German Unification: Expectations and Outcomes (Studies in European Culture and History)

Studies in European Culture and History edited by Eric D. Weitz and Jack Zipes University of Minnesota Since the fall of the Berlin Wall and the collapse of communism, the very meaning of Europe has been opened up and is in the process of being redefined. European states and societies are wrestling with the expansion of NATO and the European Union and with new streams of immigration, while a renewed and reinvigorated cultural engagement has emerged between East and West. But the fast-paced transformations of the last fifteen years also have deeper historical roots. The reconfiguring of contemporary Europe is entwined with the cataclysmic events of the twentieth century, two world wars and the Holocaust, and with the processes of modernity that, since the eighteenth century, have shaped Europe and its engagement with the rest of the world. Studies in European Culture and History is dedicated to publishing books that explore major issues in Europe’s past and present from a wide variety of disciplinary perspectives. The works in the series are interdisciplinary; they focus on culture and society and deal with significant developments in Western and Eastern Europe from the eighteenth century to the present within a social historical context. With its broad span of topics, geography, and chronology, the series aims to publish the most interesting and innovative work on modern Europe.

Published by Palgrave Macmillan: Fascism and Neofascism: Critical Writings on the Radical Right in Europe by Eric Weitz Fictive Theories: Towards a Deconstructive and Utopian Political Imagination by Susan McManus German-Jewish Literature in the Wake of the Holocaust: Grete Weil, Ruth Klüger, and the Politics of Address by Pascale Bos Turkish Turn in Contemporary German Literature: Toward a New Critical Grammar of Migration by Leslie Adelson Terror and the Sublime in Art and Critical Theory: From Auschwitz to Hiroshima to September 11 by Gene Ray Transformations of the New Germany edited by Ruth Starkman

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Caught by Politics: Hitler Exiles and American Visual Culture edited by Sabine Eckmann and Lutz Koepnick Legacies of Modernism: Art and Politics in Northern Europe, 1890–1950 edited by Patrizia C. McBride, Richard W. McCormick, and Monika Zagar Police Forces: A Cultural History of an Institution edited by Klaus Mladek Richard Wagner for the New Millennium: Essays in Music and Culture edited by Matthew Bribitzer-Stull, Alex Lubet, and Gottfried Wagner Representing Masculinity: Male Citizenship in Modern Western Culture edited by Stefan Dudink, Anna Clark, and Karen Hagemann Remembering the Occupation in French Film: National Identity in Postwar Europe by Leah D. Hewitt “Gypsies” in European Literature and Culture edited by Valentina Glajar and Domnica Radulescu Choreographing the Global in European Cinema and Theater by Katrin Sieg Converting a Nation: A Modern Inquisition and the Unification of Italy by Ariella Lang German Postwar Films: Life and Love in the Ruins edited by Wilfried Wilms and William Rasch Germans, Poland, and Colonial Expansion to the East edited by Robert L. Nelson Cinema after Fascism: The Shattered Screen by Siobhan S. Craig Weimar Culture Revisited edited by John Alexander Williams Local History, Transnational Memory in the Romanian Holocaust edited by Valentina Glajar and Jeanine Teodorescu The German Wall: Fallout in Europe edited by Marc Silberman Freedom and Confinement in Modernity: Kafka’s Cages edited by A. Kiarina Kordela and Dimitris Vardoulakis German Unification: Expectations and Outcomes edited by Peter C. Caldwell and Robert R. Shandley

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Ge r m a n Un i f ic at ion Ex p e c tat ions a n d O u tcom e s

Edited by

P e t e r C. Ca ldw e ll and Robe rt R. Sh a n dl e y

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GERMAN UNIFICATION

Copyright © Peter C. Caldwell and Robert R. Shandley, 2011. All rights reserved. First published in 2011 by PALGRAVE MACMILLAN® in the United States—a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–0–230–12075–4 Library of Congress Cataloging-in-Publication Data German unification : expectations and outcomes / edited by Peter C. Caldwell and Robert R. Shandley. p. cm.—(Studies in European culture and history) ISBN 978–0–230–12075–4 (hardback) 1. Germany—History—Unification, 1990. 2. Germany—Politics and government—1990– 3. Germany—Economic conditions—1990– 4. Germany—Social conditions—1990– I. Caldwell, Peter C. II. Shandley, Robert R. DD290.25.G469 2011 943.087⬘8—dc23

2011026987

A catalogue record of the book is available from the British Library. Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition: October 2011 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

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Con t e n t s

Preface James A. Baker, III, 61st Secretary of State

vii

Acknowledgments

ix

Contributors

xi

Introduction Peter C. Caldwell

1

One

Two

Three

Four

Five

German Unification, Western Order, and the Post–Cold War Restructuring of the International System G. John Ikenberry

15

Between Euroland and Abendland? Opportunities and Challenges for German Foreign Policy since Unification Mary N. Hampton

41

Rethinking Reunification: German Monetary Union and European Integration Jonathan R. Zatlin

61

The Quest for Freedom and Stability: Political Choices and the Economic Transformation of East Germany 1989–1991 Wolfgang Seibel A Splendid Failure: Reflections on Two Decades of East German Economic Reconstruction Irwin L. Collier

Six

Political Institutions and German Unification Ulrich K. Preuss

Seven

German Unification and the Federal Constitutional Court: A Retrospective View after Twenty Years Peter E. Quint

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99

121 137

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Epilogue

The End of Dictatorship and Its Aftermath: Personal Reflections of the Federal Commissioner for the Records of the State Security Agency of the German Democratic Republic Marianne Birthler

Index

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P r e fac e James A. Baker, III, 61st Secretary of State

On November 9, 1989, I was hosting a lunch in honor of Philippine president Corazon Aquino when an aide handed me a note saying that the East German government had announced that it was opening its borders to the West. Like hundreds of millions of others around the world, I would later watch East and West Berliners taking sledge hammers to a wall that had divided their city since 1961. It had been a tumultuous summer and fall across Central and Eastern Europe. The Soviet Empire created in the wake of World War II was clearly crumbling. East Germany itself had been the scene of ever larger public demonstrations. Still, I was astonished by the speed and scope of change that swept the former Soviet Bloc following the fall of the Berlin Wall. Germany would be reunified within a year. The Warsaw Pact would be formally disbanded in July 1991. The Soviet Union itself would cease to exist in December of the same year. The Cold War that had shaped German, European, and, indeed, world history for nearly fifty years was over. Twenty years after the fall of the Berlin Wall, the James A. Baker III Institute for Public Policy and Rice University’s History Department cohosted a conference to celebrate the anniversary. I participated on the first day of the event, which featured policymakers who had been deeply involved in the diplomacy surrounding German reunification. I was joined by Hans-Dietrich Genscher, former foreign minister of the Federal Republic of Germany; Roland Dumas, former foreign minister of France; Markus Meckel, former foreign minister of the German Democratic Republic; and Charles Powell, former private secretary to British prime minister Margaret Thatcher. Eduard Shevardnadze, former foreign minister of the Soviet Union, took part in our discussion by satellite from Tbilisi, Georgia. The second day of the conference shifted the focus in a more scholarly direction. Political scientists, economists, and historians discussed a

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wide range of issues related to the complex interplay of international and domestic forces that drove German reunification. Marianne Birthler, once a leading East German human rights activist and now commissioner for the archives of the East German secret police, played a key role in leading the day’s discussion. This volume represents the work of the first-rate scholars, German and American alike, who participated in the conference. Chapters address the diplomatic, political, and economic issues associated with reunification. This book may not represent the last word on any of these topics; we may be confident that they will be the subject of scholarly interest for decades to come. But I do believe that this book makes an important contribution to the study of one of the most significant events of the twentieth century. I am proud that the Baker Institute is associated with it. Let me conclude with a personal observation. There are many who deserve credit for the peaceful reunification of Germany: the Soviet Union’s Mikhail Gorbachev, who was wise enough to forgo the use of force; West Germany’s Helmut Kohl, who was single minded in his pursuit of reunification; and Prime Minister Margaret Thatcher of the United Kingdom, President Francois Mitterrand of France, and particularly President George H. W. Bush of the United States, who put the full power and prestige of America behind a process that would ease the path to a single Germany firmly anchored in Europe and the West. I myself take what I hope is pardonable pride in the modest part I played, as do the other foreign ministers involved, including Eduard Shevardnadze of the Soviet Union, Hans-Dietrich Genscher of West Germany, Douglas Hurd of the United Kingdom, Roland Dumas of France, and Markus Meckel of East Germany. But the true heroes of reunification were the people of East Germany. They kept the faith during long years of oppression. And, when a moment of historic opportunity arose, they were determined and brave enough to seize it.

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Ac k now l ed gm e n t s

We would like to thank the James A. Baker, III Institute for Public Policy at Rice University for its generous support for the conference on October 21, 2009, where the first versions of the chapters in this volume were presented.

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Con t r i bu tor s

Marianne Birthler served as the Federal Commissioner for the Documents of the State Security Agency of the German Democratic Republic (GDR) from 2000 to 2011. A former citizen of the GDR, in the 1980s she became active in child and youth work for the Evangelical Church in Berlin. From 1986 onward, Marianne Birthler became actively involved in various opposition groups, such as the “Initiative Frieden und Menschenrechte” (Initiative for Peace and Human Rights) and the “Arbeitskreis Solidarische Kirche” (Solidarity Church Workshop), which demanded the democratization of the state and a greater distance of the church from the ruling communist regime. She also participated in the Round Table and was elected to the first (and only) freely elected People’s Chamber of the GDR in March 1990. Commissioner Birthler has been active in the political life of Unified Germany as both a parliamentary representative, and, since 2000, as the chief administrator of the papers of the East German State Security Agency (Stasi). Peter C. Caldwell is professor of history at Rice University. His publications have focused on German political thought from 1848 to the present, including Dictatorship, State Planning, and Social Theory in the German Democratic Republic (New York: Cambridge University Press, 2003), Popular Sovereignty and the Crisis of German Constitutional Law: The Theory and Practice of Weimar Constitutionalism (Durham, NC: Duke University Press, 1997), and Love, Death, and Revolution in Central Europe (Houndmills: Palgrave Macmillan, 2009), on Ludwig Feuerbach and political radicalism in Germany. Irwin L. Collier is professor of economics at the Free University, Berlin. He has published widely on state-socialist management and planning, the economics of German Unification, transitional economics, and standards of welfare in united Germany. Recent publications include “The ‘Welfare Standard’ and Soviet Consumers,” in Comparative Economic Studies 47, no. 2 (June 2005), 333–45, and the coedited Welfare States in Transition: East and West (New York: St. Martin’s, 1999).

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Mary N. Hampton is professor of national security studies at the Air Command and Staff College. She has published numerous articles and books on German politics and national security, including The Wilsonian Impulse: U.S. Foreign Policy, the Alliance, and German Unification (New York: Praeger, 1996) and Between Bonn and Berlin: German Politics Adrift (Rowman and Littlefield, 1999). Professor Hampton is currently completing a book comparing U.S. and European security cultures. G. John Ikenberry is the Albert G. Milbank Professor of Politics and International Affairs at Princeton University. He is the author of numerous books and articles addressing the problem of international order, including After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order after Major Wars (Princeton, NJ: Princeton University Press, 2001), which won the 2002 Schroeder-Jervis Award presented by the American Political Science Association (APSA). In addition to his extensive academic work, Professor Ikenberry has held positions at the State Department, on the Council of Foreign Relations, and at the Carnegie Foundation for International Peace. Ulrich K. Preuss is professor of law and politics at the Hertie School of Governance in Berlin. He holds a J.D. from Gießen University and worked as professor for public law at the University of Bremen from 1972 to 1996. From 1996 to 2005, he was professor of law and politics at the Freie Universität Berlin. In 1989–1990, he coauthored the draft of the constitution as a participant of the Round Table of the German Democratic Republic. He has taught at, among others, Princeton University, New School University, and the University of Chicago. He serves on the advisory board of various research institutions and is a member of the Staatsgerichtshof (State Constitutional Court) in Bremen. His book publications include, among others, Constitutional Revolution. The Link Between Constitutionalism and Progress (Atlantic Highlands: Humanities Press, 1995); Institutional Design in Post-Communist Societies. Rebuilding the Ship at Sea (coauthored with Jon Elster and Claus Offe) (New York: Cambridge University Press, 1998); and Krieg Verbrechen Blasphemie. Zum Wandel bewaffneter Gewalt. 2nd expanded ed. (Berlin: Klaus Wagenbach, 2003). Peter E. Quint is Jacob A. France Professor of Constitutional Law at the University of Maryland School of Law. His main research interests include American constitutional law and comparative constitutional law, particularly the constitutional law of the Federal Republic of Germany. He is the author of The Imperfect Union: Constitutional Structures of German Unification (Princeton, NJ: Princeton University Press, 1997) and Civil Disobedience and the German Courts: The Pershing Missile Protests in

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Comparative Perspective (London and New York: Routledge-Cavendish, 2008), as well as numerous articles on American and German constitutional law. Wolfgang Seibel is professor of politics and public administration at the University of Constance. He has published on a wide range of issues involving organization theory and institutions, including the important work on the Treuhandanstalt and East German economic transition, Verwaltete Illusionen. Die Privatisierung der DDR-Wirtschaft durch die Treuhandanstalt und ihre Nachfolger 1990–2000 (Frankfurt a.M./New York: Campus Verlag, 2005). His most recent work, Macht und Moral. Die “Endlösung der Judenfrage” in Frankreich 1940–1944 (Munich: Fink, 2010), concentrates on institutional organization and the Holocaust. Robert R. Shandley is associate professor of film studies and German at Texas A&M University. Along with German cinema and the German language, his work also extends to the European fairy tale, problems of representation and the Holocaust, and postwar U.S. history. He is the author of Runaway Romances: Hollywood’s Postwar Tour of Europe (Philadelphia, PA: Temple University Press, 2009) and Rubble Films: German Cinema in the Shadow of the Third Reich (Philadelphia, PA: Temple University Press, 2001), and editor of Unwilling Germans: The Goldhagen Debate (Minneapolis: University of Minnesota Press, 1998). Jonathan R. Zatlin is associate professor of history at Boston University. He is the author of The Currency of Socialism: Money and Political Culture in East Germany (Washington, DC: German Historical Institute, 2007) and “Out of Sight. Industrial Espionage, Ocular Authority, and East German Communism, 1965–1989,” Contemporary European History 17, no. 1 (January 2008), 45–71; he has also published widely on a variety of topics of economic history, including the relationship between money and xenophobia, consumer cooperatives under socialism, and the role of the Bundesbank in the German economy.

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I n t roduc t ion Peter C. Caldwell

When the Berlin Wall fell on November 9, 1989, policymakers faced the unprecedented challenge of establishing the foundation for a unified, stable, and prosperous Germany within a peaceful Europe. What were policymakers’ expectations as they sought to create viable institutions for a world beyond the Wall and indeed the Cold War? And how did these expectations related to the eventual outcome of their efforts? On October 30–31, the James A. Baker III Institute for Public Policy at Rice University in Houston, Texas, hosted a conference to examine these questions. On October 30, five of the six foreign ministers directly involved in German Unification—James A. Baker III, Hans-Dietrich Genscher, Markus Meckel, Roland Dumas, and by satellite Eduard Shevardnadze—as well as Charles Powell, Margaret Thatcher’s foreign advisor, assembled at Rice University for an extraordinary conversation. The foreign ministers’ panel discussion is available on the Web.1 On the next day, an academic conference took place that explored these issues further. The present volume consists of the results of that academic conference. The intention on both days was to reopen a narrative that has seemed, in retrospect, ever more inevitable and “easy.” As Baker noted, the process may seem inevitable in retrospect, but to those involved, “it took some very hard work.”2 And as Sheverdnadze noted, the peaceful results were not foreordained in a divided Germany filled with hundreds of thousands of foreign troops and surrounded by nuclear missiles. The challenge in foreign policy was to create a “usable framework” (Genscher) for a post–Cold War order.3 But the challenges extended beyond foreign policy; already on the first evening, Meckel pointed out that for many dissidents in the German Democratic Republic (GDR), himself included, the opening of the Berlin Wall was a disappointment: on this day, as the possibility of unifying the two Germanys emerged, the possibility diminished for a democratic, revolutionary renewal from within.4 Indeed, the decisions of 1989–1990 had implications for domestic politics as well as international

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2 / peter c. caldwell

politics, for the German economy (or economies) as well as the economy of the European community. And we are still dealing with the effects of the decisions today. The expansion of the North Atlantic Treaty Organization (NATO) into Eastern Europe has, certainly, ushered in an era of tranquillity in Europe—but also ongoing tensions on the edges, in the former Yugoslavia, in Ukraine, in Chechnya, and in Georgia. The economic and social unification of Germany has certainly provided for a degree of wealth and economic security in Eastern Germany enjoyed by few others in the transition from state socialism to managed capitalism; at the same time, economic unity has come at a high cost for Western Germans and for the European Community in general, and the economic cleft between East and West remains great. The decision to unify Germany by annexation, according to Article 23 of the West German Basic Law, rather than by way of a new constitution (Article 146) resulted in a speedy process, certainly— but political differences between East and West have come to be anchored in an increasingly complex system of political parties. German Unification in 1990 was only the beginning of the story of the new Germany.5 It is easy in retrospect to ascribe inevitability to vast historical events such as the East German Revolution and the unification of Germany that followed. But in fact, such events are not inevitable; they are the product of decisions made when the outcomes of a process were not yet clear. The actors in the process responded under severe time constraints to an opportunity created by three factors: an opening in international relations connected to Gorbachev, an ongoing upheaval in East German politics that put the old state’s existence into question, and an economic collapse in East Germany. Policymakers sought not only to find a way out of the crisis but also to create new, stable structures at all levels. They sought, to paraphrase Baker, not only to adapt or create institutions, but also to prepare for a new set of problems, from terrorism to the environment to weapons of mass destruction, that would mark the world after the Cold War.6 This volume examines all three intertwining strands of this moment, taking into account not only the limited knowledge of the future of the actors involved but also the long-term consequences of their actions. And in fact, the historian is confronted with three very different narratives of inevitable transition. Because in fact, quite different stories are told depending on which aspect of German Unification receives emphasis. If the main story is the resolution of the symbol of divided Europe in the Cold War, then Mikhail Gorbachev becomes the main actor, and the decline of the Soviet Union the main underlying cause.7 One might argue about how Gorbachev came to his reformist position, how he came to accept the principle that Eastern European states should have the right to explore their own paths to socialism, how he managed to maintain

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introduction / 3

power against conservative forces in the Soviet Union; President Ronald Reagan might even play a role as a catalyst in the process, though certainly not the main cause. But it is the person of Gorbachev—a product of the system who aimed at transforming the system and also a leader who produced results inimical to his own intentions—whom all on the first night recognized as the key figure—just as President George H. W. Bush and Secretary of State James Baker were the consummate careful managers of the process.8 But at issue was far more than one person’s retreat in the face of necessity; at issue in the area of international relations was nothing less than the conclusion of the Cold War, however one dates the latter’s definitive end. The fall of the Wall and German Unification meant nothing less than the Soviet Union’s abandonment of its post-1945 empire, an abandonment of the claim to be a separate world in competition with the capitalist world.9 It is also the story of the willingness of the leaders of Great Britain and France to accept the reestablishment of an economically and politically powerful German state in the middle of Europe—hardly a foregone conclusion, as documents from both France and Britain, released just before the conference, revealed.10 Indeed, Roland Dumas displayed his annoyance with the process that brought German unity at the panel discussion of October 30. He noted repeatedly that the “two plus four” talks might as well have been “four plus two,” questioning, in other words, the decision to view the negotiations as first and foremost matters of democratic selfdetermination worked out by two democratically elected German states in the context of the four occupation powers of 1945.11 Margaret Thatcher certainly expressed a visceral distrust of a unified Germany, a distrust that would lead to the much publicized “seminar” on the German character at Chequers. Charles Powell sought to explain the distrust as a sense of “supreme elation” tempered with caution during the panel discussion. The process itself, then, raised problems of the horrible past that had shaped all the major actors. But at issue was not just the past but also the future: how to ensure a workable, peaceful European order. Two major problems emerged. First, what would happen to the many international institutions that existed precisely as part of the Cold War world, especially NATO and the Warsaw Pact? Second, how would new institutions, or transformed old ones, serve to preserve peace and stability in Europe? The diplomats sought the answer to both questions in existing institutions. NATO in particular would remain a key component in the Transatlantic Alliance but would at the same time be restructured and supplemented by other institutions such as the Conference on Security and Cooperation in Europe (CSCE), such that it would not threaten the Soviet Union but would rather provide for increased security and trust for a democratizing

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Russia.12 From one point of view, this solution represented a kind of Metternichian realism: the forces that in essence survived the Cold War would provide a structure for Europe after the Cold War. From another point of view, however, the commitment to democracy and the dispersal of power in the interest of an international community founded on the nation-state contained some aspects of Wilsonian idealism. Indeed, as John Ikenberry and Mary Hampton have argued in recent years, the postUnification settlement contained both realist and idealist aspects in its aim of binding powers to an existing order.13 German Unification, then, was an important moment in a grand diplomatic process aimed at retaining and expanding existing international institutions, at providing the context for the transition from state socialism to some more democratic system of government, and at ensuring order throughout. In other words, whatever the hopes of the framers of the “New World Order” for democratization, the underlying intent remained conservative in the sense of Metternich or Kissinger. As both Hampton and Ikenberry note in their chapters for this volume, the future was to be more complex. Ikenberry views the decisions of 1989–1990 as tantamount to “constitution making,” a strong claim that restores to the Bush administration in particular the clarity of vision and purpose that it lost in the public eye soon after Unification. He notes, however, that this new “constitutional order” may have begun eroding in recent years, and indeed that a new period of “constitution making” may be in store. Hampton, meanwhile, notes how the presumed alignment of transatlantic and European interests has begun to come apart in the twenty years since Unification. For both, the place of Russia in the “New World Order” remains the question.14 Hampton also points out a different challenge affecting Russia as well: the integration of Muslims into a traditionally Christian European order. The care with which state leaders sought to coordinate their overall expectations with existing realities to produce a stable and lasting outcome, the “hard work” that Baker described, did pay off. Yet history continually produces new challenges that pose the problem of long-term outcomes differently. In the realm of foreign policy, then, policymakers, at least in the United States and Germany, sought to avoid crisis and to exploit an opening to reach long-sought-after goals.15 The economic narrative of German Unification takes a different form: it was driven not by a sense of opportunity but by a sense of impending crisis related to the socioeconomic collapse of state socialism in Eastern Europe. The story is one of the gradual collapse of the East German state, which on some post-1990 accounts seems to start already in the 1950s. The inefficiencies of central planning became gradually more apparent over the forty years after the end of war: its difficulty in

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responding to change, its inflexible supplies, its inherent tendencies toward hoarding, and its implicit “deal” with labor that resulted in the massive waste of human resources.16 A system that had worked well—during an existential crisis and under conditions of dictatorship—to produce a limited number of goods (especially military) became weaker as society and economy became more complex and as repressive structures were relaxed.17 On top of the standard deficits of planning, the GDR owed external debt to the West, in the currency of capitalist countries. This debt began to grow after Honecker’s ascent to power in 1971 and played a major role in the final collapse of the state.18 And finally, the opening up of the Berlin Wall returned the East German regime to its pre-Wall dilemma: how to manage an inefficient economy when labor, especially skilled labor, is exiting.19 By the end of 1989, it had become clear that the East German economy was collapsing. Economic decline and the mass emigration of East Germans to the Federal Republic had immediate political repercussions. The worse the economy in the East, the more workers would leave; the more East Germans came to West Germany, the more social institutions at all levels there would be overwhelmed, from municipal housing authorities to school systems to the social services provided by the federation. Calls for quick and resolute action to halt the decline appeared on both left and right by the end of 1989: the liberal Social Democrat Ingrid Matthäus-Maier even called for a currency union prior to political union, which she hoped would provide a “signal to stay” to East Germans, breaking the downward cycle.20 Economic union was proposed, then, not as a good in itself or as an opportunity but rather as a response to a crisis. And, however policymakers at the time blurred the issue, currency union did imply some kind of political union. A quick economic union to avoid political disaster would become the standard economic story of German Unification, summed up in the title of Dieter Grosser’s important work: “Political Constraints in Conflict with Economic Rules.” Alternatives appeared, of course, at the time. Indeed, the preferred alternative from the point of view of economic theory and policy would have seen a gradual alignment of the two economies over a period of months or years through some kind of economic confederation. In his chapter in this volume, Jonathan Zatlin shows just how radical the decision for a quick currency union before any period of alignment actually was. But an economic confederation aiming at a gradual, step-by-step economic union raised political challenges that might well have been hard to master. Could such a policy really have restrained East German workers’ exit to West Germany? And, more important, could an alternative be conceived that did not involve denying citizenship rights in the West to East German citizens, against the express language of the Basic Law?21 Whether or not an alternative existed to quick currency union,

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economic unification was definitely a shock to the East German economy, which soon found itself in free fall, and to the European economy as a whole. Jonathan Zatlin takes these issues on in his chapter, describing the relationship between currency union and Europe, the inflation that resulted from the currency union, and the long-term failures of economic unification in Germany. Even assuming that some kind of quick currency union was unavoidable, many aspects of the way that union was carried out came under fire immediately. A short list of controversial decisions indicates the complex set of options policymakers faced. Should property be returned to its original owner or monetary compensation provided instead? If either alternative were chosen, then who would constitute the owners of property: those who possessed it before the Nazis, those who possessed it under the Nazis, the owners immediately after 1945, or those who acquired property during the GDR itself? By what process should property be returned? Should debt held by individual socialized firms continue to be payable, or should these firms receive debt relief? Should “people’s firms” be taken over by the Federal Republic and sold? Given over to workers? Or given to the entire population in the form of stocks? Should wages be permitted to float outside of the structures of collective bargaining that covered West Germany, or should they come under the purview of trade unions? Should wages be kept low to reflect the lower productivity of the East? Should they be subsidized to make it easier for firms to spend money updating their plant and to provide for social peace? And most fundamentally, at what rate should the currency of the East be converted to the West? Should that transaction follow an economic rationality or a political one?22 The most controversial decision was to create the Treuhandanstalt, which served as a “trustee” of the state-owned firms of the former GDR. As Wolfgang Seibel has noted, this institution, headed by leading managers from the decentralized, capitalist West, paradoxically took over the role of the central planner for the firms of the former GDR; they managed some 8,000 firms that employed about 4 million workers and covered some 40 percent of the area of the former GDR.23 The Treuhandanstalt aimed at the speedy privatization of these firms. But the process of privatization was neither automatic nor easy, and the Treuhandanstalt became what Grosser and Seibel have described as a natural scapegoat for the economically problematic decisions of 1989–1990.24 And yet, as Seibel argues in his chapter in this volume, both the Treuhandanstalt and the trade unions played necessary roles in the difficult and still unrealized process of economic unification. The economic narrative is not as tidy as the one about international order, nor does it focus on individuals to the same extent. But it is, in

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a sense, a more profound story; to use a now-outdated language, it is a narrative about the economic base from which is derived the wealth that supports the superstructure, including the state. At issue here is how to provide for continued production within a capitalist economy, production that will both satisfy needs and provide a tax base. The problem of how to unify two such different economic systems was a profound one, and the experience of unification was unprecedented. And messy. Irwin Collier showed the conference just how wrong the predictions of economists were as they sought to predict growth rates in the East over the 1990s. They were off not only because of the limits of economic theory, but also because of poor policy decisions made following the German Unification, and persisting through the 1990s, he argues. Economic stability was achieved only at great cost. The political narrative of German Unification takes yet a third form, for here the voices of the citizens matter in a different way. The year 1989 was indeed a revolutionary moment, and Secretary of State Baker’s praise for “the indomitable spirit of the people of the German Democratic Republic” was certainly warranted. But what those people wanted changed over time. As the textbook story goes, the first demand was for adequate representation of the people: the slogan “We are the people” implied the demand for democratic reform in the face of the obviously hypocritical claim of the Socialist Unity Party to represent all Germans.25 But after the fall of the Berlin Wall, the slogan shifted: “We are one people!” implied a call for German unity above democratic reform within Eastern Germany. In fact, the difference between these two slogans is not absolute: the demand for representation and self-determination can also entail unification. Moreover, these words obscure the divergent voices in the revolutionary process. There were the countercultural dissidents seeking a different kind of democracy entirely, based on the direct contact of people with each other, integrity and trust, and with at best limited roles of mediating institutions such as political parties. There were the founders of new parties, such as Markus Meckel and his Social Democratic Party, who sought a party democracy that would support a new kind of democratic state, different from both East and West and internationally independent of either NATO or the Warsaw Pact. There were serious socialist reformers in the tradition of, for example, Alexander Dubček (all too often forgotten or set aside in the years that followed) who sought a rejuvenated and liberalized state socialism. There were those on both left and right in East Germany who sought unity with West Germany on the basis of its existing institutions.26 And there were no doubt some involved with the revolution who hoped for a right-wing nationalist revival of Germany: the rise of right radicalism in the years following 1989 did not come from nowhere.

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The mass protests of October 1989 opened the possibility of radical change within the GDR. The fall of the Wall provided a political opening to both the Federal Republic and the rest of the world. The establishment of a consultative Round Table opened up the possibility of a different kind of polity, where dissidents and social groups would have a permanent voice in the state. Finally, the elections to the Volkskammer of March 18, 1990, gave a solid majority to the parties that wanted to dispense with the GDR—and left both the postcommunist defenders of the old order and the dissidents of fall 1989 in the minority.27 The March elections in fact proved that a solid majority in the East had abandoned the GDR and adopted the party system of West Germany. Once the population had made this decision, the other alternatives rapidly faded from view. Ultimately, the challenge of democratization was answered following the same conservative logic that operated at the level of international relations. East Germany was annexed to West Germany by way of Article 23 of the West German Basic Law and not by Article 146, which had stated that the Basic Law as a whole would cease to be valid on the day when a constitution was freely approved by the entire German people. The latter seemed to suggest a new national assembly and perhaps a referendum; neither was called, and the formal process of annexation was taken to represent the will of the German people.28 At issue in this process was revolution. An older, heroic notion of revolution associated with the French Revolution presupposes a unified People (in the singular) that gives itself a basic order. And in fact, the people of East Germany had achieved remarkable consensus—against the old order. But any revolution that seeks democracy must confront the problem of how to create a new order open to plurality, an order that provides a means for making explicit and resolving differences. Neither the October demonstrations nor the Round Table offered a usable alternative to parliamentary democracy, as Ulrich Preuss noted in a perceptive analysis.29 At best they offered some examples of supplements that could enhance representative democracy, whether in the form of referenda or standing committees representing specific ideas and interests. It is less clear, however, that the decision to annex Eastern Germany gave enough credit to the revolutionary efforts of its citizens or offered a realistic possibility of incorporating their newfound experiments with political forms. Would a new constitutional convention, or at the least a referendum on the Basic Law, really have posed a threat to the stability of united Germany? At least one leading constitutional scholar and Constitutional Court justice, Dieter Grimm, argued for such a referendum following Article 146.30 Preuss makes a similar argument in the present volume about the need for a people, whatever its differences, to affirm the rules of the game: to say

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“We are the people.” Such a process would, however, have run the risk of being a mere formality. Beyond general elections, there was no such moment at which the German people—and in particular the West German population—could make such a statement. And yet, the German polity did change following Unification. Change was, of course, most apparent in the East, which saw entirely new systems of administration at every level of government. In particular, the addition of five new Bundesländer (federal lands) to the political system has changed the legislative process itself, especially given the growing importance of the Bundesrat (Federal Assembly) in legislative decision making. And the process of change occurred in a system in which the “new citizens” of the East were in a distinct minority; but in a way, they were afforded a remarkable opportunity to affect German politics, and not only through the Bundesrat. As Peter E. Quint notes in his chapter for this volume, the Constitutional Court made a clear decision not to challenge the high political decisions around German Unification; it did, however, take a position on the way Unification proceeded. Its rulings generally sought to protect those more exposed to the changes. It ensured a place for East German parties in the first United German elections, for example, requiring them only to reach the 5 percent hurdle within the bounds of the East and not across Germany; it sought middle ground in the clash between two very different approaches to abortion; and it issued rulings that protected former property owners and civil servants in the former East Germany. In this way, the court helped to ease the transition for East German citizens. German Unification has also left profound marks on the political system of united Germany that the policymakers who guided the process did not intend. The people, after all, form the basis of the political system in a democracy, and they are not, thank goodness, fully susceptible to manipulation by policy elites. In the 1970s, the Federal Republic was basically a bipolar political system with two major political parties and one minor one; today, it is a complex system with five major political parties, each of which has received more than 10 percent of the vote. Within this system, the left is fragmented into three parties (the Greens, the Social Democrats, and the Left, formerly the Party of Democratic Socialism). These divisions are not, however, completely ascribable to the process of German Unification; even before 1989, the German left was split. More important, clear and important differences in political culture in East and West Germany persist, which Robert Rohrschneider addressed in an analysis of the 2009 Federal elections, which unfortunately could not be included here.31 Political affiliations are still less fixed in the East; commitment to the existing democratic order, as measured by public opinion polls, is

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far less in the East. Nonetheless, the most recent elections showed some remarkable similarities across Germany when it came to evaluating the leading candidates of the Social Democrats and the Christian Democrats, the only two leaders with a chance at becoming chancellors. Although different values may persist, East-West differences may, in fact, be declining in the wake of the “personalization” of politics. Politics is not just about institutions and policies, however. It is about the past. Debates about the second German dictatorship persist; and the polity of unified Germany defines itself, in a fundamental way, against dictatorship. Thus, a careful monitoring of political parties for their commitment to democratic values remains a function of the state, and thus as well, Unified Germany seeks to make records available on the dictatorships that preceded it. A final chapter in the volume by Marianne Birthler, the Federal Commissioner for the Records of the State Security Agency of the GDR from 2001 to 2011, describes one such institution. The office that administers the records of the Stasi in Germany serves as both a political reminder of what the revolution was about and as an irritant, insofar as its holdings have constant political effects. It is also fitting to end the volume with a statement from a GDR dissident centrally involved in the activism of the 1980s, the mass demonstrations of October and November 1989, the Round Table, the first freely elected legislature of East Germany, and the new parliamentary assembly in post-Unification Brandenburg. There were important parallels between the international politics and the domestic politics of German Unification. In both cases, the actors in the process sought to manage change by relying on existing institutions. They sought to effect a major, even revolutionary break with structures of the Cold War by means of the organizations of the winning side in the old regime. And in both cases, the long-term effects of unification have been precisely to raise critical questions about the older institutions. NATO, for example, continues to exist as a defensive treaty organization. But already at the foreign ministers’ conference on the first night of this conference, the question arose as to its exact purpose. While the architects of the new world order sought to “de-enemize” Russia, at the same time they explicitly excluded Russia from NATO. NATO’s expansion into Eastern Europe has put the question of how it relates to Russia front and center—as have the crises in the Ukraine and Georgia, which in the end involve the question of Russian influence. German rapprochement with Russia at the same time complicates the situation even more. In politics, the attempt not to alter the foundations of political order has contributed to a far more complex party system, without the stability and continuity that marked the old Federal Republic. It has also contributed to a system that is in the process of constitutional change, as the amendments to the constitutions

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concerning the right to asylum and out-of-area military intervention indicate. Unified Germany is indeed a different place—and German history has not come to an end. Notes 1. The panel discussion of Friday, October 30, 2009, is available at: http:// webcast.rice.edu/webcast.php?action=details&event=2057, accessed February 24, 2011. 2. A detailed account of just how much work, and of the way German issues overlapped with many other issues, may be found in James A. Baker (with Thomas M. Defrank), The Politics of Diplomacy: Revolution, War, and Peace, 1989–1992 (New York: G. P. Putnam’s Sons, 1995); as he notes, with reference to remarks at the time by Henry Kissinger, the issue was how to translate what seemed a highly likely, indeed inevitable process of German Unification into a process of peaceful evolution (165). 3. That is, a framework that retained institutions such as NATO and the CSCE in a way that would “de-enemize” NATO’s relationship to the Soviet Union, in the words of Genscher: Rebuilding a House Divided: A Memoir by the Architect of Germany’s Reunification, trans. Thomas Thornton (New York: Broadway, 1998), 337. 4. The disappointment about the eventual unification is documented in English in Dirk Philipsen, We Were the People: Voices from East Germany’s Revolutionary Autumn of 1989 (Durham, NC: Duke University Press, 1993). 5. The best single volume on German unification covering all the various aspects of the process is Andreas Rödder, Deutschland einig Vaterland: Die Geschichte der Wiedervereinigung (Munich: C. H. Beck, 2009). In English, the best overall narratives remain Konrad H. Jarausch, The Rush to German Unity (New York: Oxford University Press, 1994) and Charles Maier, Dissolution: The Crisis of Communism and the End of the German Democratic Republic (Princeton, NJ: Princeton University Press, 1997), and on the international context Mary-Elise Sarotte, 1989: The Struggle to Create Post–Cold War Europe (Princeton, NJ: Princeton University Press, 2009). More recent works with updated bibliography include David Childs, The Fall of the GDR (London: Longman, 2001) and Lothar Kettenacker, Germany 1989: In the Aftermath of the Cold War (London: Longman, 2009). 6. Baker, Politics of Diplomacy, 46. 7. Of the many sources detailing Gorbachev’s crucial role in the transformation of Europe and Germany, see especially Philip Zelikow and Condoleezza Rice, Germany Unified and Europe Transformed: A Study in Statecraft (Cambridge, MA: Harvard University Press, 1995), 4–18. Zelikow presented further comments on the diplomacy and international historical context of German Unification at the present conference, which unfortunately could not appear in this volume. See, however, Zelikow and Condoleezza Rice, “German Unification,” in Turning Points in Ending the Cold War, ed. Kiron K. Skinner (Stanford, CA: Hoover Institution Press, 2008), 229–54, which significantly broadens discussion from Gorbachev

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8. 9. 10.

11.

12. 13.

14. 15.

16.

17.

