A new study from the German Institute for Economic Research (DIW Berlin) reveals a complex picture of economic development across Germany, highlighting both progress and persistent disparities. While eastern German states are steadily closing the gap with their western counterparts in terms of financial and economic strength, the divide between the wealthiest and most financially challenged regions is widening.
Thirty-five years after German reunification, the economic and financial power of the eastern states remains below the national average. However, the study, authored by economist Kristina van Deuverden, notes a significant narrowing of the gap between eastern states and the poorest western states. Notably, the Saarland’s economic standing is now comparable to and even lower than, that of Brandenburg, while the difference with Lower Saxony is shrinking. Brandenburg, benefitting from its proximity to Berlin, is experiencing population and tax base growth and Saxony is also seeing a marked increase in its financial power.
Despite these improvements, the study warns that the gap between these progressing eastern states and the stronger economies of states like Bavaria, Baden-Württemberg, Hesse and Hamburg is expanding. Van Deuverden’s analysis suggests this trend could become entrenched, potentially requiring increased financial transfers between states and signalling an increasing heterogeneity across the nation. The traditional urban-rural divide is reportedly being overshadowed by a growing east-west economic gradient.
A separate DIW study, also reported by Funke-Mediengruppe newspapers, offers a more encouraging perspective on productivity. In 1991, labor productivity in eastern German states was only about half that of the national average; today, it has reached approximately 90 percent. This progress is particularly evident in sectors involving personal services – education, healthcare and public administration – where eastern German states have surpassed their western counterparts in productivity.