ww2? ›

This law gave surviving Japanese Americans $20,000 in reparations and a formal apology by President Reagan for their incarceration during World War II. But its passage did not happen overnight. It took years to turn the redress movement into legislation.

Does East Germany technically still exist? ›

East Germany (German: Ostdeutschland), officially the German Democratic Republic (GDR; Deutsche Demokratische Republik, pronounced [ˈdɔʏtʃə demoˈkʁaːtɪʃə ʁepuˈbliːk] ( listen), DDR, pronounced [ˌdeːdeːˈʔɛʁ] ( listen)), was a country that existed from its creation on 7 October 1949 until its dissolution on 3 October ...

Why is Germany so powerful after ww2? ›

It had a great military and a robust economy. The country was able to defeat many other countries during the world wars. It made it one of the most powerful countries in the world.

Why did so many East Germans leave for the West? ›

Escapees had various motives for attempting to flee East Germany. The vast majority had an essentially economic motive: they wished to improve their living conditions and opportunities in the West. Some fled for political reasons, but many were impelled to leave by specific social and political events.

How many WWII veterans are still alive 2022? ›

In 2022, only 167,284 of the 16 million Americans who served in World War II are still alive, reports the US Department of Veteran Affairs.

Is Germany allowed to have an army? ›

Yes, Germany is allowed to establish armed forces for solely defense but is limited to the German Army, German Soldiers, German Navy, and German Air force. It is also not allowed to have biological, chemical, or nuclear weapons.

When did France pay off WW2 debt? ›

This time the mood was different, and in 1946 a partial consolidation of the French debt was agreed in which 2 billion dollars were written off. The balance was absorbed into U.S. contributions to France from 1947 under the Marshall Plan for European recovery (2.296 billion dollars).

Is Germany in financial trouble? ›

The European energy crisis is set to push Germany into a recession in 2023, as rising energy prices put a damper on industrial production and inflation means citizens will buy less, said the economy ministry in its autumn projection for the country's economic development.

Is Germany good country to live? ›

Overall, Germany is a great place to live. It has a high standard of living, a strong economy, and plenty of culture and entertainment options for a good work-life balance. The cost of living can be high in the major cities, but there are also many benefits to living in Germany.

Is Germany still a rich country? ›

In 2021, Germany was ranked the 20th richest country in the world, measured by GDP per capita. This means that if you add up the value of all the goods and commodities produced in a country and divide the figure by the number of inhabitants, you get $50,700 (€52,200) per person per year in Germany on average.

How much was a loaf of bread in Germany 1923? ›

This flood of money led to hyperinflation as the more money was printed, the more prices rose. Prices ran out of control, for example a loaf of bread, which cost 250 marks in January 1923, had risen to 200,000 million marks in November 1923.

Which country printed too much money? ›

Zimbabwean banknotes ranging from 10 dollars to 100 billion dollars printed within a one-year period. The magnitude of the currency scalars signifies the extent of the hyperinflation.

Has the US ever had hyperinflation? ›

The United States has never experienced hyperinflation, but the unprecedented government stimulus measures taken during the COVID-19 pandemic increased one measure of the nation's money supply, known as M2, from $15.4 trillion in January 2020 to more than $21.6 trillion by January 2022 and has helped drive inflation to ...

Could people leave East Germany? ›

The East German constitution of 1949 granted citizens a theoretical right to leave the country, though it was hardly respected in practice. Even this limited right was removed in the constitution of 1968 which confined citizens' freedom of movement to the area within the state borders.

Which region of Germany is the richest? ›

StateRankGRP per capita (US$)
13 more rows

How much of Berlin Wall is left? ›

Today, almost nothing is left of it. In many places, metal plates in the ground remind us where the Wall once stood. For more than 28 years, the Wall divided East and West Berlin. Today, almost nothing is left of it.

Is Germany still split into two? ›

Germany was divided during the Cold War between the Western Allies led by the United States and the Soviet Union in the East, with the two countries (in East and West) not being united until 1990.

Why was East Germany and West Germany divided? ›

For purposes of occupation, the Americans, British, French, and Soviets divided Germany into four zones. The American, British, and French zones together made up the western two-thirds of Germany, while the Soviet zone comprised the eastern third.

Is Germany still divided into East and West? ›

To commemorate the day that marks the official unification of the former East and West Germany in 1990, 3 October has since then been the official German national holiday, the Day of German Unity (Tag der deutschen Einheit).

When was Germany split into East and West? ›

In October of 1949, the Soviet Union responded with the establishment of the German Democratic Republic, a Communist state known as East Germany. In 1952, East Germany began policing its Western border to stop the flight of engineers, scientists and doctors to West Germany.

Does Germany still pay reparations for ww2? ›

World War II Germany

After World War II, according to the Potsdam conference held between July 17 and August 2, 1945, Germany was to pay the Allies US$23 billion mainly in machinery and manufacturing plants. Dismantling in the west stopped in 1950. Reparations to the Soviet Union stopped in 1953.

Who decided to tear down the Berlin Wall? ›

In 1986, 25 years after the construction of the wall, in response to West German newspaper Bild-Zeitung asking when he thought the wall could be removed, Reagan said, "I call upon those responsible to dismantle it [today]".

Why did the US divide Germany? ›

By 1945, the United States and the Soviet Union had begun to emerge as ideologically opposed 'superpowers', each wanting to exert their influence in the post-war world. Germany became a focus of Cold War politics and as divisions between East and West became more pronounced, so too did the division of Germany.

Which side was communist in Germany? ›

By the time of the formal formation of the East German state in 1949, the SED was a full-fledged Communist party, and developed along lines similar to other Soviet-bloc communist parties. It was the ruling party in East Germany from its formation in 1949 until 1989.

Who rebuilt Germany after ww2? ›

In 1948, hoping to promote European recovery and further democracy, the United States, led by President Truman, enacted the Marshall Plan. The Marshall Plan, named after Secretary of State, George Marshall, was a $15 billion-dollar economic plan to help with the reconstruction of Germany and Europe after WWII.

Is West Germany its own country? ›

The Federal Republic of Germany (popularly known as West Germany) is formally established as a separate and independent nation.

When did it stop being West Germany? ›

West Germany, from 1949 to 1990, a republic consisting of the western two-thirds of what is now Germany. West Germany was created in 1949 when the United States, Great Britain, and France consolidated those zones, or portions, of Germany that they had occupied at the end of World War II.

Why is Austria not part of Germany? ›

Austria existed as a federal state of Germany until the end of World War II, when the Allied powers declared the Anschluss void and reestablished an independent Austria.

How long did Russia occupy Germany? ›

The result is a richly detailed and fascinating account of the four and one half year occupation. The author argues that the Soviets did not occupy Germany with "specific long-range goals" in mind (465), let alone a detailed plan of action.

Which country played the biggest role in ww2? ›

Although the United States played the dominant role, all three major Allied countries were necessary to victory in Europe. The most important contribution made by Britain was to survive Hitler's onslaught in 1940. Had the British failed to hold off the Nazis, the Second World War would have taken a far different turn.


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