18.

to the many specific variables making German Unification possible, and Sarotte, 1989. A point that appears across the literature. See, for example, Rödder, Deutschland einig Vaterland, 149–52, 233, 247–49; Maier, Dissolution, 246–48; Zelikow and Rice, Germany Unified and Europe Transformed, passim. Baker’s account dates the end of the Cold War with the joint Soviet-U.S. denunciation of Saddam Hussein’s invasion of Kuwait: Politics of Diplomacy, 1–16. Thatcher’s reticence was clear at the time: see Zelikow and Rice, Germany Unified and Europe Transformed, 113–16, 133–34, 137–38, 144–45, 206–7. But the depth of the distrust comes out in documents made public just before the conference, in particular exchanges between her and François Mitterrand recorded by Charles Powell, reprinted in Documents on British Policy Overseas, Series III, Vol. 7, German Unification 1989–1990, ed., Patrick Salmon, Keith Hamilton, Stephen Twigge (New York: Routledge, 2010), xv–xx, 164–66, 215–19. In a sense, this was merely a semantic issue, but one with important ramifications for domestic politics in Germany, as the diplomatic players themselves recognized: Baker, Politics of Diplomacy, 195–216, 245–46, 356; Genscher, Rebuilding a House Divided, 339–40; Zelikow and Rice, Germany Unified and Europe Transformed, 167–72. Zelikow and Rice, Germany United and Europe Transformed, 368–69. G. John Ikenberry, After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order after Major Wars (Princeton, NJ: Princeton University Press, 2001), Mary N. Hampton, The Wilsonian Impulse: U.S. Foreign Policy, the Alliance, and German Unification (Westport, CT: Praeger, 1996). Critical on the missed opportunities: Sarotte, 1989. A different story emerges from Russia, where the entire process is viewed as a dramatic loss of power and stature. See, for example, Vladislav M. Zubok, A Failed Empire: The Soviet Union in the Cold War from Stalin to Gorbachev (Chapel Hill: University of North Carolina, 2007), 303–35. Among the many works on these topics, see especially Jeffrey Kopstein, The Politics of Economic Decline in East Germany, 1845–1989 (Chapel Hill: University of North Carolina Press, 1997); Jonathan Zatlin, The Currency of Socialism: Money and Political Culture in East Germany (New York: Cambridge University Press, 2007), Part one; both books contain further references to the economic theory of state socialism. Brief survey of the Union of Soviet Socialist Republics’s production for war—at the cost of so much else—in Mark Harrison, “The Second World War,” in The Economic Transformation of the Soviet Union, 1913–1945, ed. R. W. Davies, Mark Harrison, and S. G. Wheatcroft (New York: Cambridge University Pres, 1994), 238–67. See especially the summary of the evidence in Dieter Grosser, Das Wagnis der Währungs-, Wirtschafts- und Sozialunion: Politische Zwänge im Konflikt mit ökonomischen Regeln, Geschichte der deutschen Einheit, v. 2 (Stuttgart: Deutsche Verlags-Anstalt, 1998), 17ff., who also argues, however, that the total external debt in 1989 was not as serious as it was considered at the time (51), a point echoed in the chapter by Jonathan Zatlin. See also André Steiner,

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19. 20. 21.

22.

23. 24.

25. 26. 27. 28. 29.

30.

Von Plan zu Plan: Eine Wirtschaftsgeschichte der DDR (Munich: Deutsche Verlags-Anstalt, 2004), 191–96, 221–26 and Jaap Sleifer, Planning Ahead and Falling Behind: The East German Economy in Comparison with West Germany, 1932–2002, Jahrbuch für Wirtschaftsgeschichte, Beiheft 8 (Berlin: Akademie, 2006), with figures on the relative wealth and productivity of East and West Germany in English. The reference, of course, to Albert O. Hirschman’s influential essay, “Exit, Voice, and the Fate of the German Democratic Republic: An Essay in Conceptual History,” World Politics 45 (1993), 173–202. See especially the important article by Ingrid Matthäus-Maier, “Signal zum Bleiben,” Die Zeit, January 19, 1990; further discussion in Grosser, Wagnis, 136–37, 153–54. Article 116 of the Basic Law. In the end the Social Democratic candidate for chancellor, Oskar Lafontaine, found himself forced into suggesting the denial of citizenship rights to citizens of East Germany as part of his call to postpone unification: Grosser, Wagnis, 137, 502; Rödders, Deutschland einig Vaterland, 213. Summary of the main challenges presented by German Unification to economic thought in Gerlinde Sinn and Hans-Werner Sinn, Jumpstart: The Economic Unification of Germany, trans. Juli Irving-Livingston (Cambridge, MA: MIT Press, 1992); see also the summary of economic criticisms of the complicated treaty completing the currency union in Grosser, Wagnis, 485–95. Jonathan Zatlin, The Currency of Socialism, stresses the cultural meaning of money in the process. Wolfgang Seibel, Verwaltete Illusionen: Die Privatisierung der DDR-Wirtschaft durch die Treuhandanstalt und ihre Nachfolger 1990–2000 (Frankfurt am Main: Campus, 2005), 9. Grosser, 364, and the thorough analysis in Seibel, Verwaltete Illusionen. In English, see the detailed description in Wolfram Fischer, Herbert Hax, and Hans Karl Schneider, eds., Treuhandanstalt: The Impossible Challenge (Berlin: Akademie, 1996). See the biting account of these state-socialist elites in Stephen Kotkin (with Jan T. Gross), Uncivil Society: 1989 and the Implosion of the Communist Establishment (New York: Modern Library, 2009). And there were also, of course, those on the left in West Germany who hoped that German Unification would offer the opportunity to reform the Basic Law. Good account in Rödders, Deutschland einig Vaterland, 216–25. See especially. Peter E. Quint, The Imperfect Union: Constitutional Structures of German Unification (Princeton, NJ: Princeton University Press, 1997), 47–55, 112–15. Preuss, “The Roundtable Talks in the German Democratic Republic,” in The Roundtable Talks and the Breakdown of Communism, ed. Jon Elster (Chicago: University of Chicago Press, 1996), 99–134; see also his Constitutional Revolution: The Link between Constitutionalism and Progress, trans. Deborah Lucas Schneider (Atlantic Highlands, NJ: Humanities, 1995), reflecting more broadly on the process in Eastern Europe. Dieter Grimm, “Zwischen Anschluss und Neukonstitution” (1990), arguing that Article 23 did not exclude the eventual use of Article 146; “Plädoyer für

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14 / peter c. caldwell eine verfassungsgebende Versammlung” (1990), both in Die Verfassung und die Politik: Einsprüche in Störfällen (Munich: C. H. Beck, 2001), 35–57; Quint, Imperfect Union, 55, 342 n. 61. But see also the critical comments of Klaus von Beyme on the real meaning of the proposed changes: “The Legitimation of German Unification between National and Democratic Principles,” German Politics and Society 22 (1991), 1–17. 31. These divisions already described in Rohrschneider and Dieter Fuchs, “Public Opinion and Political Issue Divides,” in Germany at Fifty-Five: Berlin ist nicht Bonn? ed. James Sperling (Manchester: Manchester University Press, 2004), 155–82.

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Ch a p t e r O n e Ge r m a n Un i f ic at ion, We st e r n O r de r, a n d t h e Po st – Cold Wa r R e st ruc t u r i ng of t h e I n t e r nat iona l Syst e m G. John Ikenberry

Introduction The Berlin Wall fell in November 1989, and less than a year later a treaty was signed that formally united the German Democratic Republic (GDR) with the Federal Republic. Just months before, most American and European observers thought that German unification was still only a distant possibility. Surprisingly, although the Soviet Union initially preferred other outcomes, it ultimately acquiesced in these unsettling developments. Soviet leaders conceded not only the integration of their former ally into West Germany but also that the newly united Germany would remain fully a part of the Western alliance and European Community (EC). The balance between East and West shifted abruptly in favor of the West, but this did not trigger a new Cold War crisis. Instead, Germany was quickly and quietly reunited. As Chancellor Helmut Kohl remarked at the time, this “was the first unification of a country in modern history achieved without war, pain or strife.”1 These remarkable events were not preordained. Germany’s European neighbors initially resisted a quick move toward German unification. After all, as Chancellor Kohl depicted the coming drama to Secretary Baker at a breakfast meeting shortly after the Berlin Wall fell, “Change in Germany means change in the math of Europe, and that means change in the structure of Europe and the world.”2 The leaders of France and Britain indicated serious reservations about the implications of German unification for European peace and stability and its impact on Gorbachev, Soviet reform, and the unwinding of the Cold War.3 British prime minister Margaret Thatcher said at a December 1989 meeting with EC leaders and

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President Bush that German unification should not occur for another ten or fifteen years. The stakes were high because if European leaders broke with Germany on such a fundamental issue, the fate of the Western system would be thrown into doubt. Moreover, Moscow could have thwarted German unification—at least for a time. Its immediate leverage was the more than half a million troops and dependents that remained stationed in East Germany. Beyond this, it also had leverage to the extent that its consent—and the legitimacy that consent would confer on German unification—was necessary for a stable outcome. All of these moving parts were in play in November 1989. But in the end, on September 12, 1990, the four allied victors in World War II met in Moscow to sign the Treaty of the Final Settlement, restoring full sovereignty to a united Germany and relinquishing their “rights and obligations” to Berlin and Germany. Two weeks before the German settlement, at a summit between U.S. president George Bush and Soviet president Mikhail Gorbachev in Helsinki, the issue of German unification was not even on the agenda.4 The quickness and seeming ease of this historical passage from division to unification was surprising. But it was also important in world historical terms. It spelled not just the end of the Cold War but also the grand settlement of Germany’s relationship to and position within Europe—a geopolitically fraught question that had consumed European and world politics for over a century. Beyond this, the unification of Germany was also a moment when the terms of the wider global system were also on the table, at least implicitly. That is, this was a “constitutional” moment when the rules and architecture of relations among the great powers were debated and a settlement was reached. Politicians and diplomats were not just struggling over the specific issues of Germany’s polity and relations with the North Atlantic Treaty Organization (NATO), the Soviet Union, and Europe, they were struggling over the basic structure of great-power relations. This chapter looks at this remarkable moment and asks three questions. First, how was unification accomplished, that is, accomplished in the world of power politics and diplomacy? How were fears, insecurities, and disagreements overcome? Second, what does the unification of Germany—its relatively quick and peaceful accomplishment—say about the wider postwar Western and international order? Third, what is the future of the “Cold War settlement” of which German unification was a part? I argue that the most striking aspect of the 1989 moment was how the institutions of the West—NATO, the EC, and the wider liberal international order—shaped and facilitated the flow of events. There were several possibilities for how the collapse of East Germany and the crisis in the

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Eastern bloc could have unfolded. Resistance existed on both sides of the Cold War divide to a unified Germany and to its quick and definitive integration in Western institutions. Alternative pathways were proposed, including a German federation that would exist outside of NATO and the reintegration of Germany within a wider pan-European security structure that would also include the Soviet Union. Various alternatives were proposed, and all of them ultimately failed.5 So the questions are, why did Gorbachev and his colleagues finally agree—if grudgingly—to a unified Germany within NATO and the EC? And why did this architectural structure of Western institutions operate as it did to trump alternative options and facilitate the quick integration of a united Germany? My argument is that the West has had important characteristics as a political order that make it unusually “user-friendly.” These are institutions that are accessible, integrative, and vehicles for the restraint of power. They are a complex set of institutions that facilitate integration of transitioning states. The West is “easy to join and hard to overturn.”6 At the same time, these Western institutions are also capable of signaling geopolitical restraint. To have a united Germany inside NATO—tied to other countries and restrained in its independent military capacity— helps reassure worried neighbors about the threat of a more powerful Germany. The Western states tied themselves together during the Cold War in a set of institutions. These same institutions proved to be a functional vehicle for post–Cold War integration, consolidation, and power restraint. In the diplomatic buying and selling of institutional solutions to problems generated by German unification, the coin of the realm was commitment and reassurance.7 I will develop this argument by looking at the 1989 moment from four perspectives. The first looks at German unification as a diplomatic process, as a grandly sprawling negotiation. Here we can appreciate the extraordinary process of consultations, exchange, reassurance, and alliance building. The heart of this was the coalition that emerged between West German and American leaders, led by Chancellor Kohl and President Bush and their delegations. But the wider diplomatic process—a rolling sequence of bilateral and multilateral meetings and summits—was also extraordinary and critical to the outcome. The ability of the political leaders and their deputies to negotiate, compromise, and offer assurances—doing so at first over the Two-plus-Four formula for settlement and later about the actual status of Germany within European and Atlantic institutions—brought the traveling diplomatic process to a successful ending. The second perspective on the 1989 moment is the “grand strategy” that the United States and West Germany pursued in the give-and-take over how unification was to take place within the Euro-Atlantic system.

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At the heart of this process was the strategy of binding and reassurance. The Soviets had to be convinced that a unified Germany would not present a new threat to the East. So too did American and West German allies need to be convinced that a unified Germany would not unseat President Gorbachev and explode the fragile process of ending the Cold War. The strategy of binding and reassurance was the cutting edge of this process. The so-called nine assurances that the American side produced for the Bush-Gorbachev summit in June 1990 is emblematic of this strategy. The process of closing down alternative institutional pathways for German unification—which played out in late 1989 and 1990—was fundamentally a story of reassurance, conveying signals that the West would not exploit the East German collapse and the wider implosion of Soviet power in Europe. The third perspective on the 1989 moment involves stepping back from the diplomacy to see the ways in which the West itself—as a complex structure that tied the United States and Europe together during the Cold War—operated to shape the ways in which the Cold War ended. Paradoxically, this Western system was both more dynamic than its Soviet counterpart, capable of producing more wealth and power at a lower cost, and remarkably capable of establishing restraints and commitments. It was this blend of power and restraint that ultimately tilted the Cold War struggle in the West’s favor and that shaped how it actually ended. The Soviet Union found reassurance in the complex institutions of the West. Gorbachev saw opportunities to engage the West. But he also saw in the West a sufficiently restrained alliance that would not exploit Soviet weakness as it sought to reform and reorient the Soviet system. Finally, a fourth perspective on the 1989 events is the bigger “constitutional moment” that presented itself at the end of the Cold War. The United States, Europe, and the Soviet Union were all struggling to define a new world order. World politics does not ordinarily rise to this level of vision and discourse. States typically define and pursue their interests within a system of rules and relationships. But once in a while, particularly after great-power wars or upheavals, an opening emerges when leaders see that they are playing for bigger stakes. They have an opportunity to “lay down the tracks” for a generation or more of international relations. Woodrow Wilson saw himself making decisions “for a hundred years” of world politics. The rules, institutions, and expectations that guide the play of great-power relations are put in place. These “constitutional moments” generate interesting ideas and surprising politics. The relationship between Reagan and Gorbachev was infused with the stuff of constitutional conversation. Gorbachev clearly wanted to transform the way in which his country and the West operated in the world system. It was not simply a

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story of collapse and surrender. It was a story of both superpowers seeking a new plane on which to operate. This was an important aspect of the politics of the moment as it surrounded the events of 1989 and 1990, and it critically shaped the hopes and dashed aspirations of what has followed. The international politics of the 1989 moment was a politics of reassurance, restraint, and commitment. All parties to the diplomatic drama were compelled to offer and seek reassurance—and to offer and seek restraint and commitment within the swirling events triggered by the collapse of East Germany. In searching for ways to reassure and signal restraint and commitment, the leaders relied on institutions—and this was how the struggle was ultimately settled over what institutions would emerge in post–Cold War Europe to form the framework for regional and global order. In this struggle, Western institutions—the EC and NATO—proved most adaptable and useful, and the contours of the Cold War settlement followed. The Cascade of Diplomacy The great turning point in the Cold War was the dramatic shift in Soviet policy signaled by Gorbachev in his famous speech before the UN General Assembly in December 1988. It was on this stage that the Soviet leader announced a unilateral reduction of 500,000 Soviet troops with close to half coming from Eastern Europe and the western parts of the Soviet Union. With this declaration, Gorbachev was proposing to end military competition with the West—but he was also indicating a new Soviet tolerance of political change within Eastern Europe, declaring that the “use of force” should not be an “instrument of foreign policy” and indicating that “freedom of choice” was a principle of politics in and throughout the Soviet bloc. It was this grand shift in Soviet policy that set the stage for the collapse of East Germany and the unification diplomacy of 1989. What followed, of course, was the unraveling of political order in Eastern European countries, with the crisis in the GDR leading the way. The flow of refugees out of East Germany to Hungary and the appearance of opposition groups revealed the impotence of the Erich Honecker regime in East Germany. The country was also in a financial crisis, in debt to the West and struggling under a current account deficit. On Gorbachev’s visit to the GDR in October 1989, he encouraged domestic reform and expanded integration with the West. The official hope was that East Germany could put itself on a path of socialist modernization. But when the Berlin Wall fell, this view became untenable. In the midst of the East German crisis, Chancellor Helmut Kohl began pressing for early German unification—and this unsettled not just

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Gorbachev but Germany’s other European neighbors. What followed over the course of the next year was an elaborate, multifaceted, and evolving diplomatic dance. The leaders and foreign ministers of all the major states began an extraordinary process of consultation and bargaining. The diplomacy was both about whether and how Germany would be unified and how it would fit within the larger European and world order. The diplomatic struggle played out in two ways: one was over alternative institutional configurations for German unification and European order, and the other was over the terms of commitment and reassurance. And ultimately, the two were deeply related. Different leaders proposed different pathways and institutional solutions to German unification and the ending of the Cold War. The viability of these institutional solutions, in turn, hinged on their ability to be used as mechanisms to establish restraint and commitment. In the search for ways to manage Germany’s push for unification, leaders were quickly drawn into intense and elaborate diplomatic communications. This is a story of diplomatic process, consultations, signal sending, negotiations, and the forging of political alliances. What is striking about the months of diplomacy after November 1989 was the density of the interaction. From the beginning, the presidents and foreign ministers of the leading countries found themselves in evolving combinations of bilateral and multilateral encounters—making representations and compromises along the way. Indeed, diplomatic consultations began almost immediately after the Berlin Wall fell. Only a little more than a week later, on November 18, French president François Mitterrand hosted a quickly called dinner meeting of EC leaders in Paris. As Mary Sarotte argues, Kohl realized immediately from this “tempestuous dinner” that his task of proving Germany’s commitment to European integration was a daunting one. It was less than a week later, on November 22, at a special session of the European Parliament, that he was again in a European diplomatic forum undertaking just this sort of commitment making and reassurance.8 Observers of this diplomacy have noted the ease with which the political leaders and their deputies worked, particularly the American, German, and Soviet officials. Stephen Szabo notes that the “diplomacy of German unification was typical of diplomacy in the late twentieth century—i.e., conducted by politicians, not diplomats, and done via telephone and private conversations facilitated by jet travel.”9 This was not settlement diplomacy conducted around a grand table in an ornate palace ballroom. It was a movable feast of political leaders working through issues and making deals along a quickly moving arc of geopolitics. Szabo observes that these were talented politicians, rich in experience, and capable of negotiating within a rapidly changing environment. “They were all able to manage, or

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circumvent, the enormous bureaucracies of their governments and to move these gigantic and often lethargic ships of state with dazzling skill.”10 This ability of the leaders to compromise and make decisions without going back to their governments gave the diplomatic process a creative and constructive cast. The ability of Soviet leaders to negotiate was particularly surprising—and important. This Soviet ability to make decisions was revealed at the Ottawa meetings, when the so-called Two-plus-Four formula for negotiating a settlement was adopted. “In Ottawa,” Alexander Moens argues, Shevardnadze showed a capacity for making important decisions on the spot. Traditionally, such weighty matters would have been taken back to Moscow. To many Western participants, it was a tremendous surprise to discover that the Soviet leadership could respond immediately to a proposal, and accept it simply because it was reasonable.11

The importance of negotiations and the intensity with which leaders engaged each other followed directly from special circumstances of the historical moment. First, the “problem” that triggered the negotiations was in some sense unstoppable. It was the collapse of East Germany and the flow of people out of the East that made the status quo untenable. Delay and stalemate would not work in this instance. The German people were in the midst of creating a new reality. German unification was inevitable. It was a coming reality that the Soviets and Germany’s European neighbors had to deal with. The question was, what sort of unification and on what terms? On the American side, President Bush was of the view—expressed over dinner with his advisers just a few days after the Wall came down— that he wanted a “prudent evolution.”12 Other leaders had their agendas. Negotiations aimed at shaping the flow of events were in the interest of all parties. Second, there was competition of “solutions” to the problem. These solutions came in the form of alternative institutional arrangements that would undergird and embed German unification. This competition further reinforced the incentives that diplomats faced to shape and tip what was unfolding. Third, coalitions of leaders were available for use in the diplomatic scramble. There were many parties and many positions— and so there was room for coalition building. West German leaders found a partner in the Bush administration. The French and British leaders initially found at least implicit common cause with Gorbachev. These loose alignments and shifting coalitions became valuable tools of diplomacy. Fourth, there existed an array of institutional mechanisms and forums in which to engage in diplomacy. EC meetings, NATO summits, and other gatherings filled the diplomatic calendar, and these meetings became occasions to bargain. The end of the Cold War was not a classic

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moment in which leaders make pronouncements and sign parchment around a great peace table. It was a cascading diplomatic drama played out in many acts and on many stages. Europe itself was a diplomatic theater with many stages, rehearsal halls, dance floors, and green rooms. This institutional environment both supported and encouraged this multifaceted diplomatic exercise. Fifth, the diplomacy was not just pushed forward on many stages—but also in many stages. It was a sequence of issues, one leading to the next. The first step was to establish the framework for the resolution of issues of unification. The first breakthrough was the agreement to work within a Two-plus-Four arrangement in which the two German states would carry the process forward. This ensured that the settlement would be driven by German choices in the first instance, followed by the four allied war powers acting to ratify and support these choices. In the spring and summer of 1990, the negotiations proceeded to substantives issues. Finally, the stakes of the negotiations were exceedingly high, and this too reinforced the importance of diplomacy aimed at determining the long-term institutional foundations for German unification. The shape of Europe and the wider rules and institutions of post–Cold War great-power relations were indirectly on the table. Strategies of Binding and Reassurance The directionality of political change after November 1989 was driven by the imperatives that leaders had to seek and offer reassurance, restraint, and commitment. Each of the countries facing the prospect of German unification had worries. Britain and France worried about a more powerful and united Germany that operated outside European institutions, particularly the EC—and they worried about a Soviet backlash that might unseat Gorbachev. British prime minister Margaret Thatcher wanted to slow the process of unification down and saw Gorbachev and French president Mitterrand as potential allies.13 The Soviet Union—Gorbachev in particular—worried about its former ally being absorbed in Germany and the West. The expansion and encroachment of NATO loomed. The United States worried that Germany would drift out of the Atlantic system and fracture the Western alliance precisely at the moment when it was most triumphant. West German leaders worried about gaining the acceptance of its peers for a unified Germany. All of these leaders saw these problems in the context of various institutional configurations that would provide the anchors for assurances and signals of restraint and commitment—institutions that would also shape the wider logic of the European and great-power order.

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In the first instance, it was Helmut Kohl who was under pressure to reassure the Soviets and his European counterparts that a unified Germany would continue to be a good partner—restrained and embedded in European and Atlantic institutions. In an important speech to the Bundestag on November 28, 1989, Kohl outlined a ten-point program for German unification. It would be a staged process—exchanges, travel, movement toward “confederative structures,” culminating in a single federal Germany. Kohl sought to reassure Germany’s neighbors, arguing that inter-German relations should take place within a larger European process that would allow for “an organic development which takes into consideration the interests of all parties concerned and guarantees a peace order in Europe.”14 Kohl did not mention NATO in his speech, but in a message to President Bush following the speech, the chancellor reaffirmed West Germany’s “unwavering loyalty” to NATO.15 This strategy of linking German unification to European integration became the centerpiece of Kohl’s diplomacy in the months that followed. The idea was to reassure the other great powers that a unified Germany would be deeply embedded in European institutions. It was a strategy of binding—so as to reduce the resistance of worried neighbors to a more powerful Germany. “Pool sovereignty,” Elizabeth Pond argues, “quickly became the preoccupation of Chancellor Kohl,” who shared the nightmare of his “famous nineteenth-century predecessor, Otto von Bismarck—a Germany surrounded by a hostile coalition of neighbors.” And so, his strategy of “warding off this danger was to bind his countrymen irrevocably to a pan-European structure and preclude ‘renationalization’ of defense and foreign policy on the continent.”16 The basic orientation of German policy was to reassure its neighbors— both East and West—that a unified and inevitably more powerful Germany would be deeply enmeshed in wider regional institutions. Foreign Minister Hans-Dietrich Genscher articulated this basic German view in a January 1990 speech: We want to place the process of German unification in the context of EC [European Community] integration, of the CSCE [Conference on Security and Cooperation in Europe] process, the East-West partnership for stability, the construction of a common European house and the creation of a peaceful European order from the Atlantic to the Urals.17

Genscher and other German leaders did not always mention NATO in these statements, which worried American officials in the early months of the unification debate, but the basic message was clear: to gain agreement on unification, Germany was prepared to further bind itself to its neighbors.

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The United States sought not only to reassure Gorbachev that Soviet security was not at risk in the unfolding developments but also to offer support to Kohl as he tried to allay the worries of European leaders. In September 1989, when Prime Minister Margaret Thatcher visited Moscow, Bush sent a message along to Gorbachev stressing that change in Eastern Europe should not be taken as a threat to the Soviet Union.18 In Washington on November 12, Secretary Baker had a weekend lunch with the Soviet ambassador and communicated his understanding of the importance of “keeping order.”19 At a summit of Soviet and American leaders in Malta in early December, Bush indicated to Gorbachev that the United States had not tried to exploit developments in Eastern Europe. Bush said that the United States has “not responded with flamboyance and arrogance . . . I have conducted myself in ways not to complicate your life. That’s why I have not jumped up and down on the Berlin Wall.”20 Soon afterward, at a meeting of NATO leaders in Brussels, Bush again stressed that it was important for Gorbachev not to feel cornered. While attempting to reassure the Soviets, the Bush administration was also trying to rally allied support for Kohl’s plan for unification. This entailed extracting assurances from West Germany and stressing the wider institutional structures within which change would occur. The central goal of American policy during these months was to ensure that a unified Germany remained firmly anchored in the Atlantic alliance. And during late 1989, the United States began pursuing a policy of linking support for German unification to assurances about Germany’s continued commitment to European and Atlantic institutions. President Bush presented this view as American policy at a NATO meeting in Brussels on December 4 and later stated it in public: “Unification should occur in the context of Germany’s continued commitment to NATO and an increasingly integrated European Community, and with due regard for the legal role and responsibilities of the Allied powers.”21 The American president argued that NATO should remain the guarantor of stability in Europe, and to this end, the United States remained committed to Europe. In effect, German unification would be rendered acceptable to its neighbors by the same means that a revived West Germany was rendered acceptable after World War II: Germany would be embedded in wider Euro-Atlantic institutions. The NATO alliance and European economic integration would bind Germany to Europe, and the United States would ensure agreement by adding its own security commitment. This sort of reassurance was necessary because the British and French leaders remained wary of a unified Germany. In a meeting with Bush at Camp David on November 24, 1989, Thatcher had restated her view that German unification would destabilize Europe, undercut Gorbachev, and

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work against the prospects for democracy in Eastern Europe. Mitterrand too had such concerns. In a meeting with Bush on St. Martin in the Caribbean on December 16, the French leader again reaffirmed his view that German unification must be linked to developments in NATO and the EC. Arms control, EC integration, European monetary union, and American cooperation with Europe must all be addressed together to create a new Europe in which German unification would be a part. “Otherwise,” Mitterrand warned, “we will be back to 1913 and we could lose everything.”22 These sorts of institutional linkages appeared over and over again in the following months. Specifically, the German pledge to redouble the commitment of a unified Germany to European integration was an essential part of the process of reassurance and the signaling of restraint and commitment. This was because Germany’s European neighbors had serious concerns about how Germany would relate to the EC—concerns that Chancellor Kohl and his colleagues had to allay. According to Jeff Anderson, these were twofold. One was a general worry on the part of European partners about German unification and its implications for stability in Europe and the “European project.” The other was a worry about securing an EC accession for the GDR as it made its transition. Both were concerns about how Germany would operate within the EC. As Jeff Anderson notes, “Bonn sought to signal and secure the maximum amount of continuity with its relationship to the EC.”23 In emphasizing the connections between German unification and European integration, Kohl was able to build support for his cause. Bonn’s emphasis on the European dimension of unification resonated with the architectural designs of actors elsewhere on the continent: specifically, Jacques Delors, president of the EC Commission, and key members like France, eager to secure from Germany an early and irreversible affirmation of integration.24

At a meeting of EC leaders in Strasbourg on December 8, Mitterrand was able to gain Kohl’s support for convening an intergovernmental meeting to amend the EC’s Treaty of Rome to prepare the way for a new treaty of economic and political union. In return, the EC leaders adopted a statement that endorsed German unification within the context of wider European developments. Again in March 1990, Chancellor Kohl announced that his government was committed to the goal of economic and political union. This was reinforced one month later when Kohl and Mitterrand called for the convening of an intergovernmental conference on political union to run in parallel with the formal discussions over a European Monetary Union. It was these steps that set in motion negotiations that led to the Treaty on European Union, negotiated at Maastricht in December 1991

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and signed by the leaders of the twelve European member governments in early February 1992. Germany was binding itself to Europe, even in the face of domestic German unease about economic and political union. Kohl was signaling that his country would indeed wear the “golden handcuffs” that tied a unified Germany to Europe.25 Gorbachev and the Soviets initially rejected the idea of German unification—certainly a unified Germany within NATO. The initial position of Gorbachev was that the two German states were legal entities that should remain so. As the East German collapse and calls for unification proceeded, the Soviet position moved to support for some sort of confederation or “treaty community” between the two German states. Gorbachev and Shevardnadze sought to slow the momentum toward unification by proposing to reactivate the four-power rights in Berlin. Technically speaking, Berlin was still officially under four-power jurisdiction. The Soviet strategy was to take the control of events out of the hands of West Germany and to seek accord with worried British and French leaders over the pace and destination of political change. The Soviets called a meeting of fourpower ambassadors so as to deliberate on “the control mechanisms created by the former allies of the anti-Hitler coalition.”26 When German unification became impossible to stop, Gorbachev insisted that a unified Germany could not remain within NATO. Unification was possible, but Germany must be neutral and its military power limited. On Germany remaining in NATO after unification, Gorbachev told the press in Moscow on March 6, 1990: “It is absolutely out of the question.” The goal of American policy in the spring of 1990 was to gain Soviet acceptance of a unified Germany within NATO. The first move was to resist Gorbachev’s efforts to settle the question of Germany’s status among the Four Powers, a forum that would allow the Soviets to hold out for German unification contingent on its neutrality. The critical move occurred at the Ottawa summit in February 1990 of NATO and Warsaw Pact ministers when the parties accepted the United States proposal for a Two-plus-Four formula. This agreement put the decision into the hands of the Germans themselves, leaving the Allied parties in a secondary position to ratify Germany’s determination of its status. The United States also worked with its allied partners to allay Soviet fears about a unified Germany. The Soviets sent mixed signals. In a meeting with Secretary of State James Baker in February 1990, Gorbachev indicated that the Soviets did not worry about a united Germany. At other moments, Soviet leaders were less certain. At a Kremlin meeting on policy in January 1990, there were split opinions. Gorbachev adviser Anatoly Chernyayev, for example, thought that a united Germany inside of NATO was not a threat—quite the contrary, it was a source of some

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reassurance, particularly if Kohl linked unification to an “all-European process.” Others, such as Valentin Falin, thought it was wrong to accept the absorption of East Germany into West Germany and NATO. The United States tried to convince the Soviets that a unified Germany outside of NATO would be more dangerous than a Germany inside of NATO. This argument was advanced by Baker in talks with Shevardnadze in Moscow in February 1990. The Soviets by this time understood that unification could not be stopped. It was a question of Germany’s external affiliations. Shevardnadze argued that a unified Germany might eventually become militaristic and threaten the Soviet Union, hence their proposal for a disarmed and neutral Germany. Baker turned the argument around and posed the question to Gorbachev: Assuming unification takes place, what would you prefer: a united Germany outside of NATO and completely autonomous, without American forces stationed on its territory, or a united Germany that maintains its ties with NATO, but with the guarantee that NATO jurisdiction or troops would not extend east of the current line?27

Baker’s argument in Moscow was that embedding German military power in Western institutions was preferable to neutrality, even to the Soviets. Gorbachev notes in his memoir that the second part of Baker’s statement eventually formed the basis for a compromise over Germany’s militarypolitical status. This was so even though at the time of the Moscow meeting the Soviet leader was unprepared to accept the proposal. Gorbachev recalls that I too believed that we needed a “safety net” which would protect us and the rest of Europe from any “surprises” from the Germans. However, unlike the Americans, I thought that these security mechanisms should be provided not by NATO but by new structures created within a pan-European framework.28

The opening for compromise dealt with the specific guarantees that might be attached to unification about the size and configuration of NATO and German forces. In the months that followed, the United States and German leaders sought to reassure Gorbachev that NATO could provide the needed “safety net.” The Germans were themselves open to putting limitations on the positioning of NATO troops within what would be the former East Germany. In May 1990, Secretary Baker went to Moscow with a package of incentives prepared for talks within the Two-plus-Four talks—the so-called nine assurances. The steps that the West would be willing to

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take to meet Soviet security concerns included assurances that unification would be accompanied by new conventional and nuclear arms limitation agreements; a German affirmation not to possess or produce nuclear, chemical, or biological weapons; agreement that NATO troops would not be stationed in the former territory of the GDR; and a promise that NATO would undertake to revise its strategy and its posture within a transformed Europe.29 Most of these assurances had been presented to the Soviets during the previous few months, but the repackaging of them was itself part of the process of changing Soviet thinking. In German meetings with the Soviets during this period, they presented their own package of reassurances that dealt with force levels and territorial limitations as well as promises of economic assistance. The turning point came in May 1990 during Gorbachev’s visit to Washington. Although he initially proposed that a united Germany must belong to both NATO and the Warsaw Pact, the Soviet leader conceded on this visit that all countries had the right to choose their own alliances. In agreeing to this principle, Gorbachev was effectively agreeing that Germany had a right to stay within NATO. The Four Powers could not dictate German alliance membership. In agreeing to this principle and allowing the Germans themselves to decide, the dispute over German membership in NATO was on the way to resolution.30 The Soviet leader heard American officials again make the argument that binding Germany to NATO was the most effective security strategy for all parties concerned. Bush told Gorbachev that it appears to me that our approach to Germany, i.e. seeing it as a close friend, is more pragmatic and constructive . . . all of us in the West agree that the main danger lies in excluding Germany from the community of democratic nations.31

The Soviet Union was again being asked to see NATO—and Germany’s role in it—as a security institution that could reduce Soviet worries rather than aggravate them. The American promise to recast NATO’s mission was meant to make the alliance all the more acceptable. The great contest over what European institutions would emerge to support and contain German unification ended less than a year after the Wall went down. The Western institutions—NATO and the EC—were in place and available, and ultimately they served the needs that all parties had for reassurance and restraint. The Bush administration, of course, championed these institutions as the vehicle to accommodate and embed a unified Germany. This policy took shape almost immediately after November 9. As Secretary Baker prepared for his trip to Europe, State Department

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counselor Robert Zoellick wrote a memo that emphasized the importance of these various layers of Atlantic and European institutions. He argued that there was a need for a “New Atlanticism and a New Europe that reaches farther East.” But the “architecture of the New Atlanticism and New Europe should not try to develop one overarching structure. Instead, it will rely on a number of complementary institutions that will be mutually reinforcing,” including NATO, the CSCE, the WEU (Western European Union), and the Council of Europe.32 Secretary Baker publically presented these ideas in a speech to the Berlin Press Association on December 12, arguing that the three great institutions to Europe—NATO, the EC, and CSCE—should be adapted to provide the multilevel framework to absorb the coming changes. The slogan was a “new Atlanticism for a new era.”33 The existing Western institutions were expansive and integrative— allowing new members and new configurations of states. They were also institutions that reinforced multilateralism and restraint. In a period of rapid and dramatic power shifts—and the worries and opportunities that flowed from this transitional moment—those institutions proved most critical. The Paradoxical Structure of the West Stepping back from the immediate negotiations over unification, it is possible to see a deeper dynamic at play between the West and the Soviet Union. Even before the collapse of the Berlin Wall, Gorbachev had taken truly remarkable steps to pursue domestic reform and international accommodation. Gorbachev signaled this new Soviet orientation in his UN speeches and ambitious nuclear diplomacy with President Reagan. The Soviet leader made unilateral moves to end the Cold War through accommodation, steep arms reductions, and a hands-off policy in Eastern Europe. Gorbachev was pursuing a risky strategy to end the Cold War and to reposition the Soviet Union in the global system. Why was he willing to do this? Importantly, again, the structure of the West itself facilitated this Soviet reorientation. The United States and the Western system manifest paradoxical characteristics. The West was able to generate power and wealth much more efficiently—and on a greater scale—than the Soviet Union. This put the Soviets at a structural and persistent disadvantage. But the West—as a complex political entity—was also sufficiently benign and defensive to allow Gorbachev the ability to make his historical gambles. There were many reasons that led Gorbachev to seek an end to the Cold War and a transformed political relationship with the West. The Soviet system was failing. Its political order in East Europe was crumbling. In the past, the Soviet Union had responded to crises and failures by cracking down and reimposing order. But Gorbachev responded differently,

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operating from a position of weakness but seeking to engage the United States in an ambitious restructuring of great-power relations. In contrast to earlier historical eras when Russia faced hostile and imperial European great powers, the Soviets in the 1980s faced an integrated array of Western democracies. The Western democracies together formed a grouping of countries that made it very difficult for them individually or collectively to exploit or dominate the Soviet Union as it contemplated the transformation of its posture toward the outside world. As Russian foreign minister Andrei Kozyrev noted subsequently, the Western countries were pluralistic democracies, and this “practically rules out the pursuance of an aggressive foreign policy.”34 This view was also articulated by Gorbachev. At the December 1989 summit between the American and Soviet leaders, Gorbachev argued that the United States played a stabilizing role in Europe. “We accept your role in Europe. It is very important that you be there.”35 A cluster of institutional characteristics made the Western order fundamentally a defensive aggregation of power as it confronted the Soviet crisis. The pluralistic and democratic character of the countries and transnational and domestic opposition movements toward hard-line policies all worked to soften the face that the Soviet Union saw as it looked westward. The alliance itself, with its norms of unanimity, made an aggressive policy by one country difficult to pursue. These aspects of Western order all served to make Gorbachev’s historic gamble less risky. The threats to Soviet security lay closer to home. There is a popular view—at least in the United States—that the Cold War ended by Soviet capitulation to the steady policy of Western containment and, in the 1980s, to the Reagan administration’s dramatic military buildup.36 By this analysis, Reagan’s newly vigorous military posture and ideological offensive doomed the Soviets. In fact, the Reagan administration, the United States, and the Western world presented—as a whole—a much more complex and often contradictory set of impulses and positions. Reagan was surrounded by hard-liners who wanted to push the Western military advantage, but other officials and Reagan himself entertained more ambivalent views, particularly on issues of nuclear weapons. Reagan’s willingness to consider far-reaching nuclear arms reductions was indicated at the November 1985 Geneva summit and even more dramatically at the Reykjavik summit in October 1986. Nuclear hard-liners in the administration worked to disavow Reagan’s views, but Reagan did provide Gorbachev with the signal that radical initiatives might be reciprocated rather than exploited.37 In addition to the ambivalence of Reagan himself, the hard-line position of the Reagan administration was undercut by several other factors. One was that the aggressive talk in the early years of the administration had fueled a large peace movement in the United States and Western Europe in the 1980s, a movement that put considerable pressure on Western governments

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to pursue far-reaching arms-control proposals. That mobilization of Western public opinion created a political climate in which the rhetoric of the early Reagan administration was a political liability. By the presidential election in 1984, the administration embraced arms-control goals that it had previously rejected.38 This new policy line culminated in a speech to the UN General Assembly in September 1984. To the Soviet leaders whom Reagan had previously called “the focus of evil in the modern world,” the American president now made a new appeal: “For the sake of a peaceful world . . . let us approach each other with ten-fold trust and thousand-fold affection.”39 In Western Europe, the arms-control movement was even more vocal, putting pressure on the Reagan administration to be more forthcoming or risk a split in the alliance. The Western political system as a whole exhibited a sort of counterbalancing dynamic. Hard-line policies in the United States stimulated a more vocal arms-control and disarmament movement, which, in turn, had the effect of softening the intensity of the original hard-line position. The Reagan administration’s tough policies were also undercut by powerful Western interests that favored East-West economic ties. In the early months of Reagan’s administration, the grain embargo imposed by President Jimmy Carter after the 1979 Soviet invasion of Afghanistan was lifted to keep the Republican Party’s promises to Midwestern farmers. And despite strenuous opposition by the Reagan administration, the NATO allies pushed ahead with a natural gas pipeline linking the Soviet Union with Western Europe. That a project creating substantial economic interdependence could proceed during the worst period of SovietAmerican relations in the 1980s demonstrated the failure of the Reagan administration to present an unambiguous Western hard-line toward the Soviet Union. When the Bush administration came to office, the diversity of views among advisers and agencies on how to respond to Gorbachev continued. Some in the administration wanted to see more concrete evidence that Gorbachev’s “new thinking” was real and credible. But the dominant view was that Gorbachev should be encouraged by giving him tangible signs of reciprocation. Likewise, the diversity of views within the alliance— ranging from British skepticism to French ambivalence to German enthusiasm—worked to weaken a tough response to the Soviet Union. The dominant view was reflected in a cable to Washington from Jack Matlock, the American ambassador to the Soviet Union, in 1989: We have an historic opportunity to test the degree the Soviet Union is willing to move into a new relationship with the rest of the world, and to strengthen those tendencies in the Soviet Union to “civilianize” the economy and “pluralize” the society.40

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The Bush administration sought to channel the rapidly unfolding political changes in the Soviet Union and Eastern Europe in the direction of peaceful integration and democratic reform. The unexpected nature of the change coming out of Moscow and the goal of maintaining allied unity in its face reinforced the reactive and benign character of American policy. The Soviet view of the Western order in the 1980s was not unlike the European view of American hegemony after 1945. The West represented an overwhelming concentration of power, but the actual exercise of that power was sufficiently constrained and institutionalized and the possibilities for reassurance were sufficiently available that cautious cooperation rather than outright power balancing was possible. A single, consistent, and unambiguous hard-line policy was structurally impossible to sustain within the Western order. The End of the Cold War as a Constitutional Moment Behind the diplomacy of German unification and European reorganization was a deeper saga of the American and Soviet negotiations that set the stage for the events in Germany and the end of the Cold War. The events leading to the September 1990 treaty that ratified the unification of Germany and transformed the relations across the Euro-Atlantic world cannot be understood outside of the larger context of American-Soviet diplomacy that ended the Cold War. The Cold War did not just end—it was settled. The Americans—together with their Western partners—and the Soviets negotiated an end of the Cold War. In doing so, they also articulated a vision of the international order that would follow, agreeing to a set of principles and arrangements that would guide the next era of greatpower relations. As such, it was a “constitutional” moment. Across the history of the modern state system, settlements in the wake of great conflicts have become ordering moments when the rules and institutions of the international order are on the table for negotiation and change. The principal components of settlements are peace conferences, comprehensive treaties, and postwar agreements on the principles of order. At these infrequent settlement junctures, the major powers are forced to grapple with and come to an agreement on the general principles and arrangements of international order. These ordering moments do not just ratify the outcome of the war, but they also lay out common understandings, rules and expectations, and procedures for conflict resolution. It is in this sense that they have a quasi-constitutional function.41 The great settlements of the past were of this sort—Westphalia, Utrecht, Vienna, Versailles, and Potsdam/Yalta. Similar to these settlements, the

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Cold War was brought to an end with a far-reaching negotiated settlement that its architects optimistically hoped would be the framework for the new international order. This settlement was not one event but happened in steps unfolding over several years. A sequence of events and agreements marked the process—the collapse of communism in Eastern Europe, the negotiated withdrawal of the Soviet military and the reunification of Germany, the mutual disarmament of nuclear and conventional forces, and the culminating and unexpected collapse of the Soviet Union. All of this occurred rapidly, peacefully, and unexpectedly. And all of it was negotiated. Potentially explosive developments were skillfully managed by intensive diplomacy and negotiated agreements and understandings. When the Berlin Wall came down, the Americans and Soviets had already been intensively engaged in redefining their relationship. Gorbachev had already made historic gestures aimed at ending the Cold War arms race. Both leaders had made major speeches at the United Nations offering new visions of world politics, visions in which the United States and the Soviet Union would bury their old rivalry and build a structure of cooperation. They engaged in “constitutional” discourse about rules, principles, and the desired organization of the great-power system. In his famous UN speech, on December 7, 1988, Gorbachev argued that “world progress is now possible only through the search for a consensus of all mankind, in movement toward a new world order.” The agenda for this new consensus would revolve around the “demilitarization of international relations” starting with an ambitious agenda of conventional and nuclear force reductions. This was a remarkable statement for a Soviet leader, arguing for “joint efforts to put an end to the era of wars, confrontation and regional conflicts, aggression against nature, the terror of hunger and poverty, as well as political terrorism.”42 President George H.W. Bush offered similar statements regarding the historic character of American and Soviet negotiations, describing the efforts of the two states as crafting the terms for a new world order. In short, the two superpowers were engaged in an ongoing discussion of not only how to end the Cold War standoff but also how to shape the coming great-power system. The Cold War settlement focused on the principles of restraint, accommodation, and integration. The Soviet Union would emerge from the Cold War as a partner with the West, and the West would use its institutions to integrate and accommodate the Soviet Union. A new era of cooperative security would be ushered in, organized around arms control, the political transformation of NATO, and the tackling of new “global issues.” The Cold War would not end in Soviet defeat but in a new grand understanding between East and West. Russia’s interests would be

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respected and accommodated, and on the basis of this great-power comity, a new architecture of international institutions and cooperation would be built. The United States and the Soviet Union would emerge as partners on the global stage. The settlement of the end of the Cold War was to an unprecedented degree centered around several major nuclear arms-control treaties. The Cold War was unlike all previous interstate struggles in that the fantastic destructiveness of nuclear weapons made the stakes of the conflict so large. A central turning point in the 1980s was the unexpected convergence of Reagan and Gorbachev on a view of the nuclear problem that went far beyond the deterrence and war-fighting conventional wisdom of both Soviet and American security establishments. The diplomatic centerpiece of the end of the Cold War was thus several arms-control treaties, most notably, the IntermediateRange Nuclear Forces (INF) Treaty, which completely banned entire classes of weapons based in the European region, and the START I Treaty, which mandated deep cuts in the Soviet and American long-range strategic nuclear arsenals. These treaties built upon the legacies of the earlier detente period. Of particular centrality was the Anti-Ballistic Missile (ABM) Treaty of 1970, whose draconian restraints on defensive deployments were widely understood to be the prerequisites for subsequent offensive arms reductions. The animating vision of the Cold War settlement was that nuclear arms control would continue with further rounds of building down of weapons and building up of security institutions. A second feature of this settlement was the transformation of NATO. President Bush and other Western leaders offered a new vision of the Western security alliance. A united Germany would be anchored inside of NATO, but NATO would be transformed from a Cold War military alliance into something closer to a political entity. The United States used the promise of NATO transformation in its efforts to reassure Gorbachev about Germany’s postunification membership within the alliance. A new “concept” for NATO was one of the so-called nine assurances that the Americans presented Gorbachev in May 1990. The efforts to alter NATO were made more concrete at the London NATO summit on July 5, 1990. The draft declaration prepared by the Bush administration proposed a radical shift in nuclear doctrine, elimination of nuclear artillery, additional cuts in conventional forces, an invitation to the Warsaw Pact to open a liaison mission to NATO, and the institutionalization of the CSCE. The culmination of this vision was perhaps the CSCE summit in Paris in November 1990. The most notable outcome of this summit was the signing of the Conventional Forces in Europe (CFE) Treaty, which

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mandated reductions in conventional arms of the NATO and Warsaw Pact countries. The original tasks of the CFE talks were to reduce the concentration of Soviet forces in central Europe and provide a framework for the balancing of conventional forces between the two alliances. But these efforts were overtaken by events—and the agreement became a symbol of a hoped-for transformation in Cold War security relations. As Raymond Garthoff argues, All member states of the NATO and Warsaw alliances signed a joint declaration in which they welcomed “the historic changes in Europe,” “the end of the era of division and confrontation,” and solemnly declared that they were “no longer adversaries” but would “build new partnerships and extend to each other the hand of friendship,” recognizing that “security is indivisible.”43

The third aspect of the evolving post–Cold War settlement was the expectation that the United States and the Soviet Union would work together to tackle global issues. This would start with the renewal of the United Nations itself. As Gorbachev articulated in his speeches, particularly at those given at the United Nations, the end of the Cold War was to be the beginning of a major restoration and extension of the UN system that had been paralyzed for so long by the East-West conflict. The Soviet Union would reestablish its position on the global stage as a state dedicated to a progressive global agenda, beginning with a comprehensive arms-control agenda. The reassurance that the Bush administration gave Gorbachev in the spring of 1990 in the context of Two-plusFour talks over German unification included movement on arms control and force reductions in Europe. The American position was that the events of 1989 should lead to a consolidated Western system—and indeed they did. But part of what made this acceptable to the Soviet Union was that the events of 1989 were also a prelude to a new global compact in which the Soviets would work with the United States and its Western partners of a full range of global issues. The old Cold War antagonists were redefining the basic framework of great-power relations. This background dynamic is a critical aspect of why the events of 1989 and 1990 unfolded as they did. It helps explain why Gorbachev gave the ground he did on the terms of German unification. It also explains why the United States was agreeing to major arms-control negotiations and offering to redefine the purposes of NATO. It also explains—twenty years later—why dissatisfactions and grievances linger, at least on the Russian side, over the seeming erosion and breakdown of the Cold War settlement.

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Conclusion The fall of the Berlin Wall in November 1989 triggered a cascade of diplomacy leading to the restructuring of the political order between East and West. It was part of a larger unfolding drama that punctuated the end of one world historical era and the beginning of a new one. As this chapter suggests, it is useful to see this drama at several levels. In some sense, like a Matryoshka doll—or a Russian nested doll set—there were dramas within dramas within dramas. The inner drama was the swirl of diplomacy, bargaining, and compromise that unfolded through summits, conferences, dinner meetings, state visits, and other large and small gatherings of leaders and foreign ministers in the months between November 1989 and September 1990. This diplomatic drama took place in a wider setting of great-power grand strategy that was aimed at shaping the geopolitical structures in which German unification would be situated. From the American perspective, this was a drama about ensuring that a unified Germany would remain in NATO. More generally, this was a drama about efforts to signal reassurance and restraint. It was a drama over how to find institutional arrangements that would make a unified—and more powerful—Germany acceptable to its neighbors. Institutional solutions to problems of German unification were proposed. Many proposals failed and some succeeded. Ultimately, the institutions that emerged as most acceptable were the old Euro-Atlantic ones—NATO and the EC, along with the Organization for Security and Co-operation in Europe (OSCE). These were institutions that could bind Germany to Europe and the West, making power shifts relatively unthreatening to the other leading states. At a third level, this drama over institutions and restraint played out in the context of the larger Western order. This political formation itself exerted a profound influence over the course of events. The Western order was a complex political amalgam organized around alliance partnership, multilateral institutions, market interdependence, cooperative security, democratic solidarity, and American hegemonic leadership. It was a dynamic political order that generated massive amounts of power and wealth—and it was a political order that offered a relatively benign face to the Soviet Union. At a fourth level, the events of 1989 and 1990 were part of a larger settlement of the Cold War. Similar to the settlements that followed greatpower wars of the past, the Cold War also ended with agreements and understandings that were to form the basis for a new international order. Both sides offered visions of the post–Cold War world. Leaders made concessions and promises. What most marked the settlement of the Cold War

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were the principles of accommodation, integration, and restraint. As we have seen, these were in turn expressions of a larger historical agenda of American and Western liberal order building. The United States and the Soviet Union—and later Russia—agreed to engage in far-reaching efforts at nuclear and conventional arms reductions. NATO would be expected to transform itself into a more politically oriented alliance. New partnership agreements and a pan-European security organization would tie Russia to the West. The United States and the Soviet Union would emerge from the Cold War as partners. A new “constitution” for great-power politics was laid down—or at least that was the hope and expectation that shadowed the events and decisions in the months that followed the fall of the Berlin Wall. The unification of Germany—together with the peaceful end of the Cold War—is without a doubt one of the greatest triumphs of the modern state system. It is a triumph that reminds us of the importance of diplomacy, the uses of institutions, and the unusual ability of the Western system to integrate and bind states together. The “constitutional” moment that emerged at this juncture reminds us that grand efforts at order building are not just old-fashioned diplomatic exercises of early eras, marked by dates such as 1815, 1919, and 1945, but part of the today’s world. The constitutional settlement that ended the Cold War has eroded in recent years. Promises and expectations have not been kept or fulfilled. The global system may soon be ripe for a new “constitutional moment” and new efforts at world-order building. Notes 1. Serge Schmemann, “A Historic Moment Slips by, Overshadowed,” New York Times, September 13, 1990, A6. 2. James A. Baker, III, The Politics of Diplomacy: Revolution, War, and Peace, 1989–1992 (New York: Putnam, 1995), 172. 3. See reports based on the release of Soviet archive records. Michael Binyon, “Thatcher Told Gorbachev Britain Did Not Want German Unification,” Times (London), September 11, 2009; and James Blitz, “Paris Feared New Germany after Unification,” Financial Times, September 9, 2009. 4. Philip Zelikow and Condoleezza Rice, Germany Unified and Europe Transformed: A Study in Statecraft (Cambridge, MA: Harvard University Press, 1995), 1–2. 5. For a superb detailed account of these alternative institutional proposals and their eventual fate in the unfolding events, see Mary Elise Sarotte, 1989: The Struggle to Create Post–Cold War Europe (Princeton, NJ: Princeton University Press, 2009). 6. See G. John Ikenberry, “The Rise of China and the Future of the West,” Foreign Affairs, (January/February 2008).

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38 / g. john ikenberry 7. This chapter builds on Ikenberry, After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order after Major War (Princeton, NJ: Princeton University Press, 2001). 8. Sarotte, 1989, 64–5. 9. Stephen F. Szabo, The Diplomacy of German Unification (New York: St. Martin’s Press, 1992), 30. 10. Szabo, The Diplomacy of German Unification, 30. 11. Alexander Moens, “American Diplomacy and German Unification,” Survival XXXIII, no. 6 (November/December 1991), 544. 12. Baker, The Politics of Diplomacy, 165. 13. In the early months after November 1989, Thatcher warned against the “rash” resolution of the German question and Mitterrand described German Unification as “a legal and political impossibility.” Quoted in Manfred Gortemaker, Unifying Germany, 1989–90 (New York: St. Martin’s Press, 1994), 155. See also, Jeffrey Anderson, German Unification and the Union of Europe (New York: Cambridge University Press, 1999), 33. 14. Quoted in Zelikow and Rice, Germany Unified and Europe Transformed, 120. 15. Quoted in ibid., 122. 16. Elizabeth Pond, The Rebirth of Europe (Washington, DC: The Brookings Institutions, 1999), 39. 17. Quoted in Robert Hutchins, American Diplomacy and the End of the Cold War: An Insider’s Account of U.S. Policy in Europe, 1989–1992 (Baltimore, MD: Johns Hopkins University Press, 1997), 120. See also Hans-Dietrich Genscher, Rebuilding a Divided House: A Memoir by the Architect of Germany’s Reunification (New York: Broadway Books, 1998), 335–38. 18. Zelikow and Rice, Germany Unified and Europe Transformed, 73. 19. Mary Sarotte, 1989, 67. 20. Quoted in Zelikow and Rice, Germany Unified and Europe Transformed, 127. 21. President Bush’s news conference in Brussels, December 4, 1989. 22. George H.W. Bush and Brent Scowcroft, A World Transformed (New York: Knopf, 1998), 201. 23. Anderson, German Unification and the Union of Europe, 33. 24. Anderson, Germany Unification and the Union of Europe, 33–34. 25. Timothy Garton Ash, In Europe’s Name (New York: Random House, 1993), 358. 26. Quoted in Angela E. Stent, Russia and Germany Reborn: Unification, the Soviet Collapse, and the New Europe (Princeton, NJ: Princeton University Press, 1999), 102. 27. Quoted in Gorbachev, Memoirs, 529. 28. Gorbachev, Memoirs, 529. On Baker’s report of the meeting, see Baker, The Politics of Diplomacy, 234–35. See also Don Oberdorfer, The Turn: From the Cold War to a New Era (New York: Poseidon Press, 1991), 395. 29. The nine-point “incentive” package, which was prepared by State Department counselor Robert Zoellick, is reprinted in Zelikow and Rice, Germany Unified and Europe Transformed, 263–64. See also Raymond L. Garthoff, The Great Transition: American-Soviet Relations at the End of the Cold War (Washington, DC: The Brookings Institutions, 1994), 426–27. 30. See Oberdorfer, The Turn, 429.

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german unification / 39 31. Quoted in Gorbachev, Memoirs, 533. 32. Quoted in Sarotte, 1989, 77–8. 33. See Baker, The Politics of Diplomacy, 172–73. See also, “Baker, in Berlin, Outlines a Plan to Make NATO a Political Group,” New York Times, December 13, 1989, A1, A10. 34. See Andrei Kozyrev, “Partnership or Cold War?” Foreign Policy, no. 99 (Summer 1995), 3–14. 35. Quoted in Baker, The Politics of Diplomacy, 170–71. 36. For popular version of this account, see Peter Schweizer, Victory: The Reagan Administration’s Secret Strategy that Hastened the Collapse of the Soviet Union (New York: Atlantic Monthly Press, 1994); Jay Winik, On the Brink: The Dramatic, Behind-the-Scenes Saga of the Reagan Era and the Men and Women Who Won the Cold War (New York: Simon and Schuster, 1996); and Paul Kengor, The Crusader: Ronald Reagan and the Fall of Communism (New York: Harper Perennial, 2007). 37. See Oberdorfer, The Turn; Garthoff, The Great Transition; and most recently, James Mann, The Rebellion of Ronald Reagan: A History of the End of the Cold War (New York: Viking Press, 2009). 38. Garthoff, The Great Transition, chap. 4. 39. September 24, 1984. Address to the UN General Assembly. 40. Quoted in Hutchings, American Diplomacy and the End of the Cold War, 33. 41. See Ikenberry, After Victory; Kalevi J. Holsti, Peace and War: Armed Conflicts and International Orders, 1648–1989 (New York: Cambridge University Press, 1991); Andreas Osiander, The States System of Europe, 1640–1990: Peacemaking and the Conditions of International Stability (London: Oxford University Press, 1994); and Jeff Legro, Rethinking the World: Great Power Strategies and International Order (Ithaca, NY: Cornell University Press, 2007). 42. Gorbachev speech to the UN General Assembly, December 7, 1988. 43. Raymond Garthoff, The Great Transition, 434. The quotes are from the “Text of the Joint Declaration of Twenty-Two States,” November 19, 1990.

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Ch a p t e r Two Be t w e e n E U R O L A N D a n d A B E N D L A N D ? O p p ort u n i t i e s a n d Ch a ll e ng e s for Ge r m a n For e ig n Pol ic y si nc e Un i f ic at ion Mary N. Hampton

This chapter reappraises German foreign policy since unification. A reexamination of the catalysts that helped produce German unity illuminates new opportunities and challenges that have arisen in the intervening twenty years. Exploring the salience of three identity complexes, transAtlantia, Euroland, and Abendland, highlights important opportunities and challenges to German foreign policy. These identity complexes have played a central role in the shaping and maintaining of German foreign policy from unification to the present, but their salience has shifted over time. Trans-Atlantia and Euroland have been maturing since the end of the Second World War and served as the main catalysts for change in the 1989–1991 period, and Chancellor Helmut Kohl emphasized their compatibility. To a great extent, the deeply cultural issues embedded in Abendland, such as the relationship of Germany to Turkey and the Muslim world, played virtually no role at all. Today, all three identity complexes are in play, but their interrelationship has changed drastically. Germany remains anchored in the interstate and transnational relationships that enabled unification, but the balance has shifted: trans-Atlantia remains intact but has been weakened. Euroland has become more prominent, and the impulse to propel the European integration movement continues to thrive, despite setbacks such as the crisis over Greece. The increasing salience of Abendland poses problems and choices for Germany for which the post-1945 processes of Western integration have not prepared it. One of the most important challenges to German foreign and domestic policy is therefore one that was barely visible in 1989: Germany’s and Europe’s

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relationship to the Morgenland,1 or cultures of what has been alternatively called the Orient, the Levant, and the Near and Middle East. I contrast Morgenland with Abendland, or evening land, which means the West, and usually the Christian West. Thus, Germany and Europe face the cultural challenges wrought by immigration, assimilation versus integration, and by trying to address new security threats that have cultural undertones, such as transnational terrorism. These emerging issues have spawned contentious policy and identity issues in the European Union and in Germany. In short, German foreign policy leadership has had some troubled moments but generally remains a stabilizing factor in post–Cold War Europe. That said, Germany’s clear leadership position during the Kohl years on issues vital to Europe is not as obvious or well defined today. The Historical Background The rehabilitation of West Germany after the Second World War was one of the most successful narratives of modern history. With much help from the United States, the West, and the institutionalized international order, West Germany was rapidly integrated into the West and took its place as a great power. West German leaders skillfully steered a foreign policy course that anchored the country in Western institutions, enhanced West German influence, and worked as best they could with the division of Germany. The so-called German question that haunted many inside and outside West Germany appeared resolved, or at least subsided, through the twostate solution. The rapid dissolution in 1989 and 1990 of the two German structures that both underwrote and reflected the Cold War ignited a brief but intense period of hand wringing in some European circles about the possible return of the German question. Yet the half-century process of Western integration combined with the skillful leadership of the Kohl and Bush administrations quickly dampened the nervousness. Indeed, German unification in 1990 remains a singularly awe-inspiring event and represents a watershed moment. Not only was it accomplished peacefully, but it also reconfirmed a half-century process of democratic community building in the West, led mainly by the United States, and the European integration movement of which Germany had become the engine. German unification therefore proceeded while anchored in an unthreatening environment. The unprecedented peaceful process was driven by innovative and trusted German foreign policy leadership and was dependent on a reforming Soviet Union. Therefore, although there were challenges to the project of uniting Germany, German foreign-policy makers succeeded by availing themselves of rich opportunities and by creating some themselves.

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Aside from specific policies, the road to unification can be understood by examining a number of identity complexes as well. The trans-Atlantic relationship formed the anchor for the Western community of democracies and was the incubator within which democratic West Germany developed.2 The trans-Atlantic security relationship was then critical for German unification, as it was the Bush administration that admonished the community of Western democracies to support a uniting democratic Germany. Through the 1980s, this relationship, which I have called trans-Atlantia, ran parallel to the European identity complex that was emerging through the various West European institutions. Thus, while West Germany was often torn in its foreign policy between supporting the United States and aligning itself with France, the two identity complexes did not directly challenge each other. The European identity complex would eventually evolve into what I call Euroland and has since been in tension more often with trans-Atlantia. The third identity complex dealt with in this chapter, Abendland, was barely perceptible at this time. In the years before and immediately after German unification, German foreign policy leadership was pivotal in helping integrate Europe and legitimize the North Atlantic Treaty Organization (NATO). Chancellor Kohl took the lead in moving toward unification, although U.S. and Soviet foreign policy were also critical. Kohl’s persistence helped steer Europe and especially the Germans toward acceptance of the euro, and his government was an important advocate for Polish accession to NATO. The Kohl government was also pivotal in forging cooperative relations with Russia bilaterally and through NATO. Economic and financial investment in Russia was promoted, and the German hand was present in the penning of the NATO-Russia Charter in 1997. That said, German and American leaders began to revise the trans-Atlantic understanding by the turn of the millennium. Indeed, until Chancellor Gerhard Schröder criticized and rejected U.S. military intervention in Iraq during the German federal election in 2003, the public rebuke of U.S. foreign policy by a serving German chancellor in the midst of a federal election was unprecedented in postwar history. While the moment was singular, and German-U.S. relations were revived and repaired under Chancellor Angela Merkel’s leadership, the event did symbolize the growing German identification as EU European and the concomitant weakening of identification as NATO European. The Success of Euroland The most important German foreign policy accomplishment since 1989 has been support and leadership in the sustained forward momentum in

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European integration. As Elizabeth Pond observes, Europe has responded to challenges to integration by “fleeing forward.”3 Germany has played the most critical role, beginning with Helmut Kohl’s relentless drive to unify Germany in an integrating Europe. Indeed, the desire to embed emerging Germany in a more deeply integrated European Union was widespread. Progress emerged quickly, with visible effects. The European Union was officially proclaimed with Maastricht in 1992, whereupon the tasks of deeper integration were immediately addressed. During the 1990s, a whirlwind of integration-related agreements were debated and agreed upon: the Single European Act, the Treaty of Amsterdam, and the Treaty of Nice. Success was greater in the realms of economic and financial integration than in the more difficult task of bringing EU Europe together under an integrated foreign and defense policy, which I will discuss below. The introduction of the euro was probably singular in signaling to European publics and the rest of the world that European integration was deepening and was a reality. The creation of the euro zone, or Euroland, demanded bold leadership. Kohl withstood tremendous domestic pressure in moving forward with the euro; public opinion was against it, and the deutsche mark had become the symbol of German success and identity. By maintaining an unwavering position on the introduction of the euro, Kohl confirmed his commitment to embedding united Germany firmly within an institutionalized and integrated Europe. Kohl averred, “The introduction of the euro is not only an important decision for the European Union; it is an important turning point in European history . . . The single European currency has made European integration irreversible.”4 Thus, Euroland has come to symbolize the integrating Europe. I take it as an identity complex, of which the European Security and Defense Policy (ESDP) and architecture are a significant, yet very incomplete, part. ESDP: The Idea of Europe and Security Culture Redefined Elsewhere I have compared emerging European foundational security beliefs with those of the United States and argued that different historical experiences with war have produced profoundly different security cultures. The foundational beliefs in the United States concerning the nature of threat and the legitimacy of war are more typical of traditional nationstates, where nationalism and a sense of providence combine to demonize threat and to legitimize the use of force to counter the threat. For Europe, the link between providence and the nation was broken through two devastating world wars, both of which were based initially in most of the warring great-power states on beliefs about being providentially chosen. Indeed, the American proclivity to define threats in terms of the battle

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between good and evil is not just seen as off-putting to many Europeans: it is seen as irrational and reflective of flawed democracy.5 Dominique Moisi, a leading European public intellectual, has observed that to Europeans, “the combination of religion and nationalism in America is frightening. We feel betrayed by God and nationalism.”6 Interestingly, the security culture of Europe that has been evolving slowly since the end of the Second World War revolves around a long-standing “idea of Europe,” the centuries-old evocation that Europe’s identity in the world should be peaceful and civilized. Thus, “the idea of Europe” was fundamentally forged out of war-weary dreams of unity: postwar Europe was always the venue for ripening cosmopolitan and unification models. In the postwar environment of 1648, in the postwar environment of 1919, and in the postwar environment of 1945, it was Jean Monnet, Robert Schumann, Konrad Adenauer, and others who helped forge the post-1945 “idea of Europe” that took hold.7 The “idea of Europe” was thus born in the shadows of hard-fought competitive wars, most often after wars that were fought among the European states, or great-power wars. The core is therefore a yearning for peace and the conditions under which such a state of relations might be forged. In short, the historical processes of war devastation, secularization, and post-Westphalian integration have produced in Europe a very different set of beliefs about the nature of threat and the legitimacy of war fighting than exist in the United States and in much of the world. Underlying European beliefs about the nature of threat and the acceptability of war fighting have therefore been radically altered over the last half century. This uniquely European security culture ripened in the shade of the U.S. security umbrella for fifty years or within trans-Atlantia. German Power Projection “Lite”: A Key to Understanding European Security Culture The true engine of the emerging European security culture has been Germany. Germany still diverges from other European national security cultures in important ways but forms the bedrock of the emerging European security culture. Because of its singular experience with great-power war, loss, and moral shame, West Germany developed a unique security culture after the Second World War that held for over a half century. The rejection of power projection and military interventionism developed into what many have called the “culture of reticence” in West Germany. West Germans were resistant to projecting German power abroad in any way that would be perceived as militaristic or threatening. Thus, the Germans’ evolving self-identity developed concepts that presented West Germany as

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a “civilian power,” as the first “postnational” state, and as a true believer in nonaggression. Indeed, the term “never again” for West Germans was two pronged: never again war from German soil and never again support for undemocratic demagogues such as Hitler. As has been the case with U.S. security culture, this West German culture of reticence was always contested and most often by more traditional understandings of security culture. In the end, the culture of reticence helped define the set of rules, beliefs, and norms that underwrote German security culture through the 1990s and into the twenty-first century. Germany’s approach, what I have previously termed power projection “lite,” forms the core of the European approach to security. Former German chancellor Gerhard Schröder reflected the approach succinctly in an April 2001 interview with the German weekly Die Zeit: “Military skills and strength are featuring less and less prominently in 21st century European security programs.” He further averred, “The question of security cannot be left to the military.”8 In a similar fashion, Egon Bahr, the main architect of the Social Democratic Party’s (SPD) former chancellor Willy Brandt’s pathbreaking foreign policy, Ostpolitik, argues, “To create stability through binding relationships, in which the power of the military plays an increasingly smaller role, that is the European way.”9 The European Union and Security Governance Peter Katzenstein’s claim that the European Union has taken on the features of a German approach to the internationalization of national interests is confirmed, where the tools of security governance are first political, economic, and diplomatic and are military only as a last resort.10 For the EU security blueprint, or the security governance model, the traditional reliance on military capabilities among great powers is increasingly relinquished in favor of those associated with soft power: diplomacy, economics, and information. EU troops are to be deployable in situations that were spelled out as the Petersberg Tasks in 1997 in Amsterdam. The tasks include humanitarian assistance, peacekeeping operations (PKO), crisis management and prevention, and peace enforcement operations. The tasks also advocate that the military instrument must be pursued only as a last resort, and only as one piece of a broader approach to security that includes political, economic, and environmental concerns. Although the so-called Headline Goals set an agenda for the lite projection of EU power abroad, what constitutes a threat to the European homeland? The European Union is beginning to produce security documents that define threats and recommend responses to them. For example,

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the 2003 document, A Secure Europe in a Better World: European Security Strategy, lists a number of threats to which the European Union must respond: among others, terrorism, weapons of mass destruction, and weak and failing states. For all of these, it is recommended that EU members act in concert. What is also abundantly clear is that these are interpreted as posing no potentially existential threats. The document states that “in contrast to the massive visible threat in the cold war, none of the new threats is purely military; nor can any be tackled with purely military means.” In line with the Petersberg Tasks, and with the Headline Goals, each threat needs the mixed response for which, “the European Union is particularly well equipped to respond.”11 The 2003 document is reaffirmed in the 2008 Report on the Implementation of the European Security Strategy. Security governance is reaffirmed as are the successes of power projection lite: Over the last decade, the European Security and Defense Policy, as an integral part of our Common Foreign and Security Policy, has grown in experience and capability, with over 20 missions deployed in response to crises, ranging from post-tsunami peace building in Aceh to protecting refugees in Chad.

These successes are viewed as “the results of a distinctive European approach to foreign and security policy.”12 In fact, these successes result from security Germany style, which combines cooperative European governance and power projection lite. The Limitations of Power Projection Lite Although the unique features of postwar West German security culture came to form the foundation for the emerging EU European security culture, they actually hamper the emergence of an effective German or European strategic culture. Although the Lisbon Treaty goes further than any other previous document in attempting to define conditions under which traditional defensive war fighting is conceivable, it has been difficult to arrive at political agreement on when military combat intervention as a last resort would be legitimate. The German case reveals through various polls that over time war fighting has been basically delegitimized. As I discuss in the following section, more traditional German power projection has emerged under the auspices of NATO or trans-Atlantia. Yet that very fact has also brought NATO under increasing criticism in Germany and has led to widespread dissatisfaction with the ongoing International Security Assistance Force/NATO intervention in Afghanistan, which represents the clearest manifestation of German war fighting in the traditional

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sense. I will also discuss the examples of bold German leadership in guiding Germany away from reticence and toward an active military role done “in concert” with its NATO allies. In sum, Germany has been the leading light in establishing Euroland. German leadership was critical in pushing the introduction of the euro, in promulgating the “ever-closer union” through EU-wide acceptance of a constitution, and finally, in establishing through practice the tenets of ESDP, the latter being a mixed blessing. Later in this chapter, I deal with the shortfalls of Euroland in the discussion of trans-Atlantia and Abendland. Whither Trans-Atlantia ? Trans-Atlantia has not fared as well as Euroland in the years since unification. NATO, the flagship institution of trans-Atlantic cooperation and democratic community, has managed to stay in business, but it has often been close to foreclosure. The fact that NATO survived at all in the wake of Soviet collapse was a historic accomplishment. As I have argued elsewhere, NATO was always more than a traditional collective defense alliance. Its origins reflected the beliefs of postwar American Wilsonian foreign-policy makers who were instrumental in constructing the postwar international order. NATO was consciously conceived of as a core institution in the American blueprint for a democratic community of nations with U.S. leadership at its center.13 As John Foster Dulles stated in the formative years of the postwar era, there needed to be a focus in the Alliance on “cooperation for something rather than merely against something.”14 Reaffirming that commitment, former U.S. secretary of state James Baker delivered a famous speech in Berlin in 1989 at the end of the Cold War in which he encouraged NATO to turn to its political purpose of political community building in the face of a diminished Soviet security threat. Baker stated, “Today, NATO is working in Vienna to build a new security structure for Europe, one in which the military component is reduced and the political is enhanced. This is NATO’s first new mission.”15 That united Germany joined NATO helped stabilize the historic event and calm those allies and neighbors potentially worried about emerging German power. Indeed, Germany only achieved full sovereignty upon unification, opening the door to concerns both domestically and abroad regarding how unity and sovereignty might influence German foreign policy proclivities. Kohl’s foreign policy was masterful in insisting that united Germany remain integrated in the West. In return, the integration of Germany into NATO also helped legitimize NATO’s existence. Over the next decade, German leadership would be pivotal in ensuring that trans-Atlantia continued to flourish. The Kohl government would

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enhance German influence while continuing to anchor it in Euroland, as discussed above, and in trans-Atlantia. On the defining issues of NATO enlargement, NATO-Russian cooperation, and NATO intervention into the Balkans, Germany played a key role. That said, NATO’s intervention in the Balkans and the subsequent NATO debacle after the attacks on the United States on September 11, 2001, undermined the cohesion of the trans-Atlantic community. While it has been somewhat restored over the last few years, German leadership has become much less proactive on the issues of enlargement, NATO relations with Russia, and NATO intervention in Afghanistan. Germany and NATO Enlargement in the 1990s Incorporating united Germany was NATO’s first step in the emerging post–Cold War order toward democratic enlargement on the continent. The inclusion of Poland, the Czech Republic, and Hungary by the end of the decade continued the trend. The democratic enlargement process affirmed both Article X of the NATO Charter, which recommends that alliance membership be open to those European states “in a position to further the principles of this Treaty and to contribute to the security of the North Atlantic area,”16 and gave new focus to Germany’s successful postwar democratic experience. Just as American policymakers believed at the end of the Second World War that the historical European balance-of-power system needed an overhaul, so German policymakers now sought to help actively reconstruct a more democratic order throughout Europe. Again, German foreign policy was key to achieving the successful enlargement policy, and Berlin developed its own position independent from the push for enlargement emanating from the Clinton White House by 1994. First, NATO Secretary General Manfred Wörner was one of the first NATO officials to advocate behind the scenes and then publicly for NATO opening its doors to democratizing European states in East and Central Europe. Wörner reflected the beliefs of many West German elites in revealing his sense of historic obligation to hopeful members in East and Central Europe. This view was evident already in 1990 through speeches he gave. Michael Ruehle writes of Wörner’s conviction: In 1990, during a visit to the Polish city of Gdansk, the crowd had welcomed him by cheering “NATO, Solidarno ść, NATO . . . ” For Wörner, with his vision of a Euro-Atlantic community, it was inevitable that the new democracies in Central and Eastern Europe would ultimately join the Alliance. Accordingly, Wörner worked actively to hasten that end.17

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Again, in a speech from 1993 at the International Institute of Strategic Studies in Brussels, Wörner stated, NATO is not a closed society. We have always said that the option for membership is open. My view is that the time has come for us to offer a concrete perspective to the countries of central and eastern Europe who want to join NATO, and whom we regard as possible candidates for future membership.18

The Kohl government, led by Defense Minister Volker Rühe, and especially parliamentarians such as Friedrich Pflueger, thereafter carved an important role for Germany as the advocate for accession, especially in the case of Poland. By 1994, Pflueger was on board with Rühe in enthusiastically supporting Polish membership in NATO and the European Union.19 This was Germany’s moment to be generous and extend the hand of NATO inclusion to democratizing European states, as was done for it in 1954. It was therefore also a moment in which Germany could hold itself up as a successful model of democracy. Germany, NATO, and Military Intervention NATO reached its zenith and nadir with the military interventions into the Balkans, beginning with Operation Deliberate Force in Bosnia and climaxing with Operation Allied Force (OAF) in Kosovo in 1999. The latter was truly a landmark occasion in many ways. It was the first time Germany intervened abroad militarily in combat since the Second World War, and the German policy was driven by a left-of-center coalition government led by the SPD and Greens. It was also the first time NATO intervened in a war since its inception in 1949. The fact that the Allied intervention succeeded in forcing Milošević to capitulate was a crowning moment in Allied history: the community of Western democracies hung together to intervene and halt a clear case of human rights abuse and ethnic cleansing. The success in Bosnia and then Kosovo represented NATO’s zenith and Germany’s Rubicon.20 The German position of abstinence in the U.S.-led Gulf War in 1991 reflected the culture of reticence. That said, while German political elites and the public were unwilling to contribute militarily in the conflict, there was a wide-ranging debate inside Germany concerning the justification of use of force in that instance. In fact, the domestic consensus of reticence would be modified, and Kohl’s leadership on the issue paved the way for the German military intervention in OAF that would occur less than a decade later. The German government was criticized openly and widely abroad for its hesitation to act in solidarity with its allies during

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the Gulf War. The Kohl government therefore challenged the domestic consensus by obligating Germany to participate in the United Nations’ PKO in the early 1990s. The reform was challenged constitutionally by the Free Democratic Party (FDP) and the opposition SPD. They submitted a query regarding German military intervention to the German Constitutional Court.21 The 1994 constitutional finding permitted German military deployment outside the national borders in the pursuit of “safeguarding peace,” and as long as German military forces were part of “peacekeeping troops and peace-securing measures” in the context of the UN system of collective security and in conjunction with its allies.22 The court offered no more specifics in identifying how German military power could be projected. The ruling enabled German participation in PKO in the framework of international institutions and multilateralism, and it also interpreted existing constitutional law as containing “sufficient constitutional basis for Germany’s participation in military operations led or authorized by the UN. . . . [N]o other provision in the Basic Law . . . could be interpreted as forbidding such participation.”23 The ruling also allowed for German participation in multilateral operations through international organizations other than the United Nations, as long as the “system of mutual security” was upheld.24 The way was paved for German military projection lite. Germany’s participation in the Balkan wars of the 1990s contributed to a “normalization” of German foreign policy. The Allied military intervention in Kosovo fit within the parameters of the newly emerging German domestic consensus of permitting limited military intervention as long as it was done in concert with Germany’s democratic allies and pursued in the name of community values rather than narrow self-interest. Wolfgang Ischinger, the future German ambassador to the United States and a top Foreign Office official in the Kohl government, argued that the Kosovo intervention represented a break with past European wars that were based on realpolitik considerations. In his view, the multilateral military intervention in Kosovo was focused on “the need to avert a humanitarian catastrophe . . . Instead of national interests, the international community pursued the goal of implementing the basic principles of law and humanity.”25 OAF and the follow-on peacekeeping mission therefore validated the new German approach to international power projection: it was multilateral and waged under the NATO flag; it was executed in the name of democratic community objectives; and it revealed that Germany was now willing to assume an active role alongside its democratic allies to stop ethnic cleansing. On the other hand, OAF also diminished NATO. For the first time, the technology gap between the United States and NATO Europe became

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an active source of resentment. Many in the U.S. military resented that they bore the brunt of the military burden, and many in Europe resented the fact that the United States withheld important intelligence concerning air operations and that European military backwardness was so glaring. For the first time, the British were driven to join the French at St. Malo in 1998 in seeking an autonomous European security and defense architecture. Furthermore, the fact that NATO’s war in Kosovo was executed without a UN mandate became increasingly problematical for Germany. In fact, in Germany, many read the 1994 constitutional court ruling as making UN mandates necessary ingredients for Germany’s participation in PKO and other collective security policies. Although the concern revealed political sensibilities as much as it did constitutional directives, German leaders have since repeatedly made clear their demand that Germany only participate in PKO and other missions that have a UN mandate. NATO’s experience therefore represented something of a breach in trans-Atlantic relations and encouraged greater European cooperation and integration in the security and defense fields. Indeed, the EU agreements and accords reached at St. Malo in 1999 and subsequently were discussed above in the context of Euroland. The trans-Atlantic relationship approached the precipice as relations soured further between the Schröder and Bush administrations, especially over the issue of military intervention in Iraq. The Bush administration’s military intervention followed soon after the publication in Germany of Jorg Friedrich’s book Der Brand. The book examined and questioned the morality of the Anglo-American air campaign against Dresden and the Third Reich in the Second World War and helped renew public debate about the use of force in international politics. Friedrich and other public intellectuals engaged in numerous debates about the Bombenkrieg of the German experience and the potential Iraqi experience. As Friedrich commented, a deep-seated German historical memory “situates the Germans always under the bomb and never in the bomber.”26 Germany and Afghanistan: Another Test of Changing German Culture Chancellor Merkel remarked in April at a NATO summit she cohosted in Strasbourg that “Afghanistan is a litmus test for us all.” The test results are not looking good. In 2003, NATO took over ISAF, thereby ensuring the UN mandate remained in effect. That situation has defined Afghan operations since. ISAF/NATO has conducted security and stability operations, helping the Afghan government create a stable environment and helping in the nation-building process. U.S. forces participate in that, but

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the U.S. counterinsurgency war has until recently continued separately. The problem for ISAF, but especially Germany, is that the expanding area of operation for ISAF and the deteriorating security environment in Afghanistan have forced the ISAF mission to move toward traditional military operations. From Rumsfeld’s public remark in 2003 that German Special Forces were participating in Afghanistan, a remark made before Schröder had informed the Germans, to the scandal in 2006 involving German soldiers in Afghanistan who insulted local culture by desecrating Afghani skulls, to the increased combat deaths of German soldiers in Afghanistan, to the recent controversy involving a German general on the ground in Afghanistan who ordered a NATO air strike that turned out to kill dozens of civilians: these are all incidents that have continuously stoked the public preference for an exit from Afghanistan. The latter incident was particularly repugnant to the public, as it was the largest number of deaths in a wartime incident since the Second World War. Furthermore, the episode occurred toward the end of the recent federal election, and there was momentary conjecture about whether or not the 2009 election might not turn at the last moment on the issue of foreign policy, as happened in 2002 when Schröder squeaked out his victory in some measure by criticizing publicly Washington’s military intervention into Iraq.27 “The Germans may not have gone to war, but now the war has come to them.”28 Stefan Pauley’s observation is insightful. Since the inception of Germany’s military participation in Afghanistan operations and until recently, the German government spoke only of peacekeeping and humanitarian assistance. It is becoming clearer to the German public, of whom a majority has never supported participation in ISAF operations, that its soldiers are indeed fighting a war on the ground. The German mission originally involved more peacekeeping and stability and reconstruction because the German troops were deployed in Northern Afghanistan, which had been one of the more peaceful areas of the country. That has recently changed as the resurgent Taliban has returned to the region. Increasingly, then, the German military has become involved in a shooting war and has engaged the Taliban in offensive operations. This is of huge consequence to Germany and is pushing on the limits of power projection lite for a cause that Germans are not wound up about. For some time, approximately two-thirds of Germans have been against the Afghanistan mission. All negative signs emanating from Germany regarding the Afghanistan mission notwithstanding, Merkel has resisted public pressure, countered political opposition, and held firm to the line of supporting the NATO/ ISAF mission in Afghanistan since she was elected in 2005. Under her

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guidance, the German parliament renewed its commitment in Afghanistan in 2007. That support has recently shown signs of fraying, as has the support of other EU members. In September 2009, Merkel was among the EU chorus calling for the development of an exit strategy from Afghanistan. That said, an interesting contrast to the German position on Afghanistan has been that of France and Great Britain. Both have been much more forthcoming in supporting the war-fighting aspects of ISAF. It is quite possible that France, having now rejoined NATO in full, is beginning to replace Germany as the engine of EU strategic culture. In sum, Merkel has reaffirmed the centrality of the trans-Atlantic relationship for German security. For example, the 2006 White Paper on German Security Policy and the Future of the Bundeswehr places trans-Atlantia as the cornerstone of German security and reaffirms the Western community of values. The U.S.-German troubles of 2001–2005 are absent, but so too is a hardheaded assessment of alterations in the relationship as they pertain to changes in the political and strategic environment. The real limitations of the relationship have become glaring through the Afghanistan experience and were not much clarified in NATO’s New Strategic Concept in 2010. Globalized NATO seems less suited to German security culture than does the emerging security structures of Euroland. Finally, NATO shares a problem with the European Union in having no clarified policy toward Russia. While Germany continues to develop its bilateral relationship with Russia, especially in the areas of investment and the purchase of natural gas, Berlin plays no particular leadership role in either NATO or the European Union in attempting to craft a multilateral approach. Both NATO and the European Union had robust rules of engagement with Russia in the 1990s, and German leadership was critical. However, both institutional policy frames revolved around slowly integrating Russia westward as Europe enlarged eastward. Russian foreign policy under Putin demoted Westernization from the foreign policy agenda. Instead, Russian foreign policy has flummoxed EU and NATO members in the last few years with aggressive military and economic policies toward Georgia, Estonia, and a number of East European states.

Abendland and German Foreign Policy Abendland historically is a provocative term, but it is useful in helping to conceptualize the cultural identity boundaries that are emerging in Europe. In the past, Abendland was juxtaposed to Morgenland, the cultures of the East. The religious and civilizational undertones are obvious. Today, civilizational and religious patterns of identity are once again emerging in EU European culture, and Germany’s role in the process is pivotal.

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As German identity becomes more embedded in Euroland, the process of culturally identifying member and nonmember accelerates. Although the United States is a member of trans-Atlantia, which signifies the Western democratic community, that identity complex is being overshadowed by the emerging distinct European identity. Although EU Europe is still culturally Christian, it is distinctly secularist. Europeans today generally believe that America’s religiosity makes it exceptional and very different.29 EU Europe’s distinctive culture—its Christian secularism—is emerging increasingly in contrast not just to the United States but even more so in contrast to the immigrant populations of the Levant, the Near, and Middle East who have been migrating to EU states in growing numbers. Although the most excessive reactions can be dismissed, the demographic and cultural trends do create political, social, and economic tensions that will have to be addressed. The necessity in addressing the growing cultural issues is great and problematical for Germany. The historical burden of the Second World War, and especially the Holocaust, created a number of taboos for West Germany with which united Germany must still contend. Aside from the policy of compensation to and reconciliation with Israel developed early on by Chancellor Konrad Adenauer’s government, and that is still in place, Bonn also developed very liberal asylum and religious freedom policies that would broadcast openness and fairness to the world and educate its own citizenry. The episodic debates that challenged taboos and raised doubts regarding the question of collective guilt, the historic placement of the Holocaust, and the responsibility of West Germans on issues regarding minorities, religion, and ethnic groups illuminated the constraints under which postwar West Germany lived. A recurring thorny theme for West Germany was the issue of citizenship. West Germany’s citizenship laws were based on jus sanguinis, the law of blood. This policy was introduced in 1913 and was based on German ethnicity. It had a dubious history under National Socialism, used to enact and execute many of the Nazis’ most atrocious ethnicity-based polices. Although Bonn rapidly liberalized most aspects of West German politics and policies, this citizenship law remained intact and drew domestic and foreign criticism. Yet the West German government kept it in place to achieve two goals: first, hundreds of thousands of “ethnic Germans” scattered around Eastern Europe (Aussiedler) were facing significant postwar recriminations, and allowing them to return to Germany was considered a basic and fundamental human rights issue. Second, East German citizens who managed to leave communist East Germany (Übersiedler), either voluntarily or by expulsion, were automatically granted West German citizenship upon arrival in the Federal Republic of Germany.30

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Tensions mounted surrounding the period of unification regarding the application of citizenship laws to foreign “guest workers” who may have spent their lives in West Germany but were not of German origin. A Turk who lived and worked in West Germany for thirty years remained a guest worker, whereas a newly arriving ethnic German from the diaspora, perhaps from the former Soviet Union, could be conferred immediate citizenship status, as occurred more frequently as the Cold War collapsed. The exclusion of the guest workers continued to cause domestic problems and draw negative international publicity. Pressure mounted to change the law, especially after unification. The numbers of unintegrated Turks became a real problem, and their ghettoization in Germany has not been completely erased, even after the citizenship law was finally changed with passage of the German Nationality Act of 2000. Passage of the new citizenship law enhanced Germany’s reputation and was a first step toward developing a workable way to integrate the growing numbers of culturally different groups. That said, the issue of cultural integration of Turks remains a real issue for German domestic policy and influences German foreign policy as well. Recently, a newly appointed board member of Germany’s Central Bank, Thilo Sarrazin, stated publicly, “Turks are conquering Germany . . . with a strong birth rate.” He opined further that “a great many Arabs and Turks in this city, whose numbers have grown because of the wrong policies, have no productive function other than as fruit and vegetable sellers.” Although the episode created a media and public relations storm, a public opinion poll taken afterward reveal that a majority of those Germans polled agreed with the statements. The poll, taken by the respected Emnid for the German newspaper, Bild am Sonntag, found 51 percent of Germans agreeing with the comments and 39 percent disagreeing. Beyond that, 69 percent of those polled found that the debate surrounding his comments was useful. Sarrazin’s controversial book Germany Does Away With Itself (Deutschland schafft sich ab), which appeared in September of 2010, made the same kinds of criticisms of Turks in Germany and immediately became a best seller.31 These episodes illuminate the tensions and problems that continue in German society concerning the integration of Germany’s 2.5 million Turks, who represent over 2 percent of the total population. The Turks are the largest and, according to many indicators, the least successful immigrant group in Germany. For example, only about 30 percent of Turks finish school, compared with 50 percent for other immigrant groups.

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Abendland and the European Union Germany’s struggle with integrating the Turkish minority successfully is reflective of the EU experience generally. There is growing concern and fear in Europe about how to manage the issue of Muslim integration and/or assimilation. Although immigration into EU countries from the Maghreb, Northern Africa, Turkey, and elsewhere has been proceeding for decades, it is only since the 1980s that the issue of Islam and Europe has really taken hold. Beginning in the 1990s, alarm bells have been periodically sounded from various quarters in EU Europe concerning the coming “revolution in Europe” caused by the influx of Muslims.32 Based partly on current and future demographic trends, some predictions identify around 9 percent of the European Union as Muslim by the year 2060. These predictions are based on current trends. The Muslim populations of many EU countries have grown rapidly over the last couple of decades. Overall, about 3.5 percent of the EU European population is Muslim or about 16 million. France has the largest population of Muslims, about 5 million, followed by Germany and Great Britain. While European birthrates are decreasing, birthrates among Muslim immigrant groups are increasing. The problem with the ongoing debate is to separate the realities from the sensationalist politics that are growing around the issue complex. Although some of the rhetoric and argumentation is indeed alarmist, it is clear that EU Europe has political and cultural issues that continue to smolder. Interestingly, the responses to Muslim integration have so far been carried out at the national level, despite the fact that there are many experts that encourage the European Union to develop EU-wide policies and practices.33 The issue of Turkish accession to the European Union illuminates the problem. Positions vary greatly in the European Union regarding this extremely important unresolved question. The German position has fluctuated on this topic that strikes deep cultural nerves in Turkey and the Islamic world. Although the Red-Green coalition foreign policy team led by Schröder and Fischer publicly supported Turkey’s accession to the European Union, the Merkel government has wavered between neutrality and pronouncing against it. In the latter posture, Merkel joined French president Sarkozy, who came out publicly in rigorous opposition to Turkish accession to the European Union. Indeed, the controversy has of late intensified as first Merkel, then British prime minister Cameron, and then Sarkozy, testified publicly that multiculturalism in EU Europe is a failed project.34 That said, Germany is not seeking a leadership role on these deeply cultural issues. As discussed above, this is partly due to the legacy of the German past. More than that consideration is the fact that

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Germany’s role, like that of other EU countries, has significant domestic political, as well as foreign policy and reputational consequences. Conclusion Germany necessarily plays a central leadership role in the forward momentum of European integration. That said, innovative German leadership was most clearly on display before, during, and just after the momentous event of German unification. Although the successful completion of German unification required inspired U.S. and permissive Russian leadership, it was really Kohl’s innovative foreign policy that drove the process of unification through Western integration to completion. Through his foreign policy, Kohl drove innovation in both the Euroland and trans-Atlantia identity complexes, building on the half-century progress made in Western integrative efforts. That inspirational leadership has shone through at other moments since then, but by and large, German leadership has begun to waver on issues of trans-Atlantia but especially concerning those surrounding the Abendland complex. Inspired, innovative, and assertive German foreign policy is needed today to help redefine the trans-Atlantic relationship and to enable the European Union address the emerging policy dilemmas resulting in reassertive Russia and the integration of immigrant cultures. Notes 1. Abendland and Morgenland are historically controversial terms, but they capture the cultural nature of the challenges Germany and the European Union face today. 2. Mary Hampton, “NATO, Germany, and the United States: Creating Positive Identity in Trans-Atlantia,” Security Studies 8, no. 2/3 (Winter 1998). 3. Elizabeth Pond, The Rebirth of Europe (Washington: Brookings Institute, 1999). 4. Helmut Kohl, Der Euro und die Zukunft Europas, Center for European Integration Studies, University of Bonn, ZEI: Europa Forums (2002), 3–4. 5. For an examination of U.S. and European security cultures, see Mary N. Hampton, Righteous Fury, Guarded Hope: U.S. and European Perceptions of Threat, manuscript under review. 6. Dominique Moisi, quoted in “In the World of Good and Evil,” The Economist, September 14, 2006. 7. See discussion in Anthony Pagden, ed., The Idea of Europe: From Antiquity to the European Union (New York: Cambridge University Press, 2002). See also my discussion of the various European unity models in Righteous Fury, Guarded Hope. 8. Gerhard Schröder, quoted in Die Zeit, April 2002.

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between EUROLAND and ABENDLAND? / 59 9. Egon Bahr, “Das Thema: Europa muss erwachsen werden,” Die Welt online, April 6, 2002; http://www.welt.de/print-welt/article382638/Das_Thema_ Europa_muss_erwachsen_werden.html, accessed on May 10, 2011. 10. Katzenstein, The Culture of National Security (New York: Columbia University Press, 1996). 11. European Council, A Secure Europe in a Better World: European Security Strategy (Brussels, 2003), 7. 12. European Council, Report on the Implementation of the European Security Strategy—Providing Security in a Changing World (Brussels, 2008), 2. 13. See Mary N. Hampton, “NATO at the Creation: U.S. Foreign Policy, West Germany and the Wilsonian Impulse,” Security Studies 4 (1995), 610–56. On the U.S. and postwar order, see especially G. John Ikenberry, After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order After Major Wars (Princeton, NJ: Princeton University Press, 2001). 14. John Foster Dulles, quoted in Mary N. Hampton, The Wilsonian Impulse: U.S. Foreign Policy, the Alliance, and German Unification (Westport: Praeger, 1995), 21. 15. James Baker, quoted in New York Times, “Upheaval in the East; Excerpts from Baker’s Speech on Berlin and U.S. Role in Europe’s Future,” December 13, 1989. 16. North Atlantic Charter, Article X. 17. Michael Ruehle, “Preface: Manfred Wörner’s Legacy and NATO,” in CivilMilitary Relations in Post-Communist States: Central and Eastern Europe in Transition, ed. Anton A. Bebler (Westport: Praeger, 1997), iv–xvi; quotation on p. xiv, and quoted in Mary N. Hampton, “‘Borne Ceaselessly into the Past?’ Poland, Germany, and NATO Enlargement Policy,” German Comments (January 1998), 85–94. 18. Manfred Wörner, “Wir handeln ‘Out of Area’ und sind sehr wohl ‘in business,’” in Für Frieden in Freiheit: Reden und Aufsätze, ed. Manfred Wörner (Berlin: edition q, 1995), 280–92; quotation on p. 289. 19. See my discussion of German advocacy for Polish accession in, “Borne Ceaselessly into the Past? Poland, Germany, and NATO Enlargement Policy,” German Comments. 20. Joschka Fischer, the foreign minister, referred to German intervention in the Balkans as Germany’s Rubicon. See Mary N. Hampton, “Fischer and Wilsonianism,” in Bundesrepublik Deutschland und die europäische Einigung, ed. Mareika Koenig and Matthias Schulz (Munich: Fritz Steiner, 2004). 21. See Stein, “Germany’s Constitution,” 36. 22. Collective security is basically defined as the multilateral pursuit of security objectives that include community interests and values, as opposed to national security, where traditional narrow national interests are pursued. Today’s usage of collective security largely reflects its Wilsonian heritage in combination with the regional security dynamics that have emerged in Europe, especially since the end of the Cold War. For a discussion of current uses of the term, see David S. Yost, NATO Transformed: The Alliance’s New Role in International Security (Washington, DC: U.S. Institute of Peace, 1998), especially chaps. 1, 2 and 5. For an in-depth discussion of traditional understandings of collective security, see the classic by Inis Claude, Jr., Power and International Relations (New York: Random House, 1962), especially chap. 4.

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60 / mary n. hampton 23. Stein, “Germany’s Constitution,” 37. See also Ralph Thiele, “Winning War and Peace,” in Cooperation or Conflict? American, European Union and German Policies in the Balkans, ed. Lily Gardner Feldman (Washington, DC: American Institute for Contemporary German Studies, 2001), 238–73. 24. Stein, “Germany’s Constitution,” 37. 25. Wolfgang Ischinger, “Kosovo: Germany Considers the Past and Looks to the Future,” in The Legacy of Kosovo: German Politics and Policies in the Balkans, German Issues 22, ed. Wolfgang-Uwe Friedrich (Washington, DC: American Institute for Contemporary German Studies, 2000), 27–50; quotation on p. 27. 26. For a discussion of this episode, see Mary N. Hampton and Douglas Peifer, “Reordering German Identity: Memory Sites and German Foreign Policy,” German Studies Review XXX, no. 2 (May 2007), 371ff. 27. Nicholas Kulish, “Merkel Warns of ‘Premature Judgments’ of Afghan Raid,” New York Times, September 9, 2009. 28. Stefan Pauley, “German Limits on War Are Facing Reality in Afghanistan,” New York Times, October 26, 2009. 29. See my discussion in Righteous Fury, Guarded Hope. Also see Peter Berger’s persuasive argument that it is actually Europe that is exceptional in its secularism. Peter Berger, Grace Davie, and Effie Fokas, Religious America, Secular Europe? (Aldershot: Ashgate, 2008). 30. Marc Morje Howard, “The Causes and Consequences of Germany’s New Citizenship Law,” German Politics, 17, no. 1 (March 2008), 41–62; quotation on p. 42. 31. Thilo Sarrazin, Deutschland schafft sich ab (Munich: Deutsche VerlagsAnstalt, 2010). Sarrazin was a noted expert on financial matters for the social democrats and played a central role in the Finance Ministry under Theo Waigel when it planned and implemented the German currency union in 1990. He would later become finance minister for Berlin, and he made the comments mostly as a criticism of the left and left-of-center politics influential in Berlin. 32. The words in quotations, “the revolution in Europe,” refers to a new book by Christopher Caldwell on the topic, Reflections on the Revolution in Europe: Immigration, Islam, and the West (New York: Doubleday, 2009). In the book, Caldwell takes a pessimist view, shared by many, concerning the demographic trend in Europe, where European birthrates are collapsing while those of Muslim immigrant groups are slightly increasing and immigrants continue to arrive. 33. See Samir Amghar Arnel Boubekour, and Michaël Emerson, eds., Islam in Europe: Challenges for Society and Public Policy (Brussels: Center for European Policy Studies (CEPS), 2007). 34. Merkel made this observation to a meeting of young members of the Christian Democratic Union (CDU) in Potsdam in October 2010.

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Ch a p t e r Th r e e R e t h i n k i ng R e u n i f ic at ion: Ge r m a n Mon e ta ry Un ion a n d Eu rop e a n I n t e g r at ion Jonathan R. Zatlin

On February 6, 1990, West German chancellor Helmut Kohl surprised his closest advisers, the West German public, his East German friends and foes, as well as his Western European partners and Soviet interlocutors by offering to extend the deutsche mark (DM) eastward to the German Democratic Republic (GDR).1 The chancellor had only arrived at his decision that morning, too late for the discussion point to appear on the agenda of the cabinet meeting set for the next day.2 Although they nevertheless approved his plan, Kohl’s ministers were caught unprepared by a decision they had gone on record as opposing.3 Just a few weeks prior to Kohl’s decision, for example, West German finance minister Theo Waigel had dismissed rapid monetary union with the GDR as “hair-raising,” while Bundesbank president Karl Otto Pöhl had ruled it out as “fantastic and unrealistic.”4 In fact, the very day of Kohl’s announcement, Pöhl told journalists that introducing the DM into the GDR was “premature,” whereas Economic Minister Helmut Haussmann presented a plan that foresaw monetary union by January 1, 1993, at the earliest.5 Kohl’s surprising reversal was a stroke of political brilliance; his offer of the DM changed the dynamic of the revolution in a way that his “TenPoint Plan for German Unity” of November 28, 1989, had not. Back then, it had taken Kohl three weeks to respond to the collapse of the Berlin Wall, and even then his “Ten-Point Plan” managed to be at once tentative and tactless. Most important, the plan lagged well behind the revolutionary events, holding out only vague promises of a confederation capped by an eventual currency union in the distant future.6 Within days of the Berlin Wall’s collapse, however, unification was already in the air. At the Monday

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demonstrations in Leipzig and elsewhere, the revolutionary chant “We are the people” had quickly given way to the unification slogan “We are one people.” By December, ordinary East Germans were demanding unification and the DM, shouting “Germany united fatherland.”7 If Kohl’s “Ten-Point Plan” seemed tame to East Germans, however, it provoked the ire of his Western allies and Soviet counterparts. The West German chancellor had not only failed to apprise them of his intentions but also fueled suspicions of German irredentism by suggesting that the German-Polish border was open to negotiation.8 Not so by February 6. With one sweeping gesture, this uninspiring backroom politician put himself at the head of revolutionary developments, changed the terms of the debate over German-German unification, and completely outmaneuvered his political competitors at home and abroad.9 The offer to extend the DM eastward, styled as the culmination of the 1948 currency reform, effectively ended the East German revolution and determined both the pace and the mode of German unification. If Kohl’s bold instrumentalization of monetary policy for political purposes hastened the transfer of institutions from West to East Germany, however, it also deepened the economic and social divisions between the two regions. The reservations articulated at the time by his advisers as well as his critics that eliminating the East German mark before substantial convergence of the two economies would slow the former GDR’s recovery from forty years of mismanagement have been largely borne out. Twenty years after the collapse of the Berlin Wall, eastern Germany still suffers from lower living standards, higher unemployment, and more xenophobia than West Germany. Political unification, moreover, may have transformed the GDR from a sovereign state (East Germany) into a regional designation (eastern Germany), but the institutionalization of the gap in productivity between the two German states has fueled social and political divisions while contributing to what the Bundesbank has called a “subsidy mentality.”10 Although Kohl’s strategy unified Germany in formal terms, it has failed to make the German East part of Europe’s West. Similarly, Kohl’s political daring had at home fostered the institutional unity and divergent development of Europe. German unification had profound consequences for Europe, promising to deepen Western European cooperation and overcome divisions with Eastern Europe. Ironically, the particularist aim of German national unity directly served the antinationalist project of European unity by forcing the creation of a common European currency. As many observers have pointed out, members of the European Economic Community (EEC) seized upon this historic opportunity to move a step closer to a united Europe, demanding that Germany support the European monetary union (EMU) in return for their support for

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German unification. In a series of meetings culminating in the Maastricht treaty of December 15, 1991, Kohl agreed to do for Europe what he had done for the GDR—use money to purchase political unity. Arguably more decisive than this diplomatic quid pro quo, however, was the fact, overlooked by scholars, that German monetary union— rather than the process of political and economic unification that followed it—left Kohl with no choice but to agree to the EMU. After all, for some thirty years, German governments had balked at surrendering the DM. Ever since the disruptions caused by an expansionary fiscal policy in the United States due to its prosecution of the Vietnam war and the subsequent collapse of the Bretton Woods system, the German central bank and successive West German governments had advocated what came to be called the “coronation theory” or the idea that a common currency should not initiate but rather finalize a process of political and economic convergence across regions.11 Kohl’s decision to place the monetary cart before the political and economic horse when it came to German-German unity, however, removed the intellectual and diplomatic grounds for German objections to rapid EMU. In the short term, however, more German meant less European unity. The premature introduction of the DM into East Germany created inflationary conditions that forced the Bundesbank to adopt aggressive disinflationary policies, which in turn drove a wedge between the central bank’s domestic responsibility to safeguard the German currency and its role as anchor of the European Monetary System (EMS). Not only did German monetary union damage the Bundesbank’s credibility with market participants and the German public, but it also destroyed the European Exchange Rate Mechanism (ERM), which was designed to reduce exchange rate fluctuations and advance monetary stability in Western Europe. And it did so at great cost to European monetary authorities. As the shocks generated by German unification reverberated throughout Europe during 1992 and 1993, they threatened to destroy the economic cohesion upon which the EEC was founded. Rather than retreat, European leaders attempted a Flucht nach vorn, largely abandoning requirements for greater economic convergence and accelerating the creation of pan-European monetary institutions.12 As with German unification, however, continued variation in economic activity and culture across regions united by one currency has reinforced differential economic growth, with the result that disagreements over policy and cultural recriminations threaten at times to undermine the increasingly close cooperation among Europeans. As a result, scholars continue to express skepticism about Europe’s status as an “optimum currency area,” which refers to the economic preconditions for a successful

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currency union, and the “institutional solitude” of the European central bank, which is the only pan-European institution empowered to make decisions independently of sovereign member states.13 Meanwhile, popular criticism of its undemocratic charter and disinflationary preferences, together with grave challenges to monetary coordination occasioned by the Great Recession, such as the Greek and Spanish debt crises, have raised questions about the future of European cooperation. And yet, the euro has survived, if not prospered. To understand the impact of German monetary unification on Germany and Europe, I begin by reconstructing the political calculations leading up to Kohl’s decision, including the expectations of ordinary East Germans regarding money and German unification. I then analyze the institutional crisis provoked by Kohl’s usurpation of the Bundesbank’s right to determine monetary policy and its consequences for the economic growth of eastern Germany. Finally, I locate the acceleration of the timetable for EMU in the ERM crisis of 1992/1993—that is, in the European consequences of German monetary union rather than in German unification itself. The Politics of German Monetary Union Kohl’s offer of a rapid monetary union was designed in the first place to undercut the East German government, which still remained in the hands of the Socialist Unity Party (SED), and the East German civil rights movement, which had bravely opposed the SED while the threat of a violent crackdown was still an option, by exposing the gap between East German political representatives and popular opinion. To do so, Kohl capitalized on the popular perception that the GDR was not economically viable. After the collapse of the Berlin Wall on November 9, 1989, the stream of revelations about the party’s mismanagement of the economy intensified, dimming the prospect that the GDR might recover quickly without a serious decline in living standards. Macroeconomic data made public immediately after SED strongman Erich Honecker was deposed on October 17, for example, suggested that the GDR was hopelessly indebted to the West, even though this was not the case. The SED’s new leadership, which wrongly thought it could distance itself from Honecker by drawing attention to his economic incompetence, published figures in early November that exaggerated the GDR’s net liabilities to Western creditors. In reality, the GDR owed 19.9 billion DM to the West or just over half of the 38.5 billion DM mistakenly announced.14 Of course, nearly 20 billion DM was hardly a small sum. In addition, the GDR’s ability to pay it down had been undermined by its ongoing loss of export markets during the

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chaos of the revolution. Yet the GDR was in no danger of defaulting on its debts. As Doris Cornelsen, director of the German Institute for Economic Research’s (DIW) Eastern European section and one of the most astute observers of the East German economy, pointed out in February 1990, “The GDR’s debts are in no way immense.”15 Her assessment seems all the more accurate when we recall the threat posed by Greece’s recent debt rescheduling to the euro. Such rational assessments of the GDR’s financial viability, however, were drowned out by the political chaos and economic disarray that reigned in the GDR after the Wall was breached. Confidence in the new East German minister-president, Hans Modrow, was soon shaken by his contradictory approach to political and economic liberalization. Shortly after assuming power on November 13, for example, Modrow insisted on using administrative measures to deny the fact that the two German states were no longer separated by a wall. In addition to augmenting border security, he sought to protect East German economic autonomy by preventing foreigners from purchasing subsidized East German goods and slapping customs duties on selected consumer imports.16 In the face of loud protests, Modrow quickly backtracked and agreed on the need to eliminate subsidies and open the country to foreign investment. As late as March 1990, however, he continued to advocate sharp restrictions on foreign direct investment in the GDR despite the urgent need to attract Western capital.17 Similarly, Modrow agreed in December 1989 to participate in round-table discussions with the various opposition parties in an effort to stabilize the country. In mid-January, however, his attempt to reorganize the Stasi, the hated espionage agency, sparked fears that a reinvigorated security apparatus might try to reestablish a police state. An angry crowd sacked Stasi headquarters in Berlin on January 15, revealing the yawning gap between Modrow’s reformed communists and ordinary East Germans. By the end of January, moreover, Modrow had lost control over economic activity. Managers no longer listened to government officials the way they once had under the command economy.18 Likewise, strikes and walkouts brought factory production to a standstill. At a meeting to brief noncommunist political leaders, the deputy president of the East German central bank confessed, “There is chaos in the factories right now.”19 In a bid to regain political momentum, Modrow made a speech to the East German parliament on January 29, 1990. Calling economic conditions “alarming,” Modrow noted that strikes and walkouts had led to significant shortfalls in production and that the East German state was burning through cash at a fast pace.20 In the hopes of stabilizing the economy, Modrow called for a government of “National Responsibility” that

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would include the SED as well as opposition groups. He also proposed a political condominium with the Federal Republic that foresaw monetary convergence at the end of a two-year period, most likely at an exchange rate of 3:1.21 Modrow’s speech put Kohl on the defensive and directly contributed to the chancellor’s decision to proceed with a monetary union immediately rather than in the distant future.22 If the communists under Modrow were staggering toward the market and German unification, the leaders of the civil rights movement found it equally difficult to accept what most East Germans wanted. Although civil rights leaders enjoyed widespread support in the revolution’s early stages, even leading popular opinion before November 9, they were soon marginalized by their insistence on finding a “third way” between communism and capitalism.23 The leaders of New Forum, the largest civil rights group, continued to express skepticism about the market, declaring in late November that “having liberated ourselves from the claws of Stalinism, we will not consider defecting with fluttering flags to the socially unjust twothirds society of a Herr Kohl.” The proclamation continued with a pun that equated the West German chancellor’s name with the slang for cash in German: “We want to seize what is probably our last and certainly a unique opportunity to construct a just social order in which money [Kohle] is not the measure of all things.”24 Yet the substance of their proposals remained vague at a time when the majority of East Germans were wary of economic experimentation. In fact, once the Wall had collapsed, East German opinion quickly focused on unification with West Germany. In part, this was because East German’s newly won freedom to travel to West Germany invited unflattering comparisons with the enforced underconsumption that East Germans had endured under the SED.25 In the first weekend after November 9, at least 4.5 million and perhaps as many as 10 million out of the total population of 17 million East Germans visited the Federal Republic.26 The panoply of abundance presented by West German consumer society made a tremendous impression on East German tourists, shifting sentiment away from reform of the GDR and toward participation in the social market economy via unification with West Germany. Pressure for unification only increased when East German mobility began to have a deleterious effect on the Ostmark. The East German mark was not a convertible currency. Despite the SED’s public insistence since 1951 on parity with DM, the party conceded in internal estimates that by 1989 the gap in productivity between the two states had made for a real exchange rate, based on its own index of trade with the West, averaging 4.4:1. After November 9, however, the flood of East Germans visiting West Germany with Ostmark led to a precipitous decline in the value of the East

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German mark, as the asymmetry between pent-up East German demand and West German supply pushed the exchange rate as low as 20:1.27 This sudden collapse in the purchasing power of the Mark der DDR provoked a crisis of confidence in the Ostmark, no doubt intensified by memories of the two previous currency collapses in recent German history.28 To stabilize the East German mark and ensure that East Germans could exercise their newly won right to travel, Kohl came to an agreement with SED in late November that the Federal Republic would make 3.8 billion DM available to East German tourists. More importantly, the travel agreement established a fixed exchange rate of 3 Ostmark to 1 DM.29 Backed by an agreement between the two German states, the 3:1 rate, which more accurately reflected the productivity gap between the two states, helped stabilize the black market in East German marks, which involved smaller sums and was therefore vulnerable to sudden jumps in demand.30 Although the travel agreement has been largely overlooked by scholars, it was, in the words of Helmut Schlesinger, then Bundesbank vice president, “the precursor of currency union,” which would itself become the mechanism of German unification.31 It was also the last time that Kohl would directly subsidize an SED-led government and the first time that the Federal Republic attempted to create an official, market-based system of valuation between the two economies. Yet the travel agreement failed to restore popular confidence in the East German economy. Despite the Federal Republic’s indirect support for the Ostmark, East Germans feared it would continue to lose value, while the exchange rate established by the agreement only reinforced popular demands for replacing the Ostmark with the DM. To some extent, these demands derived from the culture of economic planning in East Germany, which had conditioned people to equate the DM with wealth. For example, Honecker’s 1974 decision to supplement East German consumer goods with goods manufactured in the capitalist West by opening up and dramatically expanding the Intershops, or hard-currency stores, offered the SED short-term relief from the political pressures sparked by the shortcomings of economic planning. But integrating Western merchandise and money into the socialist economy also taught East Germans that the DM (if you could get your hands on it) had the power to overcome the chronic scarcity, narrow selection, and inferior quality of East German consumer goods. It is hardly surprising, then, that East Germans fetishized the DM, endowing it with precisely the sort of magical qualities against which Marx had warned throughout his writings.32 Instead of fashioning an egalitarian society in which economic plenty obviated the social differentiations expressed through money and power, the SED’s economic mismanagement spawned competition for social status and the illusion that money was an

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independent force in society capable of meeting the material and affective needs of East German life. By December 1989, popular confusions of money with wealth, constant revelations of West German affluence, the continued erosion of the GDR’s economy, and fears that the Ostmark might collapse fueled East German perceptions that acquiring the DM would solve their problems.33 As it often does, political culture trumped economic reality. Between December 1989 and February 1990, moreover, yet another consequence of the Wall’s collapse helped overdetermine Kohl’s decision to offer the DM. With the prospects for economic stabilization and democratic control receding, some East Germans began taking advantage of the “exit option” and leaving the GDR to resettle the Federal Republic.34 During the revolutionary months of 1989, some 343,854 people deserted the political uncertainty and economic disarray of the GDR for the safety and prosperity of the Federal Republic or 2.5 percent of its workforce. By January, the number of people fleeing the GDR exceeded 2,000 a day.35 Those who stayed behind, moreover, made clear their willingness to use their newly won labor mobility as political leverage to acquire the DM. At demonstrations throughout the GDR, millions of East Germans expressed their desire for political stability and economic prosperity in terms of West German money, chanting “If the D-Mark comes to us, we’ll stay here/ If not, we’ll go to it over there.” Even the Central Round Table placed money at the center of the crisis, declaring that “thousands continue to leave our country every day [because] they want to earn ‘real money.’”36 In the chaotic aftermath of the Wall’s collapse, a fundamental misapprehension about the meaning of money—that acquiring the DM was the same as being wealthy—convinced East Germans that a currency union with the Federal Republic was the best solution to the challenges facing them. By meeting East German demands for the DM, Kohl had effectively domesticated the revolution, placing it on an orderly path toward monetary union and unification. He had completely bypassed Modrow and his plan for convertibility of the East German mark by 1993. Kohl had also undercut the Round Table, whose leaders continued to reject “the hasty abdication of the GDR’s financial sovereignty.” 37 To step up the pressure on his competitors, moreover, Kohl and his advisers did their best to underscore the GDR’s inability to solve its own problems. Once it was clear that the Federal Republic could undermine the Modrow government without further destabilizing the GDR, Kohl’s aides consistently painted the GDR’s economic position in the worst possible light. Kohl also withheld the financial assistance to the communist-led government that he had promised in December.38 Most importantly, however, Kohl’s offer dramatically improved the political fortunes of his East German allies. The East

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German Christian Democratic Union’s (CDU) image, which had suffered because of its longtime collaboration with the SED, its initial rejection of currency union, and its willingness to join Modrow’s government of “National Responsibility,” was immediately burnished by its association with Kohl. If Kohl’s offer thoroughly rearranged the East German landscape, it also revived the fortunes of his own West German CDU. West German elections were imminent, yet through the summer of 1989, Kohl’s Christian Democrats seemed to be losing electoral ground to the Social Democrats. Kohl’s “Ten-Point Plan” had fallen flat with West German voters; by January, criticisms were mounting that the chancellor was passive in the face of political chaos in the East.39 His bold decision to bring the GDR under the DM’s umbrella not only blunted criticism over the chancellor’s inactivity but also threw the social democratic opposition into disarray by seizing upon an idea first articulated within their own ranks. On January 19, the financial expert Ingrid Matthäus-Maier, who had left Hans-Dietrich Genscher’s Free Democratic Party when he switched coalition partners from the Social Democratic Party (SPD) to the CDU in 1982, suggested that a currency union would act as a “signal to stay” for East Germans. Monetary policy could constrain labor mobility, she argued, because the underlying cause of the East German labor exodus was political, and extending the DM to the GDR was a political gesture.40 The promise of a currency union would reassure East Germans about their political future, not least because it represented “a decisive step on the path toward German unity.” Besides, she pointed out, the alternatives to replacing the Ostmark with the DM were decidedly less attractive. Doing nothing about the loss of confidence in East German money would lead to a de facto currency union, as good money crowded out the bad and East Germans refused to use the Ostmark—without stemming East German outmigration, which “is impeding reforms over there and aggravating problems on the residential housing and labor markets as well as the social welfare system in the Federal Republic.” Giving East Germans a (monetary) reason to remain would not only stabilize the GDR and provide a stepping stone to unification but also relieve the substantial burden to the Federal Republic created by the need to provide food, lodging, and employment for emigrants during an economic contraction. Anticipating economic objections to a premature currency union, Matthäus-Maier emphasized that time constraints had narrowed policy options. “The ten years that the Federal Republic required for the convertibility of the D-Mark in the 1950s,” she contended, “are not available today.” To preempt objections that currency unions are successful only where there is economic and political convergence, she even made

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an infelicitous analogy to the EMS, where “monetary policy took on a leadership function in the integration of the European Community, which no one criticizes anymore because of its success.” As we shall see, the EMS would collapse in 1992/1993 under the weight of German inflation, though Matthäus-Maier was right to underscore the leadership role that monetary policy would play in both Germany and Europe. In any case, Matthäus-Maier laid out the political reasoning for harnessing monetary policy to constrain labor mobility, even providing Kohl with a blueprint for justifying a currency union that was clearly premature from the standpoint of reigning economic theory. By co-opting Matthäus-Maier’s proposal and transforming it into a plan for unification, Kohl stole the opposition’s thunder in what was an election year for the Federal Republic of Germany (FRG). More importantly, Kohl’s acceleration of the timetable for German unification intensified an emerging split in the West German left over the meaning of communism’s collapse and the end of the post–World War II era. As the elections of December 1990 were to reveal, the prospect of unification was deeply unsettling to the West German left. Many Social Democrats viewed the division of Germany as a form of historical justice for crimes committed by Germans during World War II, were paralyzed by the intellectual vacuum left behind by the collapse of communism, and were concerned that unification would revive an aggressive German nationalism.41 During the spring and summer of 1990, the SPD’s chancellor candidate, Oskar Lafontaine, responded to the rapid unfolding of events in the GDR by trying to slow down what Konrad Jarausch has aptly called “the rush to unity.” As a result, the East German SPD was tarred with the hesitancy of its West German comrades over the question of rapid monetary union. Even though the Ost-SPD was in fact one of the first parties to come out in support of exchanging the East for the West German mark as soon as possible, it would lose the East German parliamentary elections of March 18 to the conservative Alliance for Germany.42 Kohl’s offer to move West German monetary borders further to the East also provided Kohl with a valuable edge in the complex diplomatic negotiations over German unification. Although Kohl had once again failed to consult his partners on the diplomatic stage, he could now argue—with Moscow in particular—that he was powerless in the face of the massive tectonic shift in popular sentiment in the GDR toward monetary union. The alternative to replacing the East German mark was attractive to no one, because the accelerating pace of East German outmigration might destabilize the GDR and the rest of Eastern Europe. In the estimation of the East German CDU leader and last minister-president of the GDR, Lothar de Maiziére, between 2.5 and 3 million East Germans were “sitting

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on packed bags,” waiting to see what would happen.43 In this manner, Kohl managed to make monetary union seem a matter of course and unification inevitable. United by a common currency, the transfer of economic and then political institutions could begin, sealed by pan-German elections. In actual fact, East German parliamentary elections, which returned a clear mandate to secure the DM at the best possible conditions, were followed by the Bundesbank’s takeover of East German monetary policy and institutions in late March. Without control over the money supply, the de Maiziére government’s ability to use fiscal or administrative measures to conduct economic policy was severely constrained. And while negotiations over the rate at which the two currencies would be converted forced West German leaders to make compromises, the negotiation of economic and political unification reflected the asymmetry in power between the Federal Republic and a government that had been elected to dissolve itself. After a remarkably orderly currency substitution on July 1 and formal union on October 3, all-German elections on December 2 sealed the unification of the two countries under Kohl’s leadership. Domestic Consequences of German Monetary Union Accelerating the introduction of the DM was not uncontroversial, however. Although some industry groups, such as the German Association of Industry, welcomed the opportunity to bring East Germany into the West German fold, prominent West German business leaders and professional economists rejected placing the monetary cart before the economic horse. Many business leaders objected that a currency union was premature, because the GDR had yet to make the transition from a planned to a market economy. On January 15, 1990, Wolfgang Röller, chairman of the Dresdner Bank and president of the powerful Association of German Banks, spoke out against abolishing the Ostmark. Warning that economic reform had to precede monetary union, he argued instead for eliminating both state intervention in the price formation process and state subsidies for manufactured goods before doing away with the East German mark.44 Röller continued his public opposition to the plan well after Kohl’s announcement, declaring that currency union “should not yet be a matter of debate.”45 Similarly, Detlev Karsten Rohwedder—the head of the Dortmund steel conglomerate Hoesch and the man who would oversee the privatization of East German industry until his assassination in 1991 by the Red Army Faction—argued that a rapid monetary union would make East German products uncompetitive on international markets. Like Röller, Rohwedder continued to oppose Kohl’s offer on economic grounds well after it had changed the constellation of German-German politics,

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objecting that “the foreign exchange rate is the only protection that the sick economy of the GDR has for a gradual convalescence.”46 If the objections of market participants were informed by their business experience, the debate among West German economic theorists was shaped by a longstanding scholarly consensus regarding monetary coordination across divergent economic regions. Spurred by a series of balanceof-payments crises in the Bretton Woods system, which had established a currency regime for the Western powers after 1945 by pegging European currencies to the dollar at fixed exchange rates, economists came to view currency unions as feasible only if preceded by sufficient economic and political integration. The increasing economic integration of Western European states, which presented different national currencies as impediments to the growth of trade in a common market, also reinforced the idea that successful currency unions require an institutional framework that can compensate regions for the loss of an autonomous monetary policy when there is insufficient economic convergence.47 In his pathbreaking 1961 article, for example, Robert A. Mundell argued that successfully linking economically disparate regions through a single currency was contingent on the existence of three types of adjustment mechanisms: labor mobility, relative wage flexibility, and large transfers of wealth.48 Given that labor mobility across the EEC was hampered by linguistic variation and legal obstacles, both of which significantly reduced wage flexibility,49 and that the institutions required to make transfer payments at the EEC level were woefully underdeveloped,50 most analysts (and especially American economists) concluded that the EEC did not qualify as an optimum currency area.51 The intellectual consensus regarding monetary unions was so influential that successive West German governments invoked it when articulating policy on EMU. In particular, German government officials and monetary authorities objected that the EEC’s unintegrated labor markets and the weakness of pan-European fiscal institutions constituted significant obstacles to a single European currency.52 Whether in discussions regarding British accession to the European Community or public statements about the ERM, the federal government consistently argued that political institutions strong enough to ease the loss of monetary autonomy had to accompany, if not precede, the introduction of a single currency.53 Even more vocal on this point was the West German central bank, whose leaders feared that a European monetary authority would endanger the preservation of currency stability at home and consign the Bundesbank to institutional oblivion.54 In other words, Kohl’s plan to create a monetary union before economic and political convergence contradicted not only the expectations of economic theory but also the federal government’s own policies.

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Given the literature on optimum currency areas, it should not surprise us that most West German economic experts were taken aback by Kohl’s proposal, and regarded an immediate currency union with the GDR as unnecessary, impractical, or potentially harmful. The DIW’s Cornelsen pointed out that there was no compelling economic reason to discard the Ostmark. “The GDR-Mark is clearly not the best, but certainly not the worst currency,” she commented.55 The Council of Economic Experts (Sachverständigenrat), a group of economists tasked with advising the German government on economic developments, warned that a rapid monetary union would only nurse East German equations of money with wealth and reinforce the illusion that acquiring the DM would also make them prosperous. In addition, the “Five Wise Men,” as members of the Council are called, predicted that the income gap between the two German regions would only stimulate East German demands for higher wages, which would widen the already yawning gap in productivity between the two German states.56 In contrast, Lutz Hoffmann, the head of the DIW, focused not on the domestic but on the international consequences of premature currency union. Without an adjustment mechanism such as the East German mark to cushion the sudden impact of exposure to international markets, he observed, East German manufacturers would become uncompetitive. He predicted that a hastily arranged currency union would lead to large-scale unemployment of between 2.5 and 3 million people.57 Depending on their political preferences, then, the majority of West German economists came to the conclusion that rapid monetary union would either stimulate unsupportable wage demands or price East German goods out of world markets. In both cases, they warned that prematurely consigning the East German mark to the rubbish heap of history would result in deindustrialization and mass unemployment. The fact that East and West Germany hardly constituted an optimum currency area shifted debate toward interim structures that would facilitate economic convergence. Between January 1990, when discussion regarding the GDR’s economic tribulations began in earnest, and March 18, 1990, when East German parliamentary elections were held, economists of every political stripe presented a bewildering variety of proposals aimed at stabilizing the East German economy. Despite their differences, these plans had in common an attempt to preserve the East German mark during the GDR’s transition to a market economy in order to cushion the shock of sudden integration into international markets.58 Not everyone favored a gradual approach, however.59 The few economists who did support Kohl’s plan emphasized the monetary risks postponing currency union entailed or argued that immediate introduction of the DM would produce a positive shock to the East German economy.

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Most notably, Hans-Jürgen Krupp, Hoffmann’s predecessor at the DIW and Hamburg’s finance senator, pointed out that a transitional period would necessitate propping up the East German mark, which would involve expensive interventions on currency markets and place the Bundesbank’s credibility at risk. In contrast, immediate monetary integration would improve East German morale and spark immediate gains in productivity.60 Other economists believed that the immediate introduction of the DM would singlehandedly reshape East Germany’s planned economy. In a report commissioned by Kohl to justify rapid monetary union, for example, Hans Willgerodt of the Institute for Economic Policy in Cologne contended that immediate introduction of the DM would force the “dinosaurs” of East German production into bankruptcy and clear the way for smaller, more agile producers who could take advantage of the low cost of East German labor to compete successfully in international markets. After adjusting to this shock therapy, the former GDR would emerge as one of the most efficient and modern regions in Europe.61 When they did not cite the lack of policy alternatives or romanticize the ability of market forces to unlock entrepreneurial solutions to the East German quandary, Kohl’s supporters simply emphasized the national goal of German unification in their quest to legitimate the immediate introduction of the DM. For their part, Kohl and his aides sought to gloss over their break with monetary theory and previous government policy with references to popular myths about past West German economic successes, skillfully likening German monetary union to the 1948 introduction of the DM, when the new currency and the institutions it implied helped equilibrate supply and demand and allegedly unleashed the West German “economic miracle.”62 The analogy was as historically dubious as it was politically helpful. In the meantime, the chancellor’s “flourishing landscapes” have yet to materialize.63 As economic theory and praxis predicted, rapid monetary union created insurmountable burdens for East German industry and labor. As anticipated by Röller, Rohwedder, and Hoffmann, the DM abruptly overvalued both East German manufactured goods and the labor that produced them, making East German firms uncompetitive overnight. In addition, West German ignorance regarding the role played by money in the planned economy severely constrained East German firms. In particular, the West German decision to translate the fictive debt carried by communist firms into real liabilities, even though that debt was mostly unrelated to the factory’s economic production, burdened East German firms with crushingly large debts, forcing many into bankruptcy.64 As a result, the East German economy slumped. Between 1989 and 1991, East German gross domestic product (GDP) fell by 42 percent.65 As predicted by the “Five Wise Men,” moreover, the unification of labor markets

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accomplished by unifying the two currency areas spurred higher wage demands in the East, which were supported by West German workers who worried that lower East German wages might weaken their bargaining power. Unfortunately, these wage increases were not warranted by most firms’ labor productivity, making it even harder for East German companies to meet their monthly payroll.66 As a result, East German unemployment has persisted at stubbornly high rates. Nor has the East German slump proven responsive to massive transfers of wealth from western to eastern Germany.67 Net financial transfers totaled about 75 billion euros annually between 1990 and 2000, or between 5 and 6 percent of West German GDP; between 1991 and 2003, West Germany had transferred some 1.25 trillion euros to East Germany.68 In the first decade after monetary union, “Every third deutsche mark spent in East Germany came from the West.”69 More than half of these transfers were used for welfare payments, which have spared East Germans the material privations of their Eastern European neighbors and reduced the attractions of political extremism. But only 12 percent of the transfers were used to improve infrastructure. Most alarming, the transfers have acted to shield many firms from hard budget constraints, returning East German business to old habits: vast government subsidies have made the cost of capital negative, which has encouraged firms to ignore labor productivity once again.70 In fact, German monetary union appears to have confirmed that the two countries were not optimum currency areas, and that such areas require some combination of transfer mechanisms, wage flexibility, and labor mobility. Although the Federal Republic possessed effective institutions for redistributing wealth on a regional basis, political rigidities in the face of productivity gaps restricted wage policy flexibility. As Mundell’s theory predicted, the equilibrating pressures of abdicating monetary flexibility now turned to labor mobility. Monetary union initially slowed the labor exodus, but as soon as the wage differential became apparent, the inability of monetary policy to constrain labor mobility caused East Germans to resume their migration to the West. From mid-1990 to the end of 1992, an estimated 1 million people left the GDR permanently, amounting to a rate of about 1,000 a day. Between 1992 and 2002, another 521,000 people left for West Germany.71 Nor does the German mezzogiorno show any signs of converging with the West. Despite Siebert’s predictions, East German GDP has continued to grow at a slower rate than West Germany, while labor migration persists, albeit at a slower rate.72 Of course, the premature subordination of East Germany to West German monetary authority is hardly the sole cause of the continuing slump in eastern Germany. A variety

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of policy failures, from wage rigidities to bad investment decisions, have exacerbated the German mezzogiorno.73 In addition, the pull of real income differentials together with push of depopulation have set off a vicious socioeconomic circle: as younger people leave, they deplete the local workforce, leaving behind an older and more male population that is often unemployable and increasingly dependent on government subsidies. In turn, the real and perceived prospects for economic recovery shrink, and more people decide to leave. As the continued economic chasm between the two German regions demonstrates, institutional uniformity in areas characterized by significant productivity gaps and wage rigidities is no guarantee of economic convergence. Nor has the historical legacy of state paternalism, much less a political culture that promoted the illusion that money is equivalent to wealth, provided a social complement to political unification. As one group of economists comparing East German with southern Italy have observed, “In the end, history may matter just as much as the design of economic policies and the working of market forces.” 74 Unintended (European) Consequences of German Monetary Union The most important European consequence of German currency union was the inflation it triggered. In the short run, the inflationary outcome of the currency union, triggered by the rate at which the two currencies were converted and the federal government’s decision to fund massive transfer payments by deficit spending, destabilized the EMS by damaging the Bundesbank’s institutional credibility and by transmitting its disinflationary policies to other European countries. Kohl’s decision to throw the coronation theory overboard thus had inverse consequences for EMU in the short term. In the long run, however, German monetary union accelerated the pace of European unification, although it did so in the service of not national but antinational aspirations. Three German events transpiring in short succession made it appear that the federal government was undermining the central bank’s independence: Kohl’s offer of monetary union on February 6, 1990, the conflict of interest represented by the person of Hans Tietmeyer, who was recalled by Kohl from his position on the Bundesbank directorate to lead negotiations with the East German government over economic and political union, and Kohl’s rejection of the Bundesbank’s recommendation regarding the conversion rate for monetary union. Most of the literature on German unification acknowledges in passing that Kohl’s offer of monetary union encroached upon the Bundesbank’s jurisdiction over

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monetary policy but concludes either that Kohl acted within legal limits or that the political ends justified the monetary means.75 Yet dismissing the institutional tension between the federal government and the central bank is both unnecessarily uncritical and historically problematic. After all, market participants perceived in each of these episodes a curtailment of the Bundesbank’s autonomy. After February 6, the yields on long bonds rose by more than 1 percent, driven by concerns over inflation.76 As the currency expert George Soros remarked, “The government acted against the express advice of the Bundesbank. The injection of purchasing power by exchanging the East German mark at par created an inflationary boom, and the fiscal deficit added fuel to the fire.” 77 The constitutionality of Kohl’s announcement, moreover, was murkier than most observers allow. On the one hand, the central bank’s charter made the Bundesbank independent of the democratic process. According to the Bundesbank statute of 1957, which endured no significant change until 1992, the central bank’s primary obligation was to “safeguard the currency,” although it was unclear whether this meant the domestic or foreign value of the DM.78 On the other hand, the Bundesbank’s autonomy from the other branches of government was incomplete. Paragraph 12 of the charter not only stipulated that the bank was to act independently of the federal government’s instructions but also stated that the bank was “obliged to support the economic policy of the government while guaranteeing its duty.”79 Before 1990, most observers viewed the central bank’s vaguely defined obligation to support government economic policy as less binding than its anti-inflationary duty.80 As one of the most popular economic handbooks of the time put it, “If there is no danger to the currency, the Bundesbank is on the other hand obliged to support the government in the realization of its goals—such as growth and full employment.”81 Historically, the central bank adopted a rather narrow interpretation of what constituted a “danger to the currency.” The bank’s conflicts with Chancellor Konrad Adenauer in the 1950s over its anti-inflationary hawkishness established something of a precedent for scholars and journalists. Animated by Germany’s traumatic experiences with price instability in the wake of two world wars, they viewed the bank’s periodic clashes with successive West German governments as evidence of an institutionalized guarantee against inflation.82 Whether it was Adenauer in 1956, who alleged that the Bundesbank was “a guillotine for the little people,” or officials in Helmut Schmidt government in 1981, who revived Adenauer’s guillotine comment in the face of the Bundesbank’s tight money policies, West German government officials certainly felt powerless to change the bank’s aggressive approach to price stability.83

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Since 1990, however, a retrospective consensus appears to have emerged among German legal and financial scholars that the bank’s independence is limited by its fealty to government policy.84 Going forward, the question is moot, since the Bundesbank is no longer free to set domestic policy within the framework of EMU. In February 1990, however, Kohl’s offer to extend the West German currency umbrella to the GDR appeared to most observers—and especially market participants—to usurp the authority of the Bundesbank. Prior to February 6, the leaders of West Germany’s fiercely independent central bank had firmly rejected any talk of an immediate monetary union in line with its approach to EMU: that a monetary union should take place at the end of a process of economic and political convergence. In late January, Bundesbank vice president Helmut Schlesinger objected to monetary union on the grounds that it would not close the gap in productivity between the GDR and the Federal Republic but widen it instead.85 As we have seen, Bundesbank president Pöhl also argued that extending the DM was premature. He did soften his position somewhat by the end of January, telling the Economic Club of New York that “a gradual linking of the East German mark to the Deutsche mark would be conceivable” if it were accompanied by West German business investment and “a strong improvement in the foreign exchange situation.”86 But Kohl did not bother to inform Pöhl of his decision, much less consult with him.87 Instead, Kohl left him flapping in the wind. As Kohl was announcing his plan, Pöhl, who had just met with East German Staatsbank president Horst Kaminsky and East German economic minister Christa Luft to discuss a more gradual plan to link the two currencies, was reiterating his opposition to rapid monetary union.88 Kohl not only disregarded the central bank’s clear warnings against monetary union, but he also delivered an institutional and personal snub to the central bank and its chief. The second blow to the Bundesbank’s credibility occurred several weeks later. Kohl realized that the federal government could not avoid soliciting the monetary authorities’ advice on a question concerning their own jurisdiction. But to prevent a debate from being carried out publicly, which might constrict his room for maneuver, Kohl requested that the central bank submit its proposal confidentially. For its part, the Bundesbank Council not only sought to determine a conversion rate based on economic principles but also took political realities into consideration. After all, if wages were converted in line with East German productivity, which most experts calculated at between 30 and 40 percent of the West German rate, East Germans would seek higher wages by moving to the West. But if wages were converted at too high a rate—the 1:1 rate favored by the population—East German firms would soon be forced to let workers go, which would also lead them to migrate to the West. On March 29, 1990, the

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Bundesbank submitted its confidential proposal to the government recommending the conversion of money flows (wages, salaries, and pensions) as well as stocks (financial assets and debts) at a rate of 2:1.89 The recommendation, however, was leaked to the press by a member of the Council, which provides some sense of how controversial it was inside the bank.90 In response, Kohl asked Tietmeyer, a close economic adviser who had recently been promoted to the Bundesbank’s directorate, to act as the federal government’s chief negotiator for economic questions with the GDR. Tietmeyer himself has argued that there was no conflict of interest because he recused himself from the relevant deliberations at the central bank.91 But union of the two positions in Tietmeyer’s person did not seem so innocent to outsiders, who perceived in the arrangement yet another attempt by Kohl to take charge of monetary policy. For his part, Pöhl found himself in the unusual and uncomfortable situation of dealing with a subordinate at the central bank acting as his superior in negotiations over monetary union. Perhaps it was for this reason that Pöhl saddled Schlesinger, who had good ties to Waigel’s Bavarian conservatives, with representing the Bundesbank’s interests in what was a lost cause.92 The third shock came on April 23, when the federal government announced that it advocated a rate of 1:1 (except for very large savings deposits), in line with what ordinary East Germans wanted. Where the Bundesbank Council feared that too generous a rate would eventually lead to high unemployment and fail to correct the monetary overhang in the GDR, which stemmed from the considerable savings East Germans had acquired because there was so little they could buy, the conservative-liberal coalition wanted a conversion rate that would help their East German political allies by reducing the wage gap and enabling East Germans to retain the better part of their savings. If Kohl’s announcement of monetary union without consulting the central bank was a snub and his recall of Tietmeyer aimed at containing the bank’s influence, the chancellor’s rejection of the conversion rate advocated by the central bank brought tensions to a head. Some scholars have sought to downplay the institutional significance of Kohl’s actions by pointing out that the Bundesbank’s conversion rate was not that far away from the average conversion rate that resulted from the government’s treatment of large savings deposits.93 The point, however, is not whether the two rates were close in structure or outcome, but that Kohl’s rejection of the Bundesbank’s plan was perceived as undermining the bank in its own field of expertise. Financial markets fell in response to the government’s announcement.94 At a public event on April 26, Finance Minister Waigel discussed how the federal government would pay for the costs of unification, only to take his seat and hear Bundesbank president Pöhl chastise

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the government for resorting to deficit spending rather than taxation.95 Pöhl’s 1991 resignation was clearly triggered by the federal government’s institutional disregard for the central bank; he delayed stepping down only because it might otherwise complicate the unification process.96 European Repercussions of German Inflation If Kohl’s subordination of economic expertise to political expediency met the goal of national unification but plunged the East German economy into a prolonged depression, it also threw domestic and therefore European monetary coordination into disarray. The direct result of Kohl’s actions was that the German central bank was no longer able to harmonize its domestic role as guardian of price stability with its international role as anchor of the ERM. At home, the Bundesbank was forced to raise interest rates (and particularly rates on security repurchase agreements) to combat the inflationary effects of the monetary overhang in the GDR, price instability resulting from an overly generous exchange rate, and the government’s attempt to close the productivity gap between the two regions through expenditures not covered by taxation. According to the central bank’s calculations, monetary union led to an expansion of the German money stock of approximately 15 percent without the economic activity to justify it.97 The need to underscore its independence in the face of three setbacks, moreover, led the central bank to act aggressively even as market participants sought to test its anti-inflationary resolve. The Bundesbank kept ratcheting up interest rates, which by 1991/1992 had reached the highest levels since the 1931 Banking Crisis. Its role as the anchor of the ERM, however, meant that the Bundesbank was exporting disinflationary policies to the rest of Europe, which was enduring its worst recession since 1945. This policy asymmetry between German inflation and European contraction generated a series of disruptions to European currencies not seen since the collapse of Bretton Woods. In Soros’s words, the Bundesbank “acted as the transmission mechanism for turning the internal disequilibrium of the German economy into a force for the disintegration of the EMS.”98 During 1992, the rise in German rates forced the British pound and the Italian lire out of their trading ranges with the mark. In early 1993, the French franc came under concerted attack, with Paris eventually losing “the Battle of the Franc.” Even coordinated action among European central banks, including interventions on currency markets amounting to more than $250 billion, failed to stabilize the ERM.99 The asymmetrical effects of German monetary union destroyed the ERM, dealing European monetary integration a serious setback. Italy left the ERM for four years; Britain has yet to rejoin.

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Of course, the lack of policy synchronization, which produced currency disequilibria and ended this phase of European monetary integration, was not entirely the fault of the German monetary authorities or the inflation they were desperate to keep under control. As David Marsh has pointed out, Thatcher’s decision to enter the EMS could not have been more poorly timed, and the obstinacy with which Britain sought to defend the pound was thoroughly misplaced.100 Nevertheless, the circumstances of German monetary union were the primary reason that prospects for a common European currency had receded by 1993. Germany’s disinflationary policies did, however, contain a silver lining. First, George Soros, the Hungarian American financier and philanthropist, correctly diagnosed the “dynamic disequilibrium” in the ERM created by German monetary union and became fabulously wealthy by betting against the pound.101 In contrast to other “speculators,” however, Soros recycled much of his profits into projects aimed at overcoming the democratic deficit that continues to divide countries such as Romania and Hungary from Western Europe. To give but one example, Soros founded the Central European University (CEU) in Budapest in 1992, an institution that has by now trained a generation of scholars across Eastern Europe in Western social science theory. In the process, the CEU has not merely helped close a methodological gap created by forty years of MarxismLeninism but has also helped lay the foundation for civil societies robust enough to be critical of themselves. Although it might be easy to dismiss the Popperian liberalism to which Soros adheres as naively liberal, Soros has in fact funded progressive endeavors that are not so easily reconciled with economistic critiques of his philanthropy. As Maria Bucur, associate professor of history at Indiana University, writes, Gender studies itself was founded as an academic discipline in 1994, in a pioneering gesture by the unorthodox philanthropist George Soros . . . The creation of the gender studies program at CEU was contentious at the time, as few established academics in Hungary could fathom the notion of gender studies as an actual academic discipline . . . But Soros embraced the notion that gender studies was important for fostering a more democratic academia and civil society in post-communist Eastern Europe.102

While Western Europe was preoccupied with consolidating what it had achieved before 1989, thereby deepening European divisions, Soros was facilitating the transfer of liberal institutions and accelerating the circulation of people and ideas in the East. The second unexpected consequence was that German monetary union provided the rationale for proceeding with EMU. Two arguments

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are commonly put forth to explain the German government’s decision to surrender the mark for greater European integration. The first and most widespread argument asserts that the euro was essentially a quid pro quo for German unification. Philip Zelikow and Condoleeza Rice, who were both involved in U.S. secretary of state James Baker’s attempt to facilitate German unification while keeping the new Germany committed to the North Atlantic Treaty Organization (NATO), cite as evidence Kohl aide Horst Teltschik’s visit to Paris on March 15, 1990—just days before the East German elections that would result in a landslide for the parties advocating a rapid German monetary union—where he announced German support for rapid EMU.103 That is, Kohl assented to reversing three decades of official West German policy, which had demanded political and economic integration before monetary union, and instead pledged to accelerate the pace of EMU in return for Mitterrand’s acceptance of German unification. This quid pro quo led to the 1991 Maastricht treaty, in which Germany agreed to a single currency before greater economic convergence or political unification. The second argument places German support for French aims in a longer historical framework. David Marsh, the longtime German correspondent for the Financial Times newspaper and one of the most astute observers of the Bundesbank, also views the Maastricht treaty as deriving from the relationship between Germany and France. In contrast to Zelikow and Rice, however, he regards the euro as owing its birth to a political debt that Kohl owed to French president François Mitterrand. Marsh traces the quid of the pro quo back to 1983, just after the first West German “Wende,” or turning point, when a vote of constructive noconfidence felled Helmut Schmidt’s social-liberal coalition and installed a conservative-liberal coalition under Kohl. That no-confidence vote derived from a variety of challenges that the Schmidt government had failed to master, from the inability of Keynesian countercyclical economic policy to unwind the so-called stagflation of the 1970s and the Bundesbank’s adoption of a extremely hawkish disinflationary stance to the debate over the deployment of U.S. Pershing short-range nuclear missiles and the Reagan administration’s aggressive anticommunism. Kohl, too, feared that his support for deploying the missiles would cost him power, as it had Schmidt. Oddly enough, it was a French socialist and member of the resistance who came to the aid of the German Christian Democrat and Luftwaffe conscript and saved the day. In a speech to the Bundestag on January 20, 1983, Mitterrand argued forcefully that failure to deploy the U.S. missiles would endanger the fragile European peace, and with it, Germany’s security and prosperity. According to Marsh, Mitterrand’s clear support for Kohl “granted Mitterrand an abundance of political credit in Bonn that

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was translated into the monetary sphere, with crucial effect, over the next decade.”104 Despite Mitterrand’s early and open support of Kohl, Marsh does not argue that there was a straight line between Mitterrand’s 1983 speech and the 1991 Maastricht treaty. On the contrary, he points out that there were serious “strains over German and European unity between Kohl and Mitterrand [that] neared breaking point in autumn 1989.”105 What salvaged EMU, Marsh believes, was German unification: “If unification had not happened, it is highly unlikely that French would have been able to persuade Kohl to agree the EMU timetable to replace the D-Mark by the Euro.”106 Although some observers argue that both explanations overestimate the significance of the quid pro quo, a consensus has emerged that German unification made EMU inevitable. Matthias Kaelberer, for example, argues that German unification did not cause Maastricht but instead accelerated the German government’s tilt toward EMU. He correctly points out that the quid pro quo argument assigns too much importance to Mitterrand’s role; German unification was inevitable by spring 1990, and the French government might have postponed but not prevented it.107 More importantly, Kaelberer contends that German unification exposed the paradox at the heart of its monetary leadership in Europe: that the benefits of acting as monetary hegemon were undermined by the inflationary consequences of German monetary union. That is, the German government saw the utility of surrendering the DM and its role as hegemon provided that it could act as the architect of a new monetary system. As has been pointed out by many authors, the Kohl government extracted quite a few concessions from its European partners. The European Central Bank (ECB) is in many ways even more like the Bundesbank than the Bundesbank itself. The ECB is seated in the anti-inflationary environment of Frankfurt, rather than in the presumably more tolerant climates of Paris or Rome. Its primary responsibility is price stability, which is more explicitly anti-inflationary than the Bundesbank’s mission of “safeguarding the currency.” More significantly, the ECB is more isolated from entanglements with national governments than the Bundesbank. It is not permitted to lend to governments, as the Bundesbank can, and change to its statutes requires renegotiation and ratification of a treaty by EU member states, in contrast to the simple parliamentary majority required to alter the Bundesbank’s charter.108 Of course, the Kohl government’s enthusiasm for surrendering the DM was hardly shared by the Bundesbank. Schlesinger’s handling of the mounting crisis in 1992/1993 can be understood as an attempt to undercut EMU. Nor did Kohl’s reward to Tietmeyer, whom he appointed Bundesbank president in 1993, put an end to the bank’s continued

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criticism of Maastricht. Before the introduction of the euro in 1999, German monetary authorities continued to value economic convergence above of monetary union. As Reimut Jochimsen, the head of the state bank of North Rhine-Westphalia from 1990 to 1997, declared in 1993, “A stable currency takes place over a common one.”109 In the end, however, the German government’s treaty-making powers and commitment to Europe reversed thirty years of objections to EMU. To these explanations I would add a third: that the impeccable economic logic deployed by the German government and monetary authorities before 1990 had been completely undone by German monetary union. After February 6, 1990, the German government could hardly argue with its partners that a monetary union should “crown” economic and political union. On the contrary, Kohl’s mechanism for unifying Germany removed the intellectual justification for a gradual approach to integrating disparate economic regions. The federal government was left with little argument against the pressure of its allies to build a supranational Europe by harnessing monetary policy, a pressure that was reinforced by the currency chaos of 1992/1993. The violent gyrations of European currencies and their negative consequences for national economies, moreover, demonstrated to policymakers and business leaders alike that it was necessary to surrender monetary sovereignty to a pan-European agency sooner rather than later. They agreed that the key to reducing exchange rate fluctuations (and thus to the economic stability on which the EEC was premised) lay in merging West German money—which had contributed so much to German unification and provided the model for European unification, only to upend the brief moment of postcommunist congruence between Germany and Europe—with other European monies. With the creation of the euro in 1999, what was now the European Union consolidated the diversity of European financial practices into a single administrative idiom backed by the German example. Seen in this way, German monetary union illustrates not the collision of economic expertise with political exigency or even the trumping of immediate over long-term interests. Rather, Kohl’s political daring in February 1990 became the catalyst for a (very uneven) process first of national and then of pan-European state building. Kohl’s attempt to make use of the circulation of money to control the circulation of people was arguably doomed to inflationary failure, especially during the transition from an illiberal regime that sought to restrict the movement of people, goods, and ideas. But surely the greatest irony of German monetary union is that harnessing monetary policy to national goals ultimately served antinationalist ends.

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Notes 1. The few who knew of the chancellor’s intentions include Kohl’s advisers in the Office of the Chancellery and Horst Teltschik. Finance Minister Theo Waigel does not seem to have known that Kohl would make the announcement, although he was well informed about the direction of Kohl’s thinking. See Horst Teltschik, 329 Tage (Munich: Goldmann Verlag, 1993), 129; Manfred Schell, “Zusammenbruch mit Perspektive,” in Tage, die Deutschland und die Welt veränderten. Vom Mauerfall zum Kaukasus—die deutsche Währungsunion, ed. Theo Waigel and Manfred Schell (Munich: Bruckmann, 1994), 18; Dieter Grosser, Das Wagnis der Währungs-, Wirtschafts- und Sozialunion. Politische Zwänge im Konflikt mit ökonomischen Regeln (Stuttgart: DVA, 1998), 174, 181. 2. Bundesarchiv Berlin (BarchB), 136/20170, 221—Ka 1, Bd. 1, “Nr. 161 Tischvorlage des Chefs des Bundeskanzleramtes für die Kabinettsitzung vom 7. Febuar 1990; TOP 2, Aussprache zu deutschlandpolitischen Fragen,” reproduced in Deutsche Einheit: Sonderedition aus den Akten des Bundeskanzleramtes 1989/90, ed. Hanns Jürgen Küsters and Daniel Hofmann (Munich: Oldenburg Verlag, 1998), 759; Pressemitteilung 60/90, 7. Februar 1990; “7. Februar 1990, Beratungen des Bundeskabinetts zur Deutschlandpolitik,” reproduced in Texte zur Deutschlandpolitik, ed. Bundesministerium für innerdeutsche Beziehungen, Reihe III, vol. 8 (Bonn: Deutscher Bundes-Verlag, 1990), 53–68; Grosser, Das Wagnis, 174–86; David Marsh, The Euro: The Politics of the New Global Currency (New Haven, CT: Yale University Press, 2009), 300, fn. 37. According to Horst Teltschik, Kohl declared his intention to the CDU/CSU parliamentary fraction on February 6 in part to forestall Swabian minister-president Lothar Späth’s attempt to make a similar statement (Teltschik, 329 Tage, 129). See also Kohl’s version of events in Helmut Kohl, Kai Diekmann, and Ralf Georg Reuth, Helmut Kohl: Ich wollte Deutschlands Einheit (Berlin: Propyläen, 1996), 259–60. 3. If we are to believe him, the sole cabinet-level exception was Wolfgang Schäuble, who claims to have argued in favor of rapid monetary union before Kohl’s visit to Dresden on December 19, 1989 (Wolfgang Schäuble, Der Vertrag. Wie ich über die deutsche Einheit verhandelte [Munich, January 1993], 21). In addition to the advisers in the chancellery, the Department of Intra-German Relations in the Finance Ministry, led by Thilo Sarrazin, a Social Democrat who would later be involved with the Treuhand, become Interior Senator in Berlin, and thereafter a member of the Bundesbank directorate, was working on a plan for rapid monetary union. In contrast, the intergovernmental working group “Leistungsgesetze,” which had been created on January 23, 1990, under the direction of Horst Seehofer, parliamentary state secretary in the Ministry for Work and Social Affairs, to discuss ways of reducing the financial cost of East German migration to West Germany, was rendered immediately moribund by Kohl’s announcement (author’s interview with Sarrazin, Mainz, June 13, 1996; Grosser, Das Wagnis, 174–81; Gerhard A. Ritter, Der Preis der deutschen Einheit: die Wiedervereinigung und die Krise des Sozialstaats (Munich: C.H. Beck, 2007), 194). 4. Marsh, The Euro, 139; Leipziger Volkszeitung, January 25, 1990; Phillip J. Bryson and Manfred Melzer, The End of the East German Economy: From Honecker to Reunification (New York: St. Martin’s Press, 1991), 128–29.

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86 / jonathan r. zatlin 5. Frankfurter Allgemeine Zeitung, January 1, 1990; Grosser, Das Wagnis, 184. 6. Grosser, Das Wagnis, 136–37; Stephen F. Szabo, The Diplomacy of German Unification (New York: St. Martin’s Press, 1992), 38–40; Philip Zelikow and Condoleeza Rice. Germany Unified and Europe Transformed: A Study in Statecraft (Cambridge, MA: Harvard University Press, 1995), 118–25. 7. Focusing exclusively on elites, Lothar Kettenacker offers a different view (Lothar Kettenacker, Germany 1989: In the Aftermath of the Cold War [Harlow, UK: Pearson Education, 2009]). For more on popular opinion, see Wolfgang Schuller, Die deutsche Revolution 1989 (Berlin: Rowohlt, 2009); Ilko-Sascha Kowalczuk, Endspiel. Die Revolution von 1989 in der DDR (Munich: C.H. Beck Verlag, 2009). 8. Kohl had not even bothered to let his foreign minister, Hans-Dietrich Genscher, know of his plans, though Genscher offered his public support. Kohl had consulted U.S. president George Bush, who was cautiously positive, but no one else in the American government. In fairness to Kohl, tensions surrounding German unification, which were connected both to lingering resentment over World War II and a tremendous shift in power toward Germany, led both British prime minister Margaret Thatcher and French president François Mitterrand to make objectionable statements. Nor did Mitterrand consult with Kohl over his visit to the GDR in early December. On the other hand, Mitterrand had lost patience with Kohl earlier in 1989 during negotiations over European integration. See Elisabeth Guigou, Une femme au coeur de l’etat (Paris: Fayard, 2000); Marsh, The Euro, 132–33; Elizabeth Pond, Beyond the Wall: Germany’s Road to Unification (Washington, DC: Brookings Institution, 1993), 155–64; Szabo, The Diplomacy of German Unification, 39, 41–51; Zelikow and Rice, Germany Unified. On Kohl’s ambiguous language regarding Poland, see Der Spiegel, 10/1990, March 3, 1990. For the Soviet critique, see The New York Times, December 6, 1989. For a defense of Kohl, see Henrik Bering, Helmut Kohl (Washington, DC: Regnery Publishing, 1999). 9. Kohl’s political acumen when it came to sidelining potential rivals was essential to his longevity as CDU leader and chancellor, but his tendency to embarrass himself on the diplomatic stage had also made him the object of widespread domestic amusement and anger by 1989. To give but a few examples of Kohl’s penchant for diplomatic debacles, see his ill-advised invitation to U.S. president Ronald Reagan in May 1985 to visit a military cemetery, which appeared to equate the forty-nine Waffen-SS men who were buried there with the victims of the Holocaust; his 1986 comparison of Soviet leader Mikhail Gorbachev to Nazi propaganda minister Josef Goebbels; or his obstinate attempt to leave open the question of Germany’s border with Poland in 1989 and 1990 (New York Times, May 6, 1985; Newsweek, October 27, 1986, 29; David H. Shumaker, Gorbachev and the German Question: Soviet-West German Relations, 1985–1990 [Westport, CT: Praeger Publishers, 1995], 35–36; Angela Stent, Russia and Germany Reborn: Unification, the Soviet Collapse, and the New Europe [Princeton, NJ: Princeton University Press, 1999], 65–66; Szabo, The Diplomacy of German Unification, 34. For an overly sympathetic discussion of Kohl’s blunders, see Bering, Helmut Kohl, 84–86).

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rethinking reunification / 87 10. Deutsche Bundesbank, ed., Monatsbericht Juli 1995 (Frankfurt-am-Main: Deutsche Bundesbank, 1995). 11. Barry Eichengreen and Charles Wyplosz, “The Unstable EMS,” Brookings Papers on Economic Activity 1 (1993), 51–143; Peter H. Loedel, Deutsche Mark Politics: Germany in the European Monetary System (London and Boulder, CO: Lynne Rienner, 1999), 164. 12. Commission of the European Communities, “Report: Progress with Regard to Economic and Monetary Convergence and with the Implementation of Community Law Concerning the Internal Market (Article 109e, 2(b) of the treaty on European Union),” SEC(93) 1755 final, December 8, 1993. 13. The phrase was coined by the Italian economist, politician, and central banker, Tommaso Padoa-Schioppa. In the same article, he also expressed concern over the euro’s future in terms reminiscent of the coronation theory, observing that “the Euro’s peculiar current status of ‘a currency without a State’ may only be upheld if it is merely a stage paving the way to stronger political union within the European Union” (Le Monde, September 6, 2000). The very definition of central bank autonomy is independence from parliamentary or executive supervision. See also Hans-Helmut Kotz, “EMU after Two Years—Have Critics Been Confirmed?” Intereconomics 36, no. 2 (March 2001), 68. 14. Stiftung-Archiv der Parteien und Massenorganizationen der DDR im Bundesarchiv (SAPMO-BA), DY30, IV 2/1/711 Günter Ehrensperger, Department of Planning and Finance at the Central Committee (ZK), report to the tenth Plenum of the ZK, November 8–10, 1989, which is reproduced in Das Ende der SED: Die letzten Tage des Zentralkomitees, ed. Hans-Hermann Hertle and Gerd-Rüdiger Stephan (Berlin: Christoph-Links-Verlag, 1997), 365. The debt figures had been completely exaggerated due to internal power struggles in the SED, and in particular the meddling of Economic Secretary Günter Mittag. For more on the impact of misreported economic statistics on the revolution, see Zatlin, The Currency of Socialism, chap. 3 and epilogue. 15. Leipziger Volkszeitung, February 21, 1990; Bryson and Melzer, The End of the East German Economy, 89–90. Through 1990, moreover, East German exporting industries, which were essential to the GDR’s ability to pay down the debt, performed well. East Germany registered a trade surplus of $150 million with the West for January 1990 and a trade surplus with the Soviet Union and Eastern Europe worth 11.9 billion DM in 1990, even though this surplus fell in 1991 to 6.4 billion as a result of German currency union and Eastern European economic liberalization (Hoover Institution Archives, German Subject Collection, Protokolle der Beratungen des Runden Tisch, Staatliche Zentralverwaltung für Statistik, “Mitteilung zur wirtschaftlichen und sozialen Entwicklung der DDR im Januar 1990,” February 13, 1990, 1; Deutsche Bundesbank, Statistische Reihe für 1990 ( Frankfurt-am-Main: Deutsche Bundesbank, 1990), 56, 60; Deutsche Bundesbank, Statistische Reihe für 1991 (Frankfurt-am-Main: Deutsche Bundesbank, 1991), 56, 60. 16. The New York Times, November 14, 1989; SAPMO-BA, DY30, JIV 2/2A//3262, Modrow, “Maßnahmen zur Abwehr von negativen Auswirkungen des Reiseverkehrs,” November 21, 1989, 1–4, 6.

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88 / jonathan r. zatlin 17. One of the more important sticking points was Economic Minister Christa Luft’s insistence on limiting Western participation in joint-venture projects to a minority stake, which only scared investors away (Frankfurter Allgemeine Zeitung, November 7, 1989; BArchB, DE1, 56350, Grünheid to Romberg, March 9, 1990, 2, 4–5; interview, Hans Modrow, Dresden District Party Leader (1973–1989), Central Committee member (1967–1989), chairman, Council of Ministers (November 1989–March 1990): Berlin, April 6, 1996; interview, Christa Luft, chancellor, Hochschule für Ökonomie “Bruno Leuschner” (1988–1989), economics minister (December 1989–March 1990): Berlin, March 18, 1996; Grosser, Das Wagnis, 117–27; Charles S. Maier, Dissolution: The Crisis of Communism and the End of East Germany (Princeton, NJ: Princeton University Press, 1997), 228–29. 18. On January 24, for example, the directors of the powerful IFA automobile combine (Industrieverband Fahrzeugbau) failed to show up for a meeting in Berlin—an astonishing disregard for central power unthinkable only a few months earlier (BArchB, DE1, 56413, Abteilung Materiell-Technische Sicherung der Produktion, Sektor Maschinenbau/Metallurgie, “Information über die Ergebnisse der Beratung über den Stand der Werkzeugversorgung 1990,” March 16, 1990, 29). Similarly, East German retailers began refusing to accept mediocre goods from wholesalers, even though it meant violating the plan (Handelsblatt, January 4, 1990). 19. SAPMO-BA, DY16, Vorläufige 484, “Information über eine Beratung des stellvertenden Präsidenten der Staatsbank der DDR, Kollegen Krause, mit Vertretern der NDPD, CDU, LDPD und DBD,” no date. 20. By the end of January 1990, Modrow claimed, there was a budget gap of 17 billion East German marks (GDR Minister-President Hans Modrow, speech to Volkskammer, January 29, 1990, reproduced in Texte zur Deutschlandpolitik, ed. Bundesministerium für innerdeutsche Beziehungen, Reihe III, Band 8 [Bonn: Deutscher Bundes-Verlag, 1990], 45–48). 21. Neues Deutschland, February 2, 1990; Süddeutsche Zeitung, February 2, 1990. The same day, the Working Group on Economic Reform, an East German committee tasked by the Council of Ministers with introducing market reforms, spelled out specific steps that would lead to “full convertibility” with the DM by 1992 (Hoover Institution Archives, German Subject Collection, Protokolle der Beratungen des Runden Tisch, Arbeitsgruppe Wirtschaftsreform beim Ministerrat der DDR, “Zielstellung, Grundrichtungen, Etappen und unmittelbare Massnahmen der Wirtschaftsreform in weiterer Verwirklichung der Regierungserklärung vom 17.11.1989,” 4). 22. See Kohl’s speechwriter, Michael Mertes, “The Role of the Federal Chanceller [sic] during the Process of German Unification,” lecture delivered at the German Historical Institute, Washington, DC, October 3, 2001 (http://www.ghi-dc.org/publications/ghipubs/web/mertes.pdf, last accessed on October 9, 2009), 16–18. Andreas Rödder’s contention that Kohl’s offer of monetary union was “not a manipulative, much less an intentionally deceptive, electoral campaign tactic but rather a deep conviction” does not bear up under scrutiny (Andreas Rödder, Deutschland einig Vaterland: die Geschichte der Wiedervereinigung [Munich: C.H. Beck Verlag, 2009], 207).

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rethinking reunification / 89 23. Christiane Olivo, “The Practical Problems of Bridging Civil Society and the State: A Study of Roundtables in Eastern Germany,” Polity 31, no. 2 (1998), 245–68. Kettenacker is unduly harsh on civil rights leaders and the gap between them and rank-and-file members (Kettenacker, Germany 1989, 110–20). 24. “Zum Wiedervereinigungsplan der pluralistischen Rechten,” November 28, 1989, in Die ersten Texte des Neuen Forum, ed. Julia Michaels (East Berlin: Tribühne Drückerei, 1990), 24. See also Konrad Jarausch, The Rush to German Unity (New York: Oxford University Press, 1994), 77–94. 25. For more on consumer policy in the GDR, see Mark Landsmann, Dictatorship and Demand: The Politics of Consumerism in East Germany (Cambridge, MA: Harvard University Press, 2005); Katherine Pence and Paul Betts (eds.), Socialist Modern: East German Everyday Culture and Politics (Ann Arbor: University of Michigan Press, 2008); Zatlin, The Currency of Socialism. 26. Kettenacker, Germany 1989, 110. 27. SAPMO, DY30, 3702, “Die Entwicklung des Wechselstubengeschäfts und des Wechselstubenkurses,” 233–24; BStU, HA XVIII, 6166, 7; BStU, Arbeitsbereich Mittig, Nr. 58, “Zu den ausgewählten Problemen bei der Durchführung der Beschlüsse des XI. Parteitages der SED zur ökonomischen Entwicklung der DDR,” 21, 24; BArchB, DE1 56756, Alexander SchalckGolodkowsky and Herta König, “Zur Entwicklung des Kurses der Mark der DDR zu kapitalistische Währungen seit 1989,” no date, 172–73, and Anhang 3; BArchB, DE1 56318, “Zur Frage, was erforderlich ist, damit eine Mark der DDR auch eine Valutamark wert ist,” September 8, 1988, 3; BArchB, DN1 VS 13/90, Nr. 6, Ute Nickel, minister of finance and prices, and Horst Kaminsky, president of the Staatsbank, “Einschätzung zur Stabilität der Währung der DDR,” October 26, 1989, 15; Leipziger Volkszeitung, November 23, 1989. 28. Typical of other complaints, an open letter from 326 residents in the town Berka vor dem Hainich emphasized “the population’s fear of losing its hardearned money” (BArchB, DA5, 12391, “Offener Brief der Bürger von Berka vor dem Hainich,” November 23, 1989, 2). 29. Although the GDR initially proposed the Valutamark rate of 4.4:1, the final regulation guaranteed adults 200 DM and children 100 DM a year at a rate of 3:1 (SAPMO-BA, DY30, IV 2/2.039/328, “Konzeption für ein Gespräch zwischen dem Generalsekretär des ZK der SED und Vorsitzenden des Staatsrates der DDR, Genossen Egon Krenz, und dem Bundeskanzler der BRD, Helmut Kohl,” no date, 40–46; BArchB, DN10, 2285, Staatsbank der DDR, “Information über die Entwicklung des Erwerbs von DM durch Bürger der DDR,” January 8, 1990, 2). 30. At the time, most Western analysts believed East German productivity and living standards were about half of West German levels. See, for example, Deutsche Bundesbank (ed.), “Die Wirtschaftslage in der Bundesrepublik Deutschland im Herbst 1989,” in Monatsbericht der Deutschen Bundesbank, ed. Deutsche Bundesbank (Frankfurt-am-Main: Bundesbank, December 1989), 15; “Reform der Wirtschaftsordnung in der DDR und die Aufgaben der Bundesrepublik,” Wochenbericht der DIW 6 (1990); Handelsblatt, February 8, 1990; Helmut Schlesinger, Das Handelsbatt, January 14, 1990; interview, Thilo Sarrazin, director, National Currency Affairs (Referat

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31.

32.

33. 34.

35. 36.

VII A1), Department for Intra-German Relations, West German Finance Ministry (1989–1990), Berlin senator for finance (2002—2009), Mainz, June 13, 1996; Bryson and Melzer, The End of the East German Economy, 99. Later calculations put East German productivity at some 30 percent. See George Akerlof, Andrew K. Rose, Janet L. Yellen, Helga Hessenius, Rudiger Dornbusch, and Manuel Guitian, “East Germany in from the Cold: The Economic Aftermath of Currency Union,” Brookings Papers on Economic Activity 1 (1991), 5–6; Rudiger Dornbusch, Holger Wolf, and Lewis Alexander, “Economic Transition in Eastern Germany,” Brookings Papers on Economic Activity 1 (1992), 245; A. J. Hughes Hallett and Yue Ma, “East Germany, West Germany, and Their Mezzogiorno Problem: A Parable for European Economic Integration,” The Economic Journal 103 (March 1993), 417; Joachim Ragnitz, “Lagging Productivity in the East German Economy: Obstacles to Fast Convergence,” in Cohesive Growth in the Enlarging Euroland, ed. Michael Dauderstädt and Lothar Witte (Bonn: Friedrich-Ebert-Stiftung, 2001), 94. Interview, Helmut Schlesinger, Bundesbank vice president (1980–1991), president (1991–1993), Berlin, January 23, 1996. This was also the perception of the Central Round Table (Hoover Institution Archives, German Subject Collection, Protokolle der Beratungen des Runden Tisch, session 11, February 5, 1990, Vorlage 11/22). Karl Marx, “Ökonomisch-Philosophische Manuskripte von 1844,” in MarxEngels-Werke, Ergänzungsband Schriften bis 1844, Erster Teil-Karl Marx (East Berlin: Dietz Verlag, 1968), 563–64; Karl Marx, “Zur Judenfrage,” in MarxEngels Werke, vol. 1 (East Berlin: Dietz Verlag, 1981), 374; Karl Marx, The Poverty of Philosophy. Answer to the Philosophy of Poverty by M. Proudhon, in Karl Marx and Friedrich Engels: Collected Works, vol. 6 (New York, 1976), especially 145; Karl Marx, “Das Kapital,” in Marx-Engels Werke, vol. 23 (East Berlin: Dietz Verlag, 1970), 86, 108. For more on Marxist-Leninist economic theory and practice, as well as popular equations of money with wealth, see Zatlin, The Currency of Socialism. In a sense, the collapse of the Wall had returned the GDR “to circumstances before [its construction in] 1961,” as Egon Krenz told an aide to Kohl. Between 1949 and 1961, some 3.5 million East Germans had “voted with their feet” against communism, fleeing the political repression and economic mismanagement of communist rule for the relative safety and prosperity of the FRG until construction of the Wall put an end to the political embarrassment and labor outflux. See Corey Ross, “Before the Wall: East Germans, Communist Authority, and the Mass Exodus to the West,” The Historical Journal 45, no. 2 (2002), 459–60; Christoph Kleßmann, Zwei Staaten, eine Nation: deutsche Geschichte 1955–1970 (Bonn: Bundeszentrale für politische Bildung, 1988), 558. A total of 72,729 left the GDR in January 1990 (Hartmut Wendt, “Die deutsch-deutschen Wanderungen. Bilanz einer 40jährigen Geschichte von Flucht und Ausreise,” Deutschland Archiv 34, no. 4 [1991], 393). Hoover Institution Archives, German Subject Collection, Protokolle der Beratungen des Runden Tisch, Ergebnisse des Runden Tisch, session 11, February 5, 1990, and SPD Vorlage 11/20.

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rethinking reunification / 91 37. Hoover Institution Archives, German Subject Collection, Protokolle der Beratungen des Runden Tisch, “Ergebnisse der 12. Sitzung des Runden Tisch, February 12, 1990,” 2. 38. Kohl had promised 15 billion DM in aid as a goodwill gesture at a meeting in Dresden on December 19, 1989. In contrast, the SED, most opposition groups, and many West Germans argued that the FRG owed a moral and material debt to the GDR that ran to hundreds of billions because it had borne the brunt of Soviet reparations after 1945. For more on the so-called solidarity contribution (Solidarbeitrag), see Jarausch, The Rush to Unity, 108–10; Otto Singer, “Constructing the Economic Spectacle: The Role of Currency Union in the German Unification Process,” Journal of Economic Issues 4 (1992): 1105–06; Zatlin, “Hard Marks and Soft Revolutionaries,” 71–73. 39. Grosser, Das Wagnis, 132–58; Szabo, The Diplomacy of German Unification, 38–40. Kettenacker skips over these points (Kettenacker, Germany 1989, 137–42). 40. Ingrid Matthäus-Maier, “Signal zum Bleiben,” in Die Zeit, January 19, 1990. The specific plan for monetary union that Kohl would eventually adopt was developed by another Social Democrat: Thilo Sarrazin in the finance ministry (interview, Sarrazin, Mainz, June 13, 1996; Thilo Sarrazin, “Die Entstehung und Umsetzung des Konzepts der deutschen Wirtschafts- und Währungsunion,” in Tage, ed. Waigel and Schell, 160–225; Grosser, Das Wagnis, 151–73). 41. Perhaps the most important and sophisticated reservations about a resurgent German nationalism were articulated by Jürgen Habermas. See, for example, the collection of essays in Jürgen Habermas, The Past as Future, trans. Max Pensky (Lincoln, Nebraska, 1994). 42. See, for example, the SPD’s declaration on February 5 at the Central Round Table that “a currency association or a currency union with the FRG would be a quick acting possibility that deserves investigation.” The CDU also argued that the GDR should “accelerate negotiations with the FRG to arrive a currency association on the fastest track” (Hoover Institution Archives, German Subject Collection, Protokolle der Beratungen des Runden Tisch, session 11, February 5, 1990, Vorlage 11/20 (SPD) and Vorlage 11/24 (CDU), 2). See also Zatlin, “Hard Marks and Soft Revolutionaries.” 43. Zelikow and Rice, Germany Unified, 199. According to the Märkische Allgemeine newspaper, there were some 780,000 applications to leave the GDR that were never processed, which means “that up to 2 million people were sitting on packed bags” (Märkische Allgemeine, June 11, 1909). 44. Leipziger Volkszeitung, January 15, 1990. The fact that Röller was involved in economic discussions with the East German government lent his admonitions further weight (Christa Luft, Zwischen Wende und Ende. Eindrücke, Erlebnisse, Erfahrungen eines Mitglieds der Modrow-Regierung (Berlin: AufbauTaschenbuch-Verlag, 1991), 112, 181–82). 45. Das Handelsblatt, February 9, 1990. 46. Frankfurter Allgemeine Zeitung, February 23, 1990. Rohwedder, who was state secretary in the Economic Ministry from 1969 to 1978, was no doubt motivated in part by his opposition to Kohl as a Social Democrat.

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92 / jonathan r. zatlin 47. For more on the breakdown of the gold standard and the run-up to Bretton Woods, see Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression, 1919–1939 (Oxford: Oxford University Press, 1992). 48. Robert A. Mundell, “A Theory of Optimum Currency Areas,” in American Economic Review 51 (November 1961), 509–17. See also Ronald McKinnon, “Optimum Currency Areas,” American Economic Review 53 (1964), 717–25; Peter Kenen, “The Theory of Optimum Currency Areas: An Eclectic View,” in Monetary Problems of the International Economy, ed. Robert A. Mundell and Alexander K. Swoboda (Chicago: University of Chicago Press, 1969), 41–60. 49. Michael J. Artis and Paul Omerod, “Is There an ‘EMS’ Effect in European Labour Markets?” in The Monetary Economics of Europe, ed. Christopher Johnson and Stefan Collignon (London: Pinter, 1994), 227–49. 50. Olivier Blanchard and Pierre-Alain Muet, “Competitiveness Through Disinflation: An Assessment of the French Macroeconomic Strategy, Economic Policy 8 (1993), 12–56. 51. Paul Krugman, “Lessons of Massachusetts for EMU,” in Adjustment and Growth in the European Monetary Union, ed. Francisco Torres and Francesco Giavazzi (Cambridge, MA: Cambridge University Press, 1994), 241–60. Despite the analytic power of Mundell’s theory, some economists have lamented that it has stimulated little empirical research and yielded few clear policy recommendations. In the estimation of two monetary specialists, “the theory has advanced only minimally” since the 1960s (Barry Eichengreen and Tamim Bayoumi, “Ever Closer to Heaven? An Optimum-Currency Area Index for European Countries,” CIDER Working Paper C96–078 [August 1996], 1). 52. This was still the case before 1999. See Barry Eichengreen, “Labor Markets and European Monetary Unification,” in Policy Issues in the Operation of Currency Unions, ed. Paul R. Masson and Mark P. Taylor (Cambridge, MA: Cambridge University Press, 1993), 111–29; Jeffrey A. Frankel and Andrew Rose, “The Endogeneity of the Optimum Currency Area Criteria,” NBER Working Paper W5700 (August 1996); Tamim Bayoumi and Barry Eichengreen, “Optimum Currency Areas and Exchange Rate Variability: Theory and Evidence Compared,” in International Trade and Finance: Essays in Honor of Peter Kenen, ed. Benjamin Cohen (Cambridge, MA: Cambridge University Press, 1997), 216–46. 53. An important exception was a proposal put together in response to French pressure by Foreign Minister Hans-Dietrich Genscher on February 26, 1988 that advocated establishing a European monetary authority without demanding that economic convergence precede a common currency (Frankfurter Allgemeine Zeitung, May 28, 1988; Hessischer Rundfunk, June 5, 1988; Financial Times, July 1, 1989; Marsh, The Euro, 116–19). 54. Kaltenthaler, Germany and the Politics of Europe’s Money, 28; Kaelberer, Money and Power, chaps. 4 and 5. 55. Das Handelsblatt, February 9, 1990; Leipziger Volkszeitung, February 21, 1990. She did, however, concede that abolishing the East German mark was politically expedient. 56. Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, “Zur Frage einer Währungsunion zwischen der Bunderepublik

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57. 58.

59.

60. 61.

62.

Deutschland und der DDR. Brief des Sachverständigenrates vom 9. Februar 1990 an den Bundeskanzler,” February 9, 1990. Frankfurter Allgemeine Zeitung, February 10, 1990. For the so-called Kronberger Kreis proposal, see Süddeutsche Zeitung, January 31, 1990; for Hans D. Barbier’s plan, see Frankfurter Allgemeine Zeitung, February 2, 1990; for an East German plan, see Erwin Rohde, Börsen-Zeitung, February 2, 1990; for Christa Luft’s alternative, see Handelsblatt, February 6, 1990; for Wolf Schäfer’s plan, see Die Zeit, February 8, 1990; for Klaus Wieners’ plan, see Börsen-Zeitung, February 9, 1990; for Lutz Hoffmann’s plan, see Frankfurter Allgemeine Zeitung, February 10, 1990; for the plan put forward by Steve H. Hanke and Alan A. Walters, see Neue Zürcher Zeitung, February 19, 1990. Michael Kreile’s otherwise excellent analysis of the policy alternatives available at the time makes the important point that key economic players did support rapid unification. In my opinion, however, he overestimates the timing, depth, and quality of support for Kohl’s plan. See Michael Kreile, “The Political Economy of the New Germany,” in The New Germany and the New Europe, ed. Paul B. Stares (Washington, DC: Brookings Institution, 1992), 55–92. Handelsblatt, February 9–10, 1990; Der Spiegel, February 12, 1990, 24–30. Hans Willgerodt, Vorteile der Wirtschaftlichen Einheit Deutschlands. Gutachten (Cologne: Institut für Wirtschaftspolitik, 1990). Similarly, one of the more influential members of the Sachverständigenrat, Horst Siebert of the Institute for World Economy in Kiel, argued for the benefits of shock therapy. Asserting that the East German recovery would resemble a “J-curve,” Siebert wrongly predicted that negative East German growth would be limited to a transitional period. Thorough-going privatization, he claimed, would quickly reduce costs, leading to a “take-off ” period as growth rates in East Germany converged with those in the Federal Republic. Siebert’s case illustrates the perils of applying neoliberal theory to empirical reality, from its problematic assumptions about markets “free” from state intervention to its misuse of historical analogy and disregard for political culture. See Handelsblatt, June 13, 1990; Horst Siebert, “The Integration of Germany. Real Economic Adjustment,” European Economic Review 35 (1991): 591–602; Irwin L. Collier, Jr. and Horst Siebert, “The Economic Integration of Post-Wall Germany,” The American Economic Review 81, no. 2 (May 1991), 196–201; Horst Siebert, Michael Burda, and Maurice Obstfeld, “German Unification: The Economics of Transition,” Economic Policy 6, no. 13 (October 1991), 287–340; Horst Siebert Das Wagnis der Einheit (Stuttgart: DVA, 1992). The DM’s relation to the “economic miracle” was indirect, not least because the currency’s strength reflected the very real story of productivity increases. More importantly, the GDR’s starting point in 1989 was worse than the FRG’s in 1948. Its labor was not as well adapted to market requirements, its plant in much worse shape, its production facilities often polluted beyond redemption, and many of its most enterprising citizens gone. See Geoff Pugh, “Economic Reform in Germany: The 1948 Currency and Economic Reforms in Comparison with the 1990 Economic and Monetary Union,” in The Political Economy of German Unification, ed. Thomas Lange and J. R. Shackleton (Providence, RI: Berghahn

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63.

64.

65. 66. 67.

68. 69. 70. 71. 72. 73. 74.

75. 76.

Books, 1998), 120–38; Manfred E. Streit, “German Monetary Union,” in Fifty Years of the Deutsche Mark, ed. Deutsche Bundesbank (New York: Oxford University Press, 1999), 640–43. Kohl first used the phrase on February 20, 1990 (Görtemaker, Unifying Germany 1989–1990 [New York: St. Martin’s, 1994], 124). See also the comments of West German economics minister Helmut Haussmann (ibid., 140). The debt carried by socialist enterprises was inflated by the social responsibilities mandated by economic planning, such as building and maintaining social halls, and by centralized bookkeeping, which imposed debt on factories for the sake of quantitative symmetry. See Zatlin, The Currency of Socialism, epilogue. Rudiger Dornbush and H. Wolf, “Economic Transition in Eastern Germany,” Brookings Papers on Economic Activity I (1992), 239. Akerlof et al., “East Germany in from the Cold,” 60–63; Hans-Werner Sinn, “Germany’s Economic Unification. An Assessment after Ten Years,” National Bureau of Economic Research, Working Paper 7586 (2000), 20. Registered unemployment in eastern Germany amounted to 18.8 percent in 2000, more than twice the western rate. If we add to this figure hidden unemployment resulting from forced early retirements, involuntary part-time work, make-work programs, and training schemes, the rate jumps to some 30 percent (Michael C. Burda and Jennifer Hunt, “From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany,” Brookings Papers on Economic Activity 2 [2001], 2). Burda and Hunt, “From Reunification to Economic Integration,” 11; Sinn, “Germany’s Economic Unification,” 9–10; Berliner Zeitung, April 7, 2004; Der Spiegel 15 (2004), 25. Sinn, “Germany’s Economic Unification,” 6. As Sinn puts it, “Capital changed from being a factor of production to being an economic good” (Sinn, “Germany’s Economic Unification,” 14–16). Der Spiegel 3/1993, 52; Jan Priewe, “Zwischen Abkoppelung und Aufholen— das schwache ostdeutsche Wachstumspotential,” WSI Mitteilungen 12 (2002), 706. Sinn, “Germany’s Economic Unification,” 9–10; Kettenacker, Germany 1989, 198–99. See, for example, the chapter by Irwin Collier in this book. Andrea Boltho, Wendy Carlin, and Pasquale Scaramozzino, “Will East Germany Become a New Mezzogiorno?” Journal of Comparative Economics 24 (1997), 241–64. See also Zatlin, The Currency of Socialism, which makes precisely this point. Grosser, Das Wagnis, 196–97; Ritter, Der Preis der deutschen Einheit, 194–95, 203; Kettenacker, Germany 1989, 167; Kreile, “The Political Economy of the New Germany,” 70; Rödder, Deutschland einig Vaterland, 208–16. According to Matthias Morys, concern over the Bundesbank’s autonomy is best measured by tracking yields in the long-bond market, which rose after these events because of inflationary worries. See Matthias Morys, “Was the Bundesbank’s Credibility Undermined during the Process of German

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77. 78.

79.

80.

81. 82.

Reunification?” London School of Economics, Working Paper No. 74/03 (May 2003), 32–57. George Soros, “Prospect for European Disintegration,” in The Alchemy of Finance (New York: John Wiley & Sons, 1994), 385. Paragraph 3 states that the bank “regelt mit Hilfe der währungspolitischen Befugnisse, die ihr nach diesem Gesetz zustehen, den Geldumlauf und die Kreditversorgung der Wirtschaft mit dem Ziel, die Währung zu sichern und für die bankmäßige Abwicklung des Zahlungsverkehrs im Inland und mit dem Ausland zu sorgen” (“Gesetz über die Deutsche Bundesbank vom 26.7.1957,” BGBl. I, 745). The statutory shift on October 22, 1992 subordinated the German bank to the European bank (GBl. 5. 2. 2009, BGBl. I, 160). See Robert L. Hetzel, “German Monetary History in the Second Half of the Twentieth Century: From the Deutsche Mark to the Euro,” Federal Reserve Bank of Richmond Economic Quarterly 88, no. 2 (Spring 2002), 29–62. According to paragraph 12, “sie ist in der Ausübung dieser Befugnisse, die ihr nach diesem Gesetz zustehen, von Weisungen der Bundesregierung unabhängig.” However, paragraph 12 also states that the bank is “verpflichtet, unter Wahrung ihrer Aufgabe die allgemeine Wirtschaftspolitik der Bundesregierung zu unterstützen” (“Gesetz über die Deutsche Bundesbank vom 26.7.1957,” BGBl. I, 745). Much of the literature published in the immediate aftermath of unification continued to emphasize the Bundesbank’s anti-inflationary mission over its relationship to the government. See, for example, Karl Kaltenthaler, Germany and the Politics of Europe’s Money (Durham and London: Duke University Press, 1998), 24–25; W. R. Smyser, The German Economy. Colossus at the Crossroads (New York: St. Martin’s Press, 1993), 47–49. Artur Woll, Allgemeine Wirtschaftslehre, 9th edition (Munich: Verlag Franz Vahlen, 1987), 463. Peter A. Johnson argues for understanding the original intent of the Bundesbank’s statutory obligation to safeguard the currency not as a domestic but rather as an international responsibility. That is, the bank’s mission as framed by lawmakers in 1957 was less anti-inflationary in origin than it was directed at the Bretton Woods system, not least because maintaining stable exchange rates assisted German exports. He further argues that the central bank did not initially enjoy the autonomy later ascribed to it. Johnson concludes from its charter that the central bank’s legal position clearly subordinates it to the German government because its institutional mission was defined by a statute, and a statute “can in principle be altered by a simple parliamentary majority.” More importantly, the Bundesbank is subject to whatever foreign treaties might be concluded by the federal government regarding the German monetary system (Peter A. Johnson, The Government of Money [Ithaca and London: Cornell University Press, 1998], 40–41, 60–63). Although Johnson’s historical reconstructions are subtle and his legal argumentation brilliant, they nevertheless fly in the face of quite a bit of empirical evidence—from the tussles with Adenauer in 1951, 1955, and 1956, to the failure of the Erhard and Schmidt governments and the

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83.

84. 85. 86.

87.

resignation of Karl Schiller as finance minister in 1972—suggesting that the bank was from its inception understood as a bulwark against inflationary chaos at home and celebrated for its independence from government interference. As a corrective to Johnson, see Uwe Wagschal, “Monetary Institutions: Maintaining Independence in Times of Fiscal Stress,” in Institutions and Institutional Change in the Federal Republic of Germany, ed. Ludger Helms (New York: St. Martin’s Press, 2000), 143–65. On Adenauer’s May 1956 speech in Gürzenich, see Helge Berger, Konjunkturpolitik im Wirtschaftswunder: Handlungsspielräume und Verhaltensmuster von Bundesbank und Regierung in den 1950er Jahren (Tübingen: Mohr Siebeck, 1997), 55–58; Jörg Bibow, “Investigating the Intellectual Origins of Euroland’s Macroeconomic Policy Regime: Central Banking Institutions in West Germany After the War,” Levy Economics Institute Working Paper No. 406 (May 2004), 1–39; Volker Hentschel, “Die Entstehung des Bundesbankgesetzes 1949–1957. Politische Kontroversen und Konflikte, Teil I,” Bankhistorisches Archiv 14 (1988), 3–31; Volker Hentschel, “Die Entstehung des Bundesbankgesetzes 1949–1957. Politische Kontroversen und Konflikte, Teil II,” Bankhistorisches Archiv 14 (1988), 79–115; Wagschal, “Monetary Institutions,” 161; David Marsh, The Bundesbank: The Bank That Rules Europe (London: Mandarin, 1992), 221; DBA/CF /Pöhl. Lahnstein letter to Pöhl, February 11, 1981, cited in Marsh, The Euro, 90. For the Bundesbank’s own sense of these conflicts, see the Bundesbank’s current president Axel Weber’s speech lauding directory member Ottmar Issing’s work for the bank (Axel A. Weber, “Unabhängige Geldpolitik in Europa—Die ersten sieben Jahre,” April 28, 2006, http://www.bundesbank.de/download/presse/ reden/2006/20060428.weber.pdf, last accessed on October 8, 2009). See, for example, Peter Betge, Bankbetriebslehre (Berlin, Heidelberg, and New York: Springer Verlag, 1996), 69–71. Leipziger Volkszeitung, January 25, 1990; Bryson and Melzer, The End of the East German Economy, 128–29. Leipziger Volkszeitung, January 25, 1990; The New York Times, January 31, 1990. Like Waigel, Pöhl came to regard monetary union as possible in the near term, but unlike Waigel viewed such a step as contingent on substantial improvements to the GDR’s financial position stemming from an influx of Western capital and the stabilization of the GDR’s current account. Although Pöhl did not explicitly say so, such an improvement could only occur if the Modrow government surrendered the planned economy, introduced marketoriented prices, and opened the GDR to Western investors—which East German officials continued to resist through February. Despite the attempts of Kohl’s advisers and scholars sympathetic to the chancellor to downplay it, the lack of consultation is striking. In a meeting on February 5, with Pöhl, Finance Minister Waigel appears to have touched on the possibility that a monetary union might come sooner than expected, though in uncertain and vague terms. In response to Pöhl’s query about whether he should bother to meet with Kaminsky and Luft, moreover, Waigel provided no guidance (interview, Pöhl, Frankfurt-am-Main, June 17, 1996; Schlesinger, Berlin, January 23, 1996; Süddeutsche Zeitung, June 26, 2000; Manfred Schell, “Zusammenbruch mit Perspektive,” 17–18).

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rethinking reunification / 97 88. Frankfurter Allgemeine Zeitung, January 7, 1990. 89. See the excellent summation in Morys, “Was the Bundesbank’s Credibility Undermined,” 11–17. 90. The Bundesbank proposal apparently represented a tenuous internal compromise between those who took a hawkish line against the inflationary consequences, such as Helmut Hesse, who bucked the bank’s tradition of secrecy and went public with his concerns, and those who believed that the government had acted responsibly given the political context, such as Norbert Kloten. To prevent the incident from undermining the bank and support the government, the Bundesbank Council took the unusual step of forcing Hesse to remove the speech from the public domain (Kreile, “The Political Economy of the New Germany,” 70; Morys, “Was the Bundesbank’s Credibility Undermined,” 19–22). 91. Interview, Hans Tietmeyer, chief, Economics Section, West German Economic Ministry (1962–1982), state secretary, West German Finance Ministry (1982–1989), economic adviser to Chancellor Kohl on German unification (1989–1990), Bundesbank director (1990–1991), Bundesbank vice president (1991–1993), Bundesbank president (1993–1999), Frankfurtam-Main, April 4, 1996; Hans Tietmeyer, “Erinnerungen an den Vertragsverhandlungen,” in Waigel and Schell, Tage, 57–117. 92. Interview, Pöhl, Frankfurt-am-Main, June 17, 1996; interview, Schlesinger, Berlin, January 23, 1996; Marsh, The Bundesbank, 43, 75. 93. Grosser, 245–52, 255–65; Kreile, “The Political Economy of the New Germany,” 70; Ritter, Der Preis der Einheit, 194–222. 94. The New York Times, April 24, 1990. 95. Morys, “Was the Bundesbank’s Credibility Undermined,” 18. 96. Interview, Pöhl, Frankfurt-am-Main, June 17, 1996. For Kohl’s churlish joke that Pöhl merely had his eyes on a higher salary as a private banker, see David Marsh, The Bundesbank, 224. 97. Deutsche Bundesbank (ed.), Die Geldpolitik der Bundesbank (Frankfurt-amMain: Deutsche Bundesbank, 1995), 86. 98. Soros, “Prospect for European Disintegration,” 385. 99. Marsh, The Euro, 133. 100. Ibid. 101. It is, of course, possible to argue, as at least one U.S. congressman has, that Soros’s profits resulted indirectly from central bank interventions, which represent British tax revenue and hence the money of individual British taxpayers. But as Soros himself pointed out, International investors did play a role in the breakdown of the Exchange Rate Mechanism, but it is impossible to have a common market without international capital movements. To blame speculators is like shooting the messenger.(Soros, “Prospect for European Disintegration,” 383). Although arbitragers play a key role in stabilizing markets, they are not exactly popular. To some extent, the moral opprobrium aimed at “speculators” is a form of premodern social criticism that misdiagnoses the brokering function as nonproductive and therefore parasitic. Given the history of European antiSemitism, it is hardly surprising that Soros’ Jewish origins have been used to cast aspersions on his profession—and vice versa.

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98 / jonathan r. zatlin 102. Maria Bucur, “An Archipelago of Stories: Gender History in Eastern Europe,” The American Historical Review 113 (December 2008), 1384. 103. See, for example, Michael J. Baun, “The Maastricht Treaty as High Politics: Germany, France, and European Integration,” Political Science Quarterly 110, no. 4 (Winter, 1995–1996), 605–24; Zelikow and Rice, Germany Unified, 234. The German-French summit on April 19, 1990 and the European Council meeting on April 28, 1990 in Dublin codified this agreement, which was then presented as the Maastricht treaty on December 15, 1991. 104. Marsh, The Euro, 99. 105. Ibid., 132. 106. Ibid., 133. 107. Matthias Kaelberer, Money and Power in Europe. The Political Economy of European Monetary Cooperation (Albany: State University of New York Press, 2001), 174–78. In addition, Kaelberer argues that the Kohl government had accepted European monetary union well before the GDR collapsed. To bolster his argument, he downplays German resistance during summer 1989. 108. Ibid., 190. 109. Reimut Jochimsen, “Economic and Monetary Union: A German Central Banker’s Perspective,” in Economic and Monetary Union: Implications for National Policy-Makers, ed. Klaus Gretschmann (Dordrecht, Boston, and Norwell, MA: M. Nijhoff Publishers, 1993), 198, cited in Kaelberer, Money and Power in Europe, 169.

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Ch a p t e r Fou r Th e Q u e st for Fr e edom a n d Sta bi l i t y: Pol i t ic a l Choic e s a n d t h e Econom ic Tr a nsfor m at ion of Ea st Ge r m a n y 19 89 –1991 Wolfgang Seibel

Introduction The economic transformation of the East German economy initiated in 1990 and its socioeconomic consequences remain to the present day one of the most controversial topics in assessing the key decisions that led to German reunification. The fact that East Germany underwent the most dramatic depression in German economic history1 has had a long-lasting impact not only on the economic and fiscal development in Germany as a whole but also on the political psyche, especially in East Germany. For East Germans, the short-term economic consequences of reunification were the opposite of what they had been hoping for when the pace to unification was accelerated in early 1990. Those hopes were not only the results of illusions and ignorance as far as the economic mechanisms of capitalism were concerned.2 They had been nurtured as well by the promises made by West German politicians seeking the support of the East German electorate in the politically pivotal year of 1990, with the first free elections in the German Democratic Republic (GDR) of March 18 and the first allGerman elections of December 2. As with every spectacular historical event shaped by ambivalence and uncertainties, the trajectory of economic transformation in post-1990 East Germany is subject to political myth-building. In September 2010, the prime minister of Brandenburg, Matthias Platzeck, denounced the reunification as an act of Anschluss and its economic consequences as a process of “merciless de-industrialization” (gnadenlose Deindustrialisierung).3 This language has been used primarily by postcommunists of the Party of

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Democratic Socialism (PDS) and its successor, Die Linke, at least so far, but it still resonates with the feelings of many East Germans who remained traumatized by unemployment and economic decline during the 1990s. The economic conditions are often characterized as the consequence of ruthless capitalism and quasi-colonial land grab of the West. German media, in turn, soon started to ridicule Helmut Kohl’s promise of “flourishing landscapes” (blühende Landschaften) that were supposed to emerge in East Germany as a consequence of reunification and the currency union of July 1, 1990. In this portrayal, Kohl became the personification of economic naïveté that discounted the expert’s objections for the sake of short-term political gains. This chapter makes an attempt to reanalyze the key political decisions that shaped the trajectory of economic transformation in 1989/1990 and the subsequent coping strategies designed to control the societal consequences. The message is fourfold: • First, the political decisions shaping the economic development in post-1990 East Germany were neither improvised4 nor the outcome of political opportunism and blundering. They were, instead, shaped by the collapse of a geopolitical equilibrium and by the attempts to keep the consequences of that collapse under control. • Second, serious attempts to initiate a gradual rather than shock-like transition to capitalism did exist in 1989/1990. They were bound to fail, not because they were unrealistic per se, but because the people of the GDR were determined to abandon their state. • Third, the political decisions shaping economic development in post1990 East Germany, the inner-German currency union in particular, were again much more influenced by East German interests and their political representatives than by West German strategies. • Fourth, both the economic depression and the attempts to deal with it were rather shaped by a combination of East and West German institutional arrangements and policy styles, including consensusoriented federalism and neocorporatism, more than by forces of unleashed capitalism or “merciless de-industrialization.”

From Gradual to Shock-Like Transition Two decisions were overwhelmingly influential in shaping the integration of the GDR into the political and economic system of the West German Federal Republic, formally completed by October 3, 1990: the announcement of the West German government of February 7, 1990, proposing

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formal negotiations with the GDR government on an inner-German currency union, and the provision in the intergovernmental treaty (Staatsvertrag) of May 18, 1990, that fixed the related conversion rate for wages and savings to 1:1. An early currency union was the opposite of what the Bundesbank and the Council of Economic Experts (Sachverständigenrat) an independent and nonpartisan government board empowered to analyze economic developments, had recommended. Until late January 1990, in accordance with those recommendations, the West German federal government had treated an inner-German currency union as the capstone of economic transition within the GDR rather than its starting point. The 1:1 conversion rate for wages and a certain amount of savings was chosen against the advice of the Bundesbank and the Sachverständigenrat. Both institutions had emphasized the disastrous consequences of a 1:1 conversion rate that would force East German firms to pay wages in hard currency at a level that could not be covered by the profits made on the basis of low productivity and a largely obsolete capital stock. The early currency union at disastrous conversion rates defied not only West German preferences for gradual transition from a socialist economy to capitalism, however, but also East German reform options that had emerged since the fall of 1989. When Prime Minister Hans Modrow took office on November 17, 1989, a reformist intellectual elite became temporarily influential—loyal communists who nonetheless had repeatedly criticized the actual practice of economic planning and production and who therefore had been neutralized by the regime. Typical representatives of this group were Christa Luft, minister of economy and deputy prime minister, and Wolfram Krause, previously deputy chairman of the Commission for Economic Planning (Staatliche Plankommission). Krause had been ousted from the Berlin district administration of the communist Socialist Unity Party (SED) in 1978. Luft had been president of the Hochschule für Ökonomie “Bruno-Leuschner” in Karlshorst. Modrow and Luft convened a Task Force for Economic Reform reporting to the Council of Ministers of the GDR (Arbeitsgruppe Wirtschaftsreform beim Ministerrat der GDR) and appointed Wolfram Krause as its director. These politicians and functionaries represented the reformist wing of the SED and, consequently, those hoping for renewal of socialism and the resilience of the GDR as a sovereign state. They also sought to maintain the system of collective ownership of industrial assets in the form of the Volkseigenes Vermögen or “people’s property.” The idea of modernizing the socialist economy, however, was soon eclipsed by the idea of a “Third Way” that was widespread among those forming the Round Table on December 7, 1989. The Round Table was

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composed of representatives of the political parties and social groups within the official National Front and the representatives of the civil movement that formed the core of the political opposition. Among those promulgating a “Third Way” beyond capitalism and socialism, GDR style, the group “Demokratie Jetzt” (DJ) or Democracy Now, came up with the most elaborate ideas in the field of economic policy. Wolfgang Ullmann, a DJ representative and himself a trained theologian, together with Matthias Artzt, an engineer, and the physicist Gerd Gebhardt had drafted a paper entitled “Future through Self-Organization” (“Zukunft durch Selbstorganisation”) in early November 1989. The paper advocated for the legalization of private ownership of firms and industrial assets under the condition of “social commitment” (soziale Bindung) of the owners.5 Moreover, the paper expressed as the “strategic goal” to “transfer as much as possible of the property of the people [Volkseigentum] directly to the citizens of the GDR.”6 The group Ullman/Artzt/Gebhardt constituted itself as the Free Scholarly Community for Self-Organization (Freie Forschungsgemeinschaft Selbstorganisation). On December 6, 1989, Ullmann took his seat at the Round Table as its representative. The goal of a “socially committed” market economy combined with a far-reaching transfer of “people’s property” to the people of the GDR resulted in preliminary considerations concerning the institutionalization of a certain trust function (Treuhänderschaft). Its main purpose would be to transform public assets into a legal form that could persist in case the GDR disappeared and became part of the constitutional and legal order of the Federal Republic. These considerations were then laid down in a paper drafted by Ullmann and others and submitted to the Round Table, where it was put on the February 12, 1990, agenda.7 The core of the document was a proposition for the immediate creation of a trust corporation in the form of a holding company to safeguard the shareholder rights of GDR citizens with respect to the people’s property. A couple of days earlier, on January 28, 1990, Prime Minister Modrow had met the chairmen of the parties of the political opposition and the previous “bloc parties.”8 As a result of that meeting, the date of the first free elections of the GDR parliament, the Volkskammer, was brought forward from May 6 to March 18, 1990, while the date for general municipal elections was set for May 6, 1990. Most importantly, however, a “government of national responsibility” was formed, which included the oppositional parties and representatives of the civic movement that had initiated the decisive protests in the fall of 1989. The Volkskammer confirmed the new interim government on February 5, 1990.9 It was during the Volkskammer session of January 29, 1990, that the minister for mechanical engineering, Karl Grünhold, in a report on the

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overall economic situation, mentioned that in the fourth quarter of 1989 alone 350,000 citizens had left the GDR, the equivalent of 2 percent of the population and, when extrapolated, a rate of 1.4 million citizens per year. During the same Volkskammer session, Prime Minister Modrow intimated that the state budget deficit had risen to 17 billion marks. Modrow characterized the economic situation as “disturbing.”10 When the West German federal government declared its readiness on February 7, 1990, to negotiate with the government of the GDR about an inner-German currency union, it was primarily meant as a political signal to the people of the GDR. The wording of the offer was significant. According to the press release, the federal government was ready “to start immediately negotiations about a currency union with economic reform.”11 The reference to “economic reforms” was, at this point, probably just a rhetorical formula designed to conceal the abrupt change of course to which the federal government had meanwhile committed itself.12 In fact, the declaration of February 7, 1990, in favor of “immediate” negotiations about a currency union, was the result of political necessity that was at least as much international as domestic in nature. The West German government was exposed to tremendous pressure from both inside and outside Germany based on the reasonable conclusion that the GDR found itself at the brink of demise and only the government in Bonn was in the position to restabilize it. The key to restabilization was the containment of the wave of immigrants that had increased to a rate of 3,000–5,000 people per day and threatened to undermine both the economic viability and the absorption capacity of the West German Federal Republic. Actors inside Germany, however, had a different sense of what should be done than those outside Germany. The obvious destabilization of the GDR required decisive steps toward a sort of inner-German integration far beyond the “federative structures” mentioned in Chancellor Helmut Kohl’s “ten-point program” promulgated in the Bundestag on November 28, 1989. Meanwhile, the key players outside Germany—the governments of the United States, the United Kingdom, and France—insisted on decelerating the pace of inner-German rapprochement. Their main motive was the fear of negative repercussions to the cooperative and prudent government of the Soviet Union under Gorbachev.13 Preparing an economic and currency union to unite the two German states and setting an earlier date for the Volkskammer elections, on March 18, 1990, were political steps that paid tribute to that delicate dilemma in which the West German federal government found itself. Intensifying economic cooperation in general and the announcement of a currency union in particular—needless to say on the basis of the West German deutsche mark (DM)—were credible signals sent to the GDR populace that the

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West German government was irrevocably determined to assume political responsibility for Germany as a whole. By way of initiating a currency union, the West German DM, the symbol of the “economic miracle” of the 1950s and 1960s, became the token of the inner-German merger. These prospects would not only contain the wave of inner-German migration. The measure itself would bring the GDR state budget and currency system under the control of the West German government and the Bundesbank. At the same time, it was a measure below the threshold of a regular unification of the two German states with its spectacular international implications, representing no less than a fundamental change of a geopolitical order that had lasted for more than 40 years as the result of World War II. But the Band Played on . . . There was yet another implication: any kind of “economic reform” such as the one envisaged in the reform-minded SED circles around Wolfram Krause and Christa Luft or the ones put forward by the Freie Forschungsgemeinschaft Selbstorganisation around Wolfgang Ullmann became totally illusory as early as in February 1990. Not that the respective ideas of economic reforms were unrealistic from the very outset. Presumably, they would have been appraised in the West as “revolutionary” had they been presented a year earlier. However, the very state order that was the indispensable framework for the implementation of any such reform was, by then, in a state of irreversible dissolution. There is a certain tradition in Germany of implementing fundamental reforms as a consequence of existential crises of the state. The Prussian reforms after the defeat in the war against Napoleonic France in 1806 or the far-reaching reform of the economic governance structure after the depression of 1873–1879, are prominent examples. However, those had been circumstances of mutual dependence of state and society that simply did not exist in the GDR of 1990. The very state that was, for the sake of its actual reform capacity, heavily dependent on civic support had become unacceptable to its own citizens. This was the price to be paid for forty years of dictatorship. And it was the existence of a real alternative, the West German Federal Republic and its political and economic order—an option for which hundreds of thousands of GDR citizens just a couple of months after the fall of the Berlin Wall had “voted with their feet”—that made the sustainable restabilization of GDR statehood fundamentally illusive. It was not just the political system but also the state of the GDR as such that lacked a minimum degree of civic loyalty. Political and economic reforms under the condition of a maintained GDR statehood therefore obviously had no basis either.

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However, on the lethally leaking vessel “GDR,” the bands played on for quite a while. In January 1990, the Arbeitsgruppe Wirtschaftsreform, chaired by Wolfram Krause, had drafted a paper that was published as supplement to the journal Die Wirtschaft on February 1, 1990. The authors wrote, “The regulatory influence of the state has to be reduced to a scale that shapes the conditions for economic growth, stability and proportionality as well as the social and ecological direction of economic development.” Governmental regulation of the economy should focus on making “economic methods” more effective. It should, therefore, initiate a reform of the price system, a tax reform, a “performance-based payment principle,” a “policy of scarce money on the basis of a performance- and efficiency-oriented loan policy,” the development of the “state-bank of the GDR . . . to an institution independent from governmental interference,” and the erection of a system of “independent commercial banks.”14 From today’s perspective, these ideas may even appear as neoliberal. They were presented, however, by loyal SED/PDS members. Birth of the Treuhandanstalt The paper drafted by Freies Forschungskollegium “Selbstorganisation” that reached the agenda of the Round Table on February 12, 1990, contained the proposition to create a “trust corporation” (Treuhandgesellschaft) to protect the property rights of GDR citizens regarding the Volkseigentum. The formal purpose of the proposition was to close a legal lacuna that could be foreseen in the case of an “affiliation of the GDR to the Federal Republic,” because the legal form of collective property of industrial assets did not exist in the West German legal system. The basic idea was, accordingly, to guarantee the Volkseigentum not only nominally but literally in the form of individual entitlement. Again, similar ideas developed within the Arbeitsgruppe Wirtschaftsreform around Wolfram Krause and his SED/PDS comrades. Here, the initiatives were even more pragmatic. The reform-minded postcommunists simply suggested transforming the so-called Volkseigene Betriebe and Kombinate into limited liability corporations (Gesellschaften mit beschränkter Haftung) and stock corporations (Aktiengesellschaften) in accordance with West German corporate law. The irony was that the Limited Liability Corporation Law of 1892 and the stock corporation law of 1937 had never been suspended in the GDR and, consequently, could serve as the basis of the envisaged transformation even within the framework of the GDR legal system. The shares of the capital stock of those newly created corporations, however, would have been held by an Office of the Treasury (Schatzamt). It is here that the proposition of the Arbeitsgruppe

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Wirtschaftsreform and the ideas of the Freies Forschungskollegium “Selbstorganisation” converged. The Treasury Office (proposed by the Arbeitsgruppe Wirtschaftsreform) and the “Treuhandgesellschaft” (proposed by the Freies Forschungskollegium “Selbstorganisation”) were similar in both form and function. Both were designed to keep the collective ownership of industrial assets, the Volkseigentum itself, in public hands. The main difference between the two propositions, however, was that the Freies Forschungskollegium “Selbstorganisation” insisted on the transformation of the collective ownership of the “people” into individual legal entitlements of the citizens of the GDR. Regardless of those differences, on March 1, 1990, the Council of Ministers of the GDR decided to create an “Authority for Trusteeship Administration” of the Volkseigentum designated as the Treuhandanstalt (Anstalt zur treuhänderischen Verwaltung des Volkseigentums [Treuhandanstalt]).15 Also on March 1, 1990, the Volkskammer passed an ordinance regulating the transformation of state-owned firms into private companies.16 Thus the Treuhandanstalt was born. The Politicization of the Currency Union and the Staatsvertrag of May 18, 1990 The Volkskammer elections of March 18, 1990, resulted in a surprising victory of Helmut Kohl’s Christian Democrats, a quasi-plebiscitarian decision in favor of the swift reunification of the two German states. The Christian Democratic Union (CDU) not only benefited from Kohl’s charisma but also from the organizational infrastructure at the disposal of the East German CDU as a former “Blockpartei.” Lothar de Mazière (CDU) became the first and last prime minister of the GDR to emerge out of free elections, acting as the head of a grand coalition comprising all major political forces with the exception of the SED/PDS. The coalition agreement of April 12, 1990, expressed the political will to achieve national reunification through the accession of the GDR to the West German Federal Republic on the basis of a currency and economic union. Of pivotal importance, also in the perception of contemporary observers, was the commitment to a currency conversion rate of 1:1. It was beyond any doubt that the East German government had not the slightest leeway to deviate from this self-binding pledge. It is only with the benefit of hindsight, however, that the decision of April 12, 1990, turned out to be the critical juncture at which the breakdown of the East German economy, under the conditions of unrestricted market forces, became unavoidable. The coalition agreement of April 12, 1990, had been prepared under the massive pressure of East German public opinion. Two weeks earlier,

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on March 29, 1990, West German newspapers reported on a confidential memo submitted to the central board of the Bundesbank for a meeting held in the presence of the West German minister of finance, Theo Waigel, advocating a general conversion rate of 2:1 (i.e., 2 GDR marks to be converted into 1 DM). According to that scheme, only individual savings up to an amount of 2,000 GDRmarks per person would be converted at a rate of 1:1. The paper leaked to the press. What followed was a public outcry in the GDR. For the first time since the dramatic fall of 1989, massive rallies were organized expressing the disappointment of East Germans who, just a couple of days earlier, had voted for what they thought would be a prosperous future.17 These protests suddenly put into jeopardy the recent gains in terms of political stability realized through the announcement of the currency union, the elections of March 18 and the formation of a democratic government constituted by a grand coalition. The intergovernmental treaty (Staatsvertrag) of May 18, 1990,18 finally stipulated a conversion rate of 1:1 for salaries and wages, stipends, pensions, housing rents, and “further permanent payments.” Savings were to be converted at a rate of 1:1 up to set limits starting at 2,000 GDR marks for children and juveniles and ranging to 4,000 GDR marks for adults to 6,000 for the retirees. This Staatsvertrag was the formal watershed of political dynamics that resulted in a bizarre combination of risk escalation and risk mitigation. The risk of triggering the final breakdown of the GDR economy grew inevitable with each step closer to conversion parity between the two currencies: with conversion, East German firms would be forced to pay salaries and wages in hard currency at a level that could never be matched by the proceeds they would be able to realize through the sale of their outmoded products on a competitive market. The 1:1 conversion rate for salaries and wages virtually sealed the fate of the GDR economy when it became effective on July 1, 1990. By the same token, however, any conversion rate below parity would have been fundamentally incompatible with the goal of political stabilization in both East and West Germany. Facing not only political disappointment but also a substantial reduction of available income and a decreasing instead of increasing standard of living, hundreds of thousands of East Germans would have chosen the obvious alternative. They would have left their own disadvantaged currency zone to settle in West Germany. Welfare payments alone would have provided a standard of living unattainable on the basis of the meager salaries paid in West German currency in accordance with East German labor productivity (which was estimated to reach only 30 percent of West German labor productivity). Even if East Germans would have decided to stay and benefit from the welfare system that was expected to be transferred from West to East

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Germany—which was precisely what the Staatsvertrag of May 18, 1990, regulated—the dilemma remained the same. Hundreds of thousands of East Germans whose salaries would fall below a certain minimum would have been entitled to receive welfare payment. Pension payments in particular would not suffice to make a living. This was spelled out to Helmut Kohl by his minister for labor and social affairs, Norbert Blüm, in a letter of March 27, 1990.19 Blüm, consequently, strongly advocated a 1:1 conversion rate for wages and pension payments because otherwise, as he wrote, the West German government could not keep the promise to transfer the West German welfare system to East Germany. It became crystal clear that no politically viable alternative existed to a conversion rate that necessarily would push the East German economy over the brink of collapse. The Changing Role of the Treuhandanstalt The currency union based on a 1:1 conversion rate totally changed the role of the Volkseigenes Vermögen and the role of the Treuhandanstalt founded by the Modrow government on March 1, 1990. With the West German government in charge of the GDR budget and fiscal system, the Volkseigenes Vermögen was designed to function as a deposit for the huge governmental investments necessary for the modernization of the East German economy and public infrastructure. As an influential commentary to the Staatsvertrag put it, The Treuhandanstalt, in assuming the ownership function for state-owned firms in the GDR, has the task of mobilizing the Volkseigene Vermögen whose industrial assets alone represent an estimated value of several hundreds of billion deutsche marks. Considerable resources are to be mobilized through an active privatization policy in order to ensure focused but broad measures of restructuring.20

In the perception of contemporary observers, this arrangement could easily seem a fair deal. On the one hand, the West German Federal Republic would bear all the major risks connected with the heavily indebted state budget of the GDR and the huge investments necessary for economic modernization in East Germany. On the other hand, the government of the GDR conceded that the Volkseigenes Vermögen would be used to cover the budget deficit and the costs of economic reform and reconstruction rather than allowing the East German people to share in what, in formal terms at least, used to be their property. The bitter irony was that whatever the use of the Volkseigenes Vermögen would be, the Staatsvertrag and the currency conversion rate of 1: 1 made it null and void anyway. The conversion rate of 1:1 for salaries and wages not

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only made the state-owned firms held by the Treuhandanstalt unprofitable but also made them unsellable. And because the Treuhandanstalt firms were unsellable, the lion’s share of the Volkseigenes Vermögen became worthless. Whether the taxpayer and the federal government would have the staying power necessary for a credit-financed restructuring of the East German economy under the vague prospects of an ultimate redemption through the sale of restructured and newly profitable firms was more than questionable. As it would soon turn out, the federal government was not willing to take that risk. Accordingly, the Staatsvertrag, in force on July 1, 1990, defined an extremely narrow path for how to use what was left from the Volkseigenes Vermögen and, consequently, for the actual policy of the Treuhandanstalt. It was also a logical consequence that not only the West German federal government took charge of the GDR budget and fiscal system but also West German managers and bureaucrats took charge of the Treuhandanstalt as an institution. Step by step, the board of the Treuhandanstalt was “westernized.” The last East German left the board in June 1992. It happened to be the very same Wolfram Krause, the former SED dissident, reactivated by Prime Minister Modrow in the fall of 1989 as the intellectual mastermind of economic reform in a socialist framework. In anticipation of these fundamental changes, the Volkskammer approved a new legal framework for the Treuhandanstalt. It passed the Law Pertaining to the Privatization and Reorganisation of the People’s Assets, by a “great majority.”21 (As a bizarre coincidence, this happened on June 17, 1990, the anniversary of the popular uprising of 1953.) The new law became effective on July 1, 1990, together with the Staatsvertrag that regulated the currency union as well as the transfer of important elements of the West German legal system, the social security system in particular. The new Treuhand Law, as it became known, stipulated that the priority of privatization of the state-owned assets as the prime task of the Treuhandanstalt.22 The speed of privatization, however, was soon dictated by the consequences of the currency union. The deep economic depression of the East German economy that followed the introduction of the DM on July 1, 1990, translated itself into a dramatic devaluation of the Treuhandanstalt assets. This, in turn, dramatically intensified the privatization efforts, which again accelerated the drop-off of the market price for firms. Soon, many Treuhandanstalt firms could only be sold at “negative prices,” that is, with the help of government subsidies. This was obviously the opposite of the official purpose of the Treuhandanstalt assets, which the Staatsvertrag treated as the collateral of the budget deficit caused by the state-financed modernization of the East German economy. The Staatsvertrag basically suspended itself.

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The Second Treuhand Law of June 17, 1990 The new Treuhand Law was designed to adapt the policy and the organizational structure of the already existing Treuhandanstalt to the new requirements established by the Staatsvertrag. Although the law itself remained relatively vague and abstract, a new charter issued by the Council of Ministers of the GDR on July 22, 1990, came up with the essentials. The charter gave the Treuhandanstalt the right to refinance itself on the capital market through issuing government bonds. This meant in practice that the Treuhandanstalt and its budget was separated from the ordinary federal budget and, thus, from ordinary parliamentary control. However, this was not the only deviation from the regular model of democratic control and West German constitutionalism. The Treuhandanstalt reorganized itself as a tightly centralized authority in charge of privatizing state-owned industrial assets of unprecedented size and scale. This institution not only had nothing in common anymore with the initial Treuhandanstalt founded by the Modrow government on March 1, 1990; it had nothing in common with the federal structure of the West German polity, either. Nonetheless, the new Treuhandanstalt was not an institutional neophyte. Ironically, it very much resembled the centralized economic governance structure of the very GDR and its planned economy it was supposed to dismantle. Even more bizarre was the fact that, from late summer 1990 onward, an organizational reform initiated by the newly appointed Treuhandanstalt president, Detlev Rohwedder, suppressed what was left in the way of decentralized structures. This affected the huge holding companies under the name Treuhand-Aktiengesellschaften (Treuhand stock corporations) that, according to the law, were designed to function as the operational units in charge of privatization and restructuring.23 In the perception of Rohwedder and others, however, the Treuhand-Aktiengesellschaften could easily emerge into uncontrollable industrial conglomerates and thus undermine the core purpose of the Treuhandanstalt, which was swift privatization. Rohwedder instead reanimated the Councils of Economic Administration (Wirtschaftsverwaltungsräte) in the previous fourteen districts of the GDR and rebaptized them Treuhandanstalt branch offices. These units were dependent on Treuhandanstalt headquarters in Berlin, just as the Wirtschaftsverwaltungsräte had been dependent on the central authorities in Berlin during the communist era. During the GDR, those central authorities had been represented by the so-called branch ministries. Now the Treuhand headquarters in Berlin was internally reorganized in accordance with the logic of those branch ministries. The so-called branch directorates were established, each of them in charge of a specific segment

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of the GDR economy and in most cases employing the same rank-and-file personnel that already had served under the regime of a state-controlled economy. The tactical rationale of tight administrative control that prevailed under communist rule remained in place. Rohwedder, an experienced troubleshooter of the crisis-ridden West German steel industry, had realized the necessity of exerting strict managerial control over an industrial empire that produced daily gigantic losses at taxpayers’ expense. Even the physical location of the Treuhandanstalt headquarters replicated the communist past. In March 1991, the headquarters moved from an insufficient building on Alexanderplatz to the vast complex of the former “House of the Ministries” located at the corner of Leipziger Strasse and Wilhelmstrasse in the heart of the former (and present) Regierungsviertel that, indeed, had accommodated the branch ministries of the GDR. As an ultimate irony, the GDR branch ministries themselves had been the beneficiaries of the Nazi past. The building at the corner of Leipziger Strasse/Wilhelmstrasse had been erected as Hermann Göring’s Reichsluftfahrtministerium in 1935. The Treuhandanstalt had to cope with legacies of all sorts, indeed. Patterns of Institutional Stabilization: Co-optation and Cooperation The economic depression that followed the currency union of July 1, 1990, implied the necessity to accelerate the privatization of the stateowned industrial assets literally at all costs. By the same token, however, the Treuhandanstalt had to serve as an institutional buffer, absorbing the social and political costs caused by its own privatization policy. Economic depression meant that the Treuhandanstalt, as the owner of several thousands of firms, had to lay off hundreds of thousands of employees. It thus contributed considerably to the unemployment rate in East Germany that quickly rose to more than 20 percent in 1991. It was the very same Treuhandanstalt, however, that successfully served as a political shock absorber desperately needed by the federal government in Bonn. The institutional stability of the Treuhandanstalt became a key factor ensuring the strategic leeway of the federal government’s privatization policy for East Germany. The main component on which this achievement was based was the combination of a rigid organizational core, GDR style, with a flexible organizational periphery in accordance with West German federalism and neocorporatism. The key period for these institutional components to emerge was the first half of 1991. In that period, political pressure on the Treuhandanstalt increased massively because the results of privatization remained modest, while lay-offs, corporate debts, and open unrest among East German

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workers steadily grew. At the end of the first quarter of 1991, 85 percent of the initial 8,000 firms were still in the Treuhandanstalt portfolio. East German industrial output had sunk to 45 percent of its 1990 level. The unemployment rate rose to 11.7 percent, but unemployment on an artificial second labor market, largely funded through government funds, accounted for an additional 13 percent. Thus a quarter of the active population had either no regular job or no job at all.24 In February 1991, a wave of wildcat strikes triggered by lay-offs and actual or anticipated shutdowns swept across Treuhand-held firms. This not only affected the Treuhandanstalt itself but also the respective state governments that meanwhile had been established according to the West German pattern, but were still weak, lacking administrative capacity and political standing. Politicians at the state level became increasingly nervous and turned to the federal government, asking for support in what they perceived as a struggle against the federal agency, Treuhandanstalt, and its privatization policy. In a similar vein, the unions asked for a decelerated pace of privatization and either the dissolution of the Treuhandanstalt or its transformation into a federal agency for economic reconstruction.25 The Treuhandanstalt could fulfill its main political task of shielding the federal government in Bonn from political pressure only under the condition that the primary and potentially powerful challenging actors were integrated or neutralized. The role and potential strength of those actors was defined by the political system and the political culture of the West German Federal Republic and its characteristic relationship between state and economy. The crucial challenging actors were the East German Länder and the unions. A remarkable aspect of the early politicoeconomic history of the reunified Germany is that the Treuhandanstalt managed, indeed, to integrate the Länder and the unions and to neutralize the political pressure they exerted. What is more, unlike prominent forerunners— the Tennessee Valley Authority, for example, in Philip Selznick’s classic case study from 1949—the Treuhandanstalt managed to integrate those challenging actors without changing course. Instead, it continued its rigid privatization policy and that policy was de facto tolerated by both the Länder and the unions. Union leaders and the entire crew of East German prime ministers were co-opted into the board of the Treuhandanstalt as early as the fall of 1990. This classic pattern of co-optation26 turned out to be the backbone of the Treuhandanstalt’s institutional stability. However, mere representation of potential challenging actors in the decision-making bodies of the Treuhandanstalt was not enough. The decisive question was whether the mechanism of co-optation would lead to effective cooperation. And, indeed, a stable pattern of cooperation emerged in the spring of 1991.

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The wave of strikes and unrest in early 1991 triggered a cascade of agreements and arrangements between the federal government, the Treuhandanstalt, the governments of the East German Länder, and the unions. On March 8, 1991, the federal government announced the Gemeinschaftswerk Aufschwung Ost (Common Work for the Rise of the East), a program consisting of a series of financial and infrastructural support initiatives favoring the East German Länder.27 On March 14, 1991, Chancellor Helmut Kohl and the prime ministers of the East German Länder reached an agreement on Principles of Cooperation between the Federal Government, the State Governments, and the Treuhandanstalt for the Rise of the East.28 Part of the agreement was the establishment of TreuhandWirtschaftskabinette (Treuhand Economic Cabinet), a slightly pretentious designation for regular meetings of Treuhandanstalt board members and relevant ministers of the respective Land. On March 20, 1991, the economic ministers of the East German Länder issued a common statement according to which the Treuhandanstalt had to coordinate regionally important decisions with the respective Länder, complemented by a catalogue of standard operating procedures designed to guarantee that cooperation actually took place.29 These decisions and procedural stipulations were adopted by Birgit Breuel, at that time the relevant board member in charge, in a letter of March 25, 1991, to her fellow board members, head of divisions and heads of the branch offices.30 On April 13, 1991, the Deutscher Gewerkschaftsbund (DGB) (the umbrella organization of the unions), the Deutsche AngestelltenGewerkschaft (the white-collar union), and the Treuhandanstalt issued a common declaration containing a “guideline for social plans.”31 On July 17, 1991, an agreement to form associations for labor support, employment, and structural development was agreed upon.32 Undeniably, the federal government and the leading officials of the Treuhandanstalt were determined to integrate the East German state governments as well as the unions into core components of strategic decision making. The resulting arrangement proved to be remarkably effective in stabilizing the weak political flank of the Treuhandanstalt. Even leading Social Democrats and influential union leaders, for example, were outspoken in their support of the Treuhandanstalt when the agency was challenged by protests and opposition elsewhere. When the Social Democrats, at that time the opposition party in the Bundestag, used their parliamentary minority rights to create a committee to investigate the role and the practice of the Treuhandanstalt in 1993, two prominent Social Democratic members of the board of the Treuhandanstalt reacted in open protest. One was the prime minister of the state of Brandenburg, Manfred Stolpe, the other the chairman of union for the chemical industry, Hans-Hermann Rappe.33

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The unions in particular had their own particular incentives for supporting the grand design of the Treuhandanstalt policy behind closed doors while also supporting, in selected cases, the protest against it. To their East German clientele, the unions needed to demonstrate their ability to influence strategic decision making. This is what they actually did through the series of basic agreements and guidelines agreed upon in the first half of 1991. To their West German clientele, by contrast, the unions had to demonstrate that they would not allow a low-wage competitor to emerge in East Germany. The unions were successful in combining both requirements—at the expense of East German jobs. On March 1, 1991, the East German employers association and the unions in the metal industry reached an agreement according to which wages in the East German metal industry should be raised in continuous steps up to the West German level by 1995. What might appear in hindsight to have been a reckless imposition of competitive disadvantages on East German firms was the result of convergent interests among employers, union representatives, the federal government, and the immediate beneficiaries among East Germans in the metal industry who were happy simply to keep their jobs. One should recall that both employers’ associations and organized labor remained weak in East Germany in 1991. There were neither experienced and politically uncontaminated union leaders nor plant-level union functionaries as established and accepted as their West German counterparts. As a result, both the representatives of the employers and the representatives of the employees who were negotiating wages and labor arrangements in East Germany were actually West Germans. The federal government, represented by the Treuhandanstalt, was still by far the largest and most important employer in East Germany. While facing a severe regional economic depression, the Treuhandanstalt depended on both the neutralization of the unions as a pressure group and their mobilization as an integrative factor at the plant level. Conversely, both the representatives of the employers and the representatives of the unions, being committed to the protection of the interests of the large majority of West German unionized labor and the West German industry, had one common interest, which was to keep the emergence of wage-based competition in East Germany under control. Conclusion: Defying the Myths Against this cartel of interests, the Treuhandanstalt stood no chance in the attempt to assume the classic role of the employer interested in containing wage costs. In a subtle way, this demonstrates that the Treuhandanstalt

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was far from pursuing a reckless (or “neoliberal”) entrepreneurial policy. The Treuhandanstalt was a highly politicized agency that fulfilled its political function with a remarkable degree of flexibility. The core of that political function was formed by the necessity of making the consequences of the currency union of July 1, 1990, compatible with the requirements of political support and integration in accordance with the dominance of West German institutional patterns and power structures. Powerless as the East Germans were once they had abandoned their own sovereign state, the main burden of adaptation was put on their shoulders. This was being done, however, by changing coalitions under the headline or pretext of various ideologies and interests. Nothing could be more aberrant than the notion of East Germany falling prey to a political and economic “Anschluss” in a quasi-colonial and neoliberal manner. Not only was the revolution of 1989 initiated and performed entirely by the East Germans alone, they also had the decisive say on the trajectory of economic change. It was they who exerted the decisive influence on the key decisions of 1990 paving the way to reunification and its economic consequences: the Volkskammer elections of March 18, 1990, were chiefly a plebiscite in favor of a swift accession of the GDR to the West German Federal Republic and a currency union at a conversion rate of 1:1. It was the East Germans who reinforced that pressure when the first freely elected GDR government was formed under the Prime Minister Lothar de Mazière in early April 1990. It was they who rendered obsolete the projects of reforms and gradual transition to a capitalist market economy that had been developed by reform-minded communists and the advocates of a “Third Way” at the Round Table in early 1990. Between November 9, 1989, the day when the Berlin Wall fell, and May 18, 1990, when the representatives of the Federal Republic and the GDR signed the intergovernmental treaty on the currency union, the East Germans had achieved almost everything they had asked for through demonstrations, protests, “voting with their feet,” and voting at the ballot boxes: They had achieved the removal of dictatorship, the dissolution of their own state, an early currency union at attractive conversion rates for wages, savings, and pensions, and the transfer of one of the most elaborate welfare systems as a “safety net,” in case all their achievements had failed to reduce the many risks that remained. Finally, East Germans through their own protests managed to achieve the continuous increase of wages independent of labor productivity in 1991. The East Germans, however, lacked the human, structural, and ideational means to keep what they had initiated under control. The new democratic elites were inexperienced and without any autochthonous professional support by experts or bureaucrats. No relevant institutional

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structures emerged out of the revolution of 1989 except for the Round Table and the Treuhandanstalt. Both were ephemeral bodies that either disappeared with the election of March 18, 1990, or completely changed their character when the currency union of July 1, 1990, was prepared and implemented. Finally, no compelling narrative has put the events of 1989 through 1991 in the historical context it emerged from: the linkages between dictatorship, war, geopolitics, postwar reconstruction, economic governance, and the conditions of political stability. It was plausible to reanimate the myth of the West German economic miracle when the inner-German currency union was prepared in early 1990 as part of an attempt to connect a movement for freedom with the prospects of economic recovery, but the economic miracle narrative was also the first step toward making West German standards the measure of all things. With this tone having been set, it was almost impossible to remind Germans of the overall framework that defined the German condition in Europe and, at the turn of 1989–1990, was shaping the mind-sets of the political elites outside Germany. As we know from the documents that have since become accessible,34 there was a strong consensus that the “German uncertainties” should not cause serious trouble for a third time in the twentieth century. This concern dictated the American, the British, and the French efforts to persuade Helmut Kohl to restabilize the GDR at all costs, even if only temporarily. The currency union was merely the most effective means to achieve that goal. It was a political measure from the very outset. However, as such, it could not be “sold” to the public. As a consequence, the economic transformation of the GDR economy not only started with illusions but also diverted the public consciousness away from the geopolitical embeddedness and the historical conditions of German reunification. The fact that the international community finally tolerated a reunified Germany was rather interpreted as a matter of course than a political miracle. By the same token, the economic consequences of the currency union at a disastrous conversion rate continue to be debated as a matter of Eastern versus Western economic performance and prosperity rather than as part of the price to be paid for Germany’s second chance. Notes 1. Gerlinde and Hans-Werner Sinn (Kaltstart. Volkswirtschaftliche Aspekte der Wiedervereinigung, 3rd ed. [München: Deutscher Taschenbuchverlag, 1993], 34–38) compared the economic depression in East Germany after the currency union of July 1, 1990, with the Great Depression of the 1930s. According

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2. 3. 4. 5.

6. 7.

8.

9.

10. 11. 12. 13.

to them, German industrial output during the Great Depression—that is, over a period of several years—fell by 40 percent, U.S. industrial output by 35 percent. By contrast, East German industrial output fell by 44.5 percent within a single year (II/1990–II/1991). See also Deutsches Institut für Wirtschaftsforschung/Institut für Weltwirtschaft an der Universität Kiel, “Gesamtwirtschaftliche und unternehmerische Anpassungsfortschritte in Ostdeutschland,” 13. Bericht, DIW-Wochenbericht 39 (1992), 467–92. Jonathan Zatlin, The Currency of Socialism. Money and Political Culture in East Germany (Cambridge/New York: Cambridge University Press, 2007). Frankfurter Allgemeine Zeitung, August 30, 2010. Gerhard Lehmbruch, “Die improvisierte Vereinigung. Die dritte deutsche Republik,” Leviathan 18 (1990), 462–86. C.f. Wolfram Fischer and Harm Schröter, “Die Entstehung der Treuhandanstalt,” in Treuhandanstalt-Das Unmögliche wagen. Forschungsberichte Berlin, ed. Wolfram Fischer, Herbert Hax, and Hanskarl Schneider (Berlin: Verlag Akademie der Wissenschaften, 1993), 17–40 (18). Ibid. Runder Tisch, Februar 12, 1990, Vorlage Nr. 12/29, reprinted in Treuhandanstalt Dokumentation 1990–1994 (Berlin: Treuenhandanstalt Eigenverlag, 1994), Vol. 1, 24–26. Cf. also Marc Kemmler, Die Entstehung der Treuhandanstalt. Von der Wahrung zur Privatisierung des DDR-Volkseigentums (Frankfurt/New York: Campus, 1994), 69–82. “Blockparteien” was the unofficial designation of the political parties that constituted the Democratic Block of the Parties and Mass Organizations (Demokratischer Block der Parteien und Massenorganisationen) that had originated as an “antifascist and democratic bloc” in the Soviet occupation zone in July 1945 in a—partly successful—attempt to mobilize the loyalty of noncommunist and nonsocialist political forces to communist rule. These “Blockparteien” were the Liberal Democratic Party (LDPD), the Christian Democratic Union (CDU), the National Democratic Party (NDPD), and the Democratic Farmers’ Party (DBD). As ministers without portfolio became members of the cabinet: Walter Romberg (SPD), Rainer Eppelmann (Demokratischer Aufbruch), Sebastian Pflugbeil (Neues Forum), Wolfgang Ullmann (Demokratie Jetzt), Tatjanja Öhm (Unabhängiger Frauenverband), Gerd Poppe (Initiative Frieden und Menschenrechte), Klaus Schlüter (Grüne Liga), and Matthias Platzeck (Grüne Partei). Volkskammer der Deutschen Demokratischen Republik, 9. Wahlperiode, 15. Tagung, January 29, 1990, Stenographische Niederschrift, S. 423. Bulletin des Presse- und Informationsamtes der Bundesregierung, February 8, 1990. The Münchner Merkur of January 20, 1990, quoted minister of finance Theo Waigel as saying, “A sustainable monetary union must be created by the market. The preconditions for this must be created by reforms in the GDR.” In an hours-long discussion with Kohl on January 4, 1990, the French president, Mitterrand, named the effects on the Soviet Union of a rapprochement between the two German states or even of a reunification as “the only true problem.” Mitterrand’s remarks are recorded as follows in the minutes of the

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14.

15. 16. 17.

18. 19.

meeting at the Federal Chancellery: “The problem of reunification in the one or the other form is on the agenda. The solution must depend on the will of the Germans in the two states. Nobody else is entitled to interfere. The Germans must understand that Eastern Germany is a member of the Warsaw Pact and Western Germany a member of NATO, that the economic systems and many other things are different, and that any unwise step will require Gorbachev to react or to disappear. For him, the president, the only true problem would be to harmonize this contradiction. The unification of Germany must not happen in such a way that the Russians harden and react with saber rattling. We are on the edge of such a development. In Kiev [where Mitterrand and Gorbachev met on December 6, 1989] Gorbachev was very uneasy, not on account of the development as such, but on account of the precipitous haste. One cannot see clearly today how the two German states can cooperate with the 350,000 Soviet troops in Eastern Germany after the elections. This is a question of the time schedule. If a start is made with the contract association, as the Federal Chancellor proposes, public opinion and the Russians could become accustomed to the idea. This is the path of history and one will get used to it.” Bundesministerium des Innern, Sonderedition aus den Akten des Bundeskanzleramtes 1989/90, (München: R. Oldenbourg Verlag, 1998), Doc. 135, 682–90 [685]– translation: James Fearns. Arbeitsgruppe Wirtschaftsreform, “Zielstellungen, Grundrichtungen, Etappen und unmittelbare Maßnahmen der Wirtschaftsreform in weiterer Verwirklichung der Regierungserklärung vom 17.11.1989,” reprinted in: Treuhandanstalt Dokumentation 1990–1994, Vol. 1, 7–14. Gesetzblatt der DDR I (1990), 107–108. “Verordnung zur Umwandlung von Volkseigenen Kombinaten, Betrieben und Einrichtungen in Kapitalgesellschaften or Umwandlungsverordnung,” Gesetzblatt der DDR I, no. 14 (1990), 332. Some impressions from the West German press: “Beim Geld hört die Freundschaft auf. Der vom Zentralbankrat vorgeschlagene Umtausch 2:1 löst in der DDR Empörung und Enttäuschung aus,” Tageszeitung, April 3, 1990; “‘Bei 2:1 gehen wir eben wieder auf die Straße.’ Auch in den Leitartikeln der DDR-Zeitungen wird der genannte Umtauschkurs einhellig abgelehnt,” Stuttgarter Zeitung, April 3, 1990; “‘Der Wahlspeck wird wieder eingesammelt.’ Die Bonner Geldumtausch-Pläne für die DDR stiften Ärger quer durch die ganze Republik,” Frankfurter Rundschau April 4, 1990; “2:1 und die Nerven. Die Empfehlungen des Zentralbankrats zur Umstellung der DDRMark treffen den bloßgelegten Nerv einer Bevölkerung in Existenzangst,” Die Welt, April 4, 1990; “Empörung in der DDR, Streit in Bonn: Welcher Umstellungskurs für die Währungsunion ist der richtige? ‘2:1—eine Illusion,’” Die Zeit, April 6, 1990. The treaty’s complete title was “Staatsvertrag zur Wirtschafts-, Währung- und Sozialunion.” Source: Gesetzblatt der DDR Teil I (1990), 332/Bundesgesetzblatt Teil II (1990), 537. Blüm to Kohl, March 27, 1990. Bundesministerium des Innern, Sonderedition aus den Akten des Bundeskanzleramtes 1989/90 (München: R. Oldenbourg Verlag 1998), Dok. 231, 979–80.

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the quest for freedom and stability / 119 20. Stern/Bleibtreu, Kommentar zum Staatsvertrag zur Wirtschafts-,Währungs- und Sozialunion (München: C.H. Beck, 1990), 63. 21. Volkskammer der Deutschen Demokratischen Republik, 10. Wahlperiode, 15. Tagung, 17. Juni 1990, Stenografische Niederschrift, 561. 22. Gesetz zur Privatisierung und Reorganisation des volkseigenen Vermögens (Treuhandgesetz), Gesetzblatt der DDR Teil I, no. 33 (1990), 300–04. 23. Gesetzblatt der DDR Teil I, no. 33 (1990), 300–04 (300). 24. Deutsches Institut für Wirtschaftsforschung/Institut für Weltwirtschaft an der Universität Kiel, “Gesamtwirtschaftliche und unternehmerische Anpassungsfortschritte in Ostdeutschland,” 3. Bericht, DIW-Wochenbericht 39–40 (1991), 553–574. 25. Frankfurter Allgemeine Zeitung, November 8, 1991, 17–18; Handelsblatt, November 7, 1991, 7, and November 28, 1991, 5. 26. Philip Selznick, TVA and the Grassroots. A Study in the Sociology of Formal Organization (Berkeley and Los Angeles: University of California Press, 1949). 27. Bulletin des Bundespresse- und Informationsamtes, März 12, 1991. 28. Grundsätze zur Zusammenarbeit von Bund, neuen Ländern und Treuhandanstalt über den Aufschwung Ost, Bulletin des Bundespresse- und Informationsamtes, März 15, 1991. 29. Beschluss der Wirtschaftsministerkonferenz vom 20. März 1991, reprinted in Treuhandanstalt Dokumentation 1990–1994, Vol. 2, 371–74. 30. Reprinted in Treuhandanstalt Dokumentation 1990–1994, Vol. 2, 369–70. 31. Reprinted in Treuhandanstalt Dokumentation 1990–1994, Vol. 9, 712–16. Sozialplan is the common language for an agreement between employers and unions or others representatives of the employees about social benefits mitigating lay-offs. 32. Rahmenvereinbarung zur Bildung von Gesellschaften zur Arbeitsförderung, Beschäftigung und Strukturentwicklung (ABS). Reprinted in Treuhandanstalt Dokumentation 1990–1994, Vol. 9, 546–52. 33. “Arbeit der Treuhand wird überprüft,” Die Welt, September 1993; “Treuhand unter der Lupe,” Berliner Zeitung, September 30, 1993. 34. Bundesministerium des Innern, Sonderedition aus den Akten des Bundeskanzleramtes 1989/90 (München: R. Oldenbourg Verlag 1998); Foreign and Commonwealth Office, Documents on Britich Policy Overseas, Series III, Vol. VII: German Unification, 1989–1990 (London and New York: Routledge, 2010).

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Ch a p t e r Fi v e A Sp l e n di d Fa i lu r e: R e f l e c t ions on Two D ec ade s of Ea st Ge r m a n Econom ic R econst ruc t ion Irwin L. Collier

The title of this chapter borrows the words chosen by W.E.B. Du Bois to characterize the political process of extending rights of citizenship to the black population of the American South after the Civil War.1 My purpose here is to consider the economic reconstruction of the German East following unification. For a two-word summary of that process, one would be hard-pressed to find a better characterization than “splendid failure.” The institutional structure of a planned socialist economy was indeed successfully replaced by that of a modern European welfare state and private market economy. The fact that this economic transformation occurred without any significant groups experiencing a drop in material standards of living was truly a splendid achievement. The scale of transfers from West to East for both private and public consumption and investment was completely appropriate to the magnitude of the historic task of German unification. And yet two decades after the Treaty of Monetary, Economic, and Social Union went into effect, the East German states and the city of Berlin are only about half way to catching up with the back of the pack of West German states, much less the average economic performance of West Germany. That gap between per capita output in West and East Germany has become smaller than it was during the last year of divided Germany, but its continued persistence constitutes a major policy failure. One could argue that the “failure” of economic reconstruction became inevitable with Helmut Kohl’s campaign speech of March 7, 1990, in Erfurt on behalf of the East German Christian Democratic Union (CDU) in which he foresaw “blooming landscapes” for East Germany once the institutional preconditions for a social market economy had been established in the East. Helmut Kohl struck a chord with the East German

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electorate that resonated a shared hope that the postwar (West) German economic miracle might indeed be repeated. The ideological (in the best sense of the word) foundation for this hope was the doctrine of the Social Market Economy à la Ludwig Erhard. It can be distilled into three subdoctrines: (1) hard money, (2) private enterprise disciplined by competitive markets, and (3) soft hearts reflected in burden sharing between the more and less fortunate members of society. Each of these components served as a pillar for the Treaty of Monetary, Economic, and Social Union that went into effect on July 1, 1990. What did the timetable of convergence between the East and West German economies appear to be to those confident enough to identify milestones of convergence and publicly announce estimated times of arrival? Figure 5.1 of this chapter plots a set of early forecasts of the degree of convergence between real per capita gross domestic product (GDP) in East and West Germany at particular points in time following German unification in 1990.2 Three of the forecasts (1, 3, and 4) involved dates when East German per capita output was expected to converge with that of West Germany. To compare these forecasts with the four forecasts3 represented by the points (2, 5, 6, and 7) for dates with incomplete convergence, paths for East German relative real per capita GDP have been drawn reflecting different hypothetical average rates of growth of real per capita GDP in East Germany from a low of 3 percent to a high of 9 percent per year. In contrast, the measured average rate of growth of West German real per capita GDP was only 0.65 percent per year over the period 1991–2009. This same rate has been extrapolated forward to 2030 to calculate the convergence paths for each of the hypothetical growth rates identified in the figure for East Germany. Thus, conditional on the West German real per capita GDP growing at 0.65 percent per year, we can see from Figure 5.1 that a continuous 9 percent rate of growth in East Germany starting in 1991 would have resulted in convergence (100 percent) by about 2002. In contrast, a 3 percent per year rate of growth in the East would achieve convergence over a quarter of a century later, in 2028. The first thing that strikes the eye in examining Figure 5.1 is the sheer range of the forecasts: from a Panglossian faith in the social market economy to generate Chinese levels of economic growth as seen in the early forecast of Siebert, point 1, to the dismal projection of Barro and Sala-i-Martin, point 7, that foresaw a Mezzogiorno in the making.4 Even allowing for the differing dates when the forecasts were made, a noneconomist can be excused for concluding that a range for forecasts, in which the combined lifetimes of the third Reich and the German Democratic Republic (GDR) would comfortably fit, is of little use for anything but discrediting all pretensions the

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a splendid failure / 123 Real GDP per capita: East states and Berlin relative to the West states (percent) Forecast , Hypothetical Growth Paths for the East , Actual (West German per capita real GDP assumed to grow at 0.65%/year)

1

100 90

2

80

3

9% 8% 7% 6%

4 5

5%

7

6 4%

70

3% 64.2%

60 50 42.9% 40 1990

1995

2000

2005

2010

2015

2020

2025

2030

Figure 5.1 Forecasts of East German per capita GDP (including Berlin) relative to that of West Germany. Note: Hypothetical convergence paths of real GDP per capita relative to West Germany are plotted for continuous annual growth rates of 3% to 9% in East Germany, assuming a .65% annual rate of growth for real GDP per capita in West Germany. The .65%/year rate is the actual average rate of per capita real GDP growth in West Germany over the period 1991–2008. 1. Horst Siebert, “Lang-und kurzfristige Perspektiven der deutschen Integration,” Die Weltwirtschaft 1/1990, 49–59. 2. Institut fur Angewandte Wirtschaftsforschung, Die ostdeutsche Wirtschaft 1990/1991, 22 (October 1991). 3. Hans-Werner Sinn and Gerlinde Sinn, Kaltstart. Volkswirtschaftliche Aspekte der deutschen Wiedervereinigung (Tübingen: Mohr Siebeck Verlag, 1991). 4. Ernst Helmstädter, “Ostdeutschland wird erst in Jahrzehnten Produktivitatsanschluss gefunden haben,” Handelsblatt 182, September 20–21, 1991. 5. Andrew J. Hughes Hallett and Yue Ma, “East Germany, West Germany and their Mezzogiorno Problem: An Empirical Investigation,” Economic Journal 103 (1993), 416–28. 6. Thomas Westermann, Thomas, “Das Produktionspotenzial in Ostdeutschland,” Volkswirtschaftliche Forschungsgruppe der Deutschen Bundesbank, Diskussionspapier 4/95 (August 1995). 7. Michael Berlemann and Marcel Thum. “Blooming Landscapes in East Germany?” CESifo Forum 4 (1991), 16–22.

profession of economics might have in providing reliable oracle services for business and government.5 The second pattern revealed in Figure 5.1 is that actual historical growth of real per capita GDP in the Eastern states (including Berlin) has not been uniform over the past twenty years: German unification was followed by four blazing years of convergence, then six years of an

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unchanging gap between East and West, with the most recent eight years showing glacial progress in closing that gap. If we lower our sights somewhat to accept a convergence of 80–85 percent, that is, when the Eastern states and Berlin attain the back of the West German pack, then we see that it has taken eighteen years to close half of this “diminished expectations” gap. However, the last fourteen years accounted for closing only about one-tenth of the gap. When we compare the historical unfolding of the convergence process with the early forecasts, the convergence pessimists have handily won the empirical debate. One of the reasons that forecasting far into the economic future is more hazardous than risking a short-run ride on current trends is that the critical assumption of other-things-being-equal (ceteris paribus) loses its plausibility as time passes. Other things can and indeed have gone wrong along the way. Furthermore, nowhere was it written that the reconstruction of the East German economy would enjoy the right of way with respect to competing policy goals. Returning to Figure 5.1, what is fairly clear to the naked eye is that there was a pronounced break in the path of convergence after only about five years into East German economic reconstruction. Convergence went off the fast track to blooming landscapes about 1995. What went wrong? One argument, made in the excellent retrospective by Karl-Heinz Paqué,6 is simply that the fast track to blooming landscapes was probably never really an option in the first place. Economic reconstruction required more than the replacement of a few key parts to get the motor of economic growth humming. Paqué argues that because the GDR economy had been stuck in economic backwaters for four decades, products evolved over time that were distinctly not what the global market ordered. With the opening of the GDR economy on July 1, 1990, East German products were extremely vulnerable to foreign competition, salable only at steep price discounts that implied extremely low wage levels. In their classic 1991 paper, Akerlof, Yellen, Rose, and Hessenius calculated that only about one-fifth of East German industrial firms would have been able to cover their variable costs of production with a conversion factor for wages of one East-Mark to one West-deutsche mark (DM), assuming that world market prices for East German goods would initially reflect the discount for GDR goods (and kept secret by the GDR foreign trade agency).7 In plain words, about 80 percent of East German industrial firms could only reduce their losses by shutting down production rather than by staying in business. At the time, this extreme competitive disadvantage was seen as a decisive argument to establish a much lower initial exchange rate for East German wages than the 1:1 parity ultimately agreed upon. As far as it goes, the argument is certainly correct that lower East German DM wages

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would have given more of the industrial firms a chance to survive long enough to adapt to the demands of the global marketplace. It is also clear that the incentive for workers to move from East to West would have been reinforced if East German wages would have been any lower. One way or another, massive West to East transfers either in the form of subsidies to keep businesses afloat or to pay for unemployment benefits to prevent a tidal wave of out-migration would be the result of a politically imposed 1:1 conversion rate for wages. Transfers would be necessary until old firms learned to produce new goods and/or enough new firms entered and produced new goods up to global standards. The fiscal burden of such transfers as well as the rate of convergence between East and West would be determined by the degree of difficulty in “teaching old dogs new tricks.” The fact that the Treuhandanstalt ultimately failed to generate the anticipated budgetary inflow of DM600 billion and instead wound up with a net loss of DM200 billion is a sign of just how fraught with uncertainty investors at the time must have regarded the task of turning the existing Eastern firms into profitable units. This systematic underestimation of the scale of the structural change required for participation in the international division of labor at terms that would maintain rough parity between East and West German wages can be characterized as the “lipstick on a pig” fallacy, to use a favorite expression of a former Texas governor.8 It is understandable how the rush of euphoria from the relative ease of achieving German political unification could have led to an overestimation of the speed with which East Germans could shed their institutions and structures of centrally planned socialism that had been harmonized to fit the reality of a division of labor largely dictated by the politicaleconomic logic of the Council for Mutual Economic Assistance (CMEA) dominated by the Soviet Union and acquire the investment, technology, and management skills needed to become competitive both at home and abroad. Nevertheless, there still remains something suspicious about that sudden break in convergence that occurred around year five of German unification, which leads us to check out a possible alibi available to policymakers during the decade following German unification. During spring 1989, less than a month separated the publication of the official timetable for the introduction of the euro, the Delors Report, and the unilateral decision by Hungary to cut the barbed-wire fences on its frontier with Austria. By that time, the euro project had become a supertanker at full steam with a crew, which included the Bundesbank, fully intent upon reaching its ultimate destination. I am not aware of any significant voices at the time in Germany or elsewhere that even suggested that the political shocks of German unification and the collapse of the Soviet empire might constitute reasonable cause for a reconsideration of

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either the timing or modalities of introducing the euro. If anything, some of Germany’s partners acquired a further interest in reinforcing the proverbial “third function” of the North Atlantic Treaty Organization (NATO), that is, “to keep the Germans down,”9 by binding unified Germany even tighter to its European partners through the political institutions of the European Union and the immanent creation of the euro. In Germany, the line often repeated by Helmut Kohl was that German unification and European unification were merely two sides of the same coin. The notion that German political and economic interests could ever diverge from the grand European project was and still is extremely politically incorrect in German policy circles—a trade-off that dare not speak its terms. Whether or not this reflected a genuine belief enabled by the underestimation of the enormity of the task of East German economic reconstruction or whether it was just a deliberately offered sop for French and British approval of German unification is not important for the argument. However, I believe it is precisely here where we should look for the reason that East-West German convergence was reduced to a crawl so soon—as a negative by-product of the forced pursuit of a common European currency and the harmonization of European competition policy.10 The key to understanding this particular instance of the law of unintended consequences is found in the determinants of business investment, understood as the acquisition of physical assets to set up or expand business operations. Without strong growth in private investment relative to West Germany, it is difficult to see how the Eastern states and Berlin would be able to close the GDP per capita gap.11 The determinants of investment can be broken down first into fundamentals, which are all the elements that go into the bottom line comparison of the up-front cost of investment to future anticipated revenues net of operating costs. The remaining determinants can be lumped into business confidence that scales revenue and cost anticipations up or down—what Keynes called the “animal spirits.” Changes in the “animal spirits,” for example, shifts from bullish to bearish expectations, generally defy explanation though are like the madness of crowds, amenable to description.12 A burst of collective optimism or pessimism can be enough to tip the balance calculated on the basis of fundamentals between action now (investing) versus waiting. The final step in my argument will be to link changes in the fundamentals to the introduction of the euro and the strict interpretation of European competition policy with respect to industrial policy for Eastern Germany. However, we first need to examine more closely the fundamentals governing the investment decision and how they may be influenced by government policies. We start with the up-front costs of acquiring and

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installing new plants and equipment. Here governments can help lower investment costs by providing a wide range of subsidies (i.e., negative taxes on investment spending) that vary greatly in name and transparency. State and local governments use this instrument in their mutual competition to attract business to their respective jurisdictions, and national governments typically use investment subsidies as a countercyclical policy tool. Providing government guarantees to credits extended to finance investment spending can be regarded as a form of subsidy having the attractive (to public officials) property of actually only becoming an explicit item in government budgets in the unplanned event of later loan default. Governments can also indirectly reduce the expected future operating costs for businesses through the provision of infrastructure investment that improves transportation, communications, and energy networks. Central banks also play a role through their interest rate policies. Lower rates of interest result in future net revenues being discounted less when compared with the full up-front costs of investment, that is the rate of return of investment projects increases so more will be worth undertaking. Current business conditions are fundamental for the investment decision, because when there is weak demand resulting in excess capacity of capital, there will be a weaker desire to invest now, given the simple alternative of increasing production using existing capacity and hiring from the pool of unemployed workers. In contrast, when an economy is running at or near full employment, the only way to exploit an opportunity on a sustainable basis will be by expanding capacity, that is, by investing. Looking to future business conditions, the sales a business can expect to realize from any new or expanded capacity it installs will depend upon whether expansion or contraction of market demand for its product is anticipated. For an open economy such as Germany, foreign demand for German exports (and hence business conditions in Germany’s trading partners) will likewise be among the fundamental determinants of investment demand in Germany. To the extent that business conditions can be positively influenced by governments’ monetary and fiscal policies, we have another leverage point for government policy to positively (or negatively) affect investment decisions. Having identified the important fundamentals for the investment decision and how government policy can change the intertemporal balancing of costs and benefits by businesses considering whether to invest, we now turn to briefly examine the principal suspects for the trend break in EastWest convergence. At twentieth wedding anniversary celebrations, it is considered bad taste and ill mannered to remind dear relatives that there once were voices strongly urging the wedding be called off. At the risk of being accused of

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bad political manners, the reader is reminded that the monetary union of East and West Germany as implemented on June 1, 1990, was preceded by the ferocious resistance of the Bundesbank, leading to the later resignation of the president of the Bundesbank at the time, Karl Otto Pöhl. The Kohl government understandably decided that the full house of constitutional mandate and political expediency beat the Bundesbank’s singular pricestability mandate, and so the Bundesbank found itself dragged by its heels into the German monetary union. However, the Bundesbank still retained its power to set German interest rates, the instrument used to hit its target of low inflation, and it did not wait long to use that power.13 The Delors Report’s recommendations found their ultimate expression in the Maastricht treaty of 1992 that laid out the timetable for the introduction of the euro in three stages. The first stage involved having candidates for membership participate in a formal network of mutually pegged exchange rates, the European Monetary System (EMS), in which exchange rate adjustments would remain within tightly defined margins. In the EMS, the DM played the role of the key currency, analogous to the role played by the U.S. dollar in the original Bretton Woods system of fixed exchange rates. Under such exchange rate systems with capital free to move from one member country to another in search of highest returns, movements in the interest rates set by the central bank of the key currency country will be shadowed by the other countries’ monetary policies to prevent massive shifts in the demands and supplies for the respective currencies that would require increasingly large central bank intervention (in the form of buying or selling from their respective foreign exchange reserves) to maintain the exchange rate at a fixed level.14 Thus, when the Bundesbank chose to step on the monetary break over the first few years of German unification to head off the inflationary pressures it feared from the constellation of high government budget deficits and high wage demands from unions;15 other EMS-participating central banks were put in a position of having to let interest rates rise at home. To be glib, Germany got its unification but all that the other EMS member countries got were crummy higher interest rates and a resulting slowdown in economic activity.16 This tendency was reinforced by efforts during the rest of the decade to meet the agreed upon convergence criteria regarding inflation and government debt/deficits in stage II of European monetary unification. To make a long story short, economic activity chilled considerably across Europe including Germany in the mid-1990s, sufficiently to frighten away the “animal spirits” motivating investment spending, and with them went the hope for rapid economic growth in the new states of Germany. There was a time when central bankers saw their duty as taking away the punch bowl when the party gets started. In effect, the Bundesbank in the early 1990s took away the punch bowl even before the guests arrived.

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Furthermore, thanks to the workings of EMS and the efforts to meet the Maastricht convergence criteria, fiscal and monetary policies were going to tighten across Europe, so that both the domestic and foreign demand for German goods fell or were stagnant for the better part of that decade. Investment in the new states was thus subject to a triple whammy of high real interest rates, significant excess capacity in West Germany, and dim prospects for future growth of sales due to the austerity policies and tight money that were the necessary by-products of the national efforts to join the future Eurozone.17 In June 1996, East German economic reconstruction encountered another obstacle to government efforts to attract private investment to the new states. The EU Commission determined that of the 780 million DM state aid promised Volkswagen for building plants in Chemnitz and Mosel, located in the state of Saxony, 241 million DM would be disallowed as being inconsistent with European competition law as the EU Commission interpreted Article 92 of the Treaty of Rome as amended by the Maastricht treaty.18 Reading the relevant texts, one sees with the benefit of hindsight that conflict on where to draw the line between good and bad state aid to East German industry was programmed from the very start. Article 92 (Treaty of Rome, March 25, 1957) 1. Save as otherwise provided in this Treaty [see 2.(c) below], any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market. 2. The following shall be compatible with the common market: ... (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, insofar as such aid is required in order to compensate for the economic disadvantages caused by that division. (Italics mine) ...

Title V (19) Maastricht Treaty (February 7, 1992) (19) Article 94 shall be replaced by the following: ARTICLE 94 The Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament, make any appropriate regulations for the application of Articles 92 and 93 and may in particular determine the conditions in which Article 93(3) shall apply and the categories of aid exempted from this procedure. (Italics mine)

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On its face Article 92, paragraph 2(c) appears to be an anachronism that one would have expected to be removed by the Maastricht treaty, having served the purpose of legitimizing economic aid to the so-called border-zone regions that were backed up against the GDR’s western and southern frontiers and suffering from a distinct locational disadvantage. However, the survival of the “German-division-clause” in a treaty drafted sixteen months after German unification was definitely not an oversight. In the summer of 1996, Hans-Dietrich Genscher, who had been Germany’s foreign minister both during the process of German unification and during the negotiation of the Maastricht treaty, wrote an op-ed article for a Berlin newspaper that clearly describes why the “German-division-clause” survived the end of German division: The German delegation at the November 4th meeting of the foreign ministers in Nordwijk in 1991 was able to get this clause [Article 92, Paragraph 2(c)] included in the new [Maastricht] treaty, against the recommendation of the president of Luxembourg at the time, so that the new federal states would have an exception made for them that would put them in a better position than what they would have had under Article 92, paragraph 3 of the Treaty [Paragraph 2 is a list of unconditional exceptions, whereas Paragraph 3 is a list of possible discretionary exceptions to be decided ad hoc by the Commission]. If German aid is approved by the Commission in accordance with Article 92, paragraph 3, one can have no objection. However, should the Commission decide that this general clause does not justify approval, then at this point, at the very latest, the new federal states must invoke their exceptional status.19

While it comes as no surprise that Germany’s EU partners would continue to cast a jealous eye on this European competition law loophole granted the East German states, what was surprising was that the Kohl government put up no significant resistance to the European Commission closing that loophole with its decision in June 1996. The fanatic defense of the German-division-clause was left to Saxony’s minister president, Kurt Biedenkopf, whose efforts were showered with euro scorn by the federal economics minister Günter Rexrodt of the Free Democrats among others. Thus, scarcely six years into East German reconstruction, German policymakers completely reversed themselves on the issue of targeted government aid for investment in the Eastern states, that is, accepting the “narrow” interpretation of the relevant paragraphs in the amended Treaty of Rome. Thus, the Volkswagen case set an important precedent— government aid to support particular investment projects in the new states would be subject to critical review by the EU Commission, and so a fog of uncertainty descended over any future promises of government support for such investment.20

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Having examined policy choices that have systematically worked to weaken the flow of investment into the new states, we switch our attention to consider those policies that have helped to strengthen fundamental determinants of investment in East Germany. Nontargeted investment incentives in the form of general tax breaks for investment played a very significant role in the early years of reconstruction. According to Paqué (2009, p. 93) between one-third to half of private investment costs were subsidized by governments at that time. Since then the scope of investment tax incentives has been narrowed, so that investment in branches such as construction, skilled trades, wholesale and retail trade, and business services have lost their particular tax advantages in the meantime. Transportation and communication infrastructures are complementary to private capital investment, meaning the productivity of newly installed capital will be higher, the better the surrounding infrastructure. Rebuilding transportation and communications infrastructures of the new states, largely through public funds, has satisfied an important necessary condition for private investment. All told, support for private and public investment over the period 1991–2007 from the West has amounted to approximately 0.5 trillion euros. An even larger sum, on the order of 700 billion euros, has been provided in the form of income transfers from West to East Germany over the period 1991–2007.21 These income transfers have stabilized the demand for locally produced goods and services in the new states and have maintained the semblance of household purchasing power in the face of what has turned out to be a prolonged depression in the East German labor market. To be sure, there has been great splendor in this 1.2 trillion euro display of national solidarity. One could even forgive the simple West German taxpayer who might think, “So much money to the East, and so little convergence,” for as we have seen, the fundamental determinants of private investment are not few, and I have charged German economic policymakers with having demonstrated an inadequate appreciation for the adverse repercussions that some of their European policy choices have had for the flow of investment into the new states. Conclusion The premise of this chapter has been that a rapid convergence of real per capita output in post-Wall Germany required a sustained “investment rush.” This and a German economy running at full employment were the preconditions for employment rates in the East to approach those in the West. However, it is an undeniable fact that the new states have neither collectively nor even selectively approached the levels of the lowest of the West German states after twenty years. This has led us to examine the

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fundamental determinants of private investment to identify what might have gone wrong. East German economic reconstruction is a failure two decades after German unification in no small part, I have argued, because the “European project” has been given the right-of-way with respect to the national project of economic reconstruction of the East. This has left direct investment in the new states much lower than would have been required for rapid convergence. Nonetheless, to be fair, it only takes a quick look in the rear-view mirror to get a sense of how far East German economic reconstruction has in fact come. The scale and scope of transfers from West to East to rebuild its cities, to smooth its autobahns, to update its information highways, and to cushion many painful adjustments are really without historical precedent. The legal order and administrative structures governing economic activity have been successfully transplanted. The failure of economic reconstruction stems from a mundane failure of imagination, of not daring to think outside of the box. Symptomatic was the framing of privatization in general and the settlement of old property claims in particular as being largely an issue of public finance: Wolfgang Schäuble, Angela Merkel’s current minister of finance, then working as Helmut Kohl’s point man in the negotiation of the details of the unification treaty, proudly boasted to the minister of finance of the time, Theo Waigel, that using the word “restitution” rather than “indemnification” for the settlement of property claims saved German taxpayers big money. A moment’s reflection and any familiarity with the logical fallacy of composition should have been enough to know that this little word substitution would work to inhibit much investment until ownership claims were sorted out by the courts that were hit by a tsunami of competing ownership claims for land and buildings across the new states. Symptomatic too was the determination to protect the value of the currency, whatever the cost to economic activity. “Nie wieder Inflation!” is a mantra shared not only by the country’s central bankers. However, under the very special conditions surrounding German unification, the legalistic defense rings hollow that the Bundesbank had but a single mandate that was to keep inflation low. In another irony of history, counted among Angela Merkel’s advisers during the 2008/2009 financial crisis was the former chief economist of the Bundesbank at the time of German unification, an inflation hawk for all seasons, Ottmar Issing. However, the greatest failure of imagination was to realize that the burden of East German economic reconstruction would demand the entire register of fiscal, monetary, labor, and regulatory policies. European political-economic and monetary integration could only further complicate the reconstruction of the East. Other than a challenge by Minister President Kurt Biedenkopf of Saxony to meet the European Union in court over

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the legality of Saxony’s state aid to Volkswagen, one is hard-pressed to find examples of German politicians actively seeking wiggle room for supporting East German reconstruction when European constraints became binding. From a parting glance at Figure 5.1 that compared forecasts to the historical path of GDP per capita, it is hard not to leverage hindsight into an accusation of gross naiveté against those expecting a repeat performance of the postwar German economic miracle. Much more was needed than simply setting the institutional switches and letting the boom begin and more was needed than overhauling the transportation, communications, and energy infrastructures—necessary though not sufficient conditions for successful reconstruction. Fortunately, the environmental, economic, and social-psychological legacy of the GDR did not alter the Ossi-DNA. Universities are now admitting students who were born after the watershed of German unification. Having spent over fifteen years at a German university, I am glad to report that I have taught the future and they work. One can still hope that the new post-Wall generation of East Germans will learn to appreciate both the splendid sweat and toils that have provided them opportunities unknown to their grandparents and that they will come to understand the failures of imagination that have unnecessarily slowed the economic reconstruction of East Germany. Notes 1. “The attempt to make black men American citizens was in a certain sense a failure, but a splendid failure. It did not fail where it was expected to fail.” W.E.B. Du Bois, Black Reconstruction: An Essay Toward a History of the Part Which Black Folk Played in the Attempt to Reconstruct Democracy in America, 1860–1880 (New York: Harcourt, Brace, and Co., 1935). 2. GDP represents the value of the final goods and services produced within a defined territory (i.e., the sum of the values added by the factors of production, e.g., labor, plant, and equipment, located within the boundaries). For obvious practical reasons, East and West Berlin have been treated as a statistical unit since unification, so that one needs to choose between “adding” West Berlin to the territory of the former GDR or “subtracting” East Berlin for later comparisons. Ignoring Berlin in a study of East-West convergence seems to me less defensible (Hamlet without the Prince of Denmark?) than unceremoniously dumping West Berlin into East German aggregates. Unlike Michael Berlemann and Marcel Thum, “Blooming Landscapes in East Germany?” CESifo Forum 4 (2005), 16–22, I have chosen to use values for GDP that have been corrected for price changes (i.e., real GDP) that in fact have not been identical in East and West Germany. 3. Note point 2 represents two forecasts that happen to coincide.

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134 / irwin l. collier 4. Horst Siebert, “Lang- und kurzfristige Perspektiven der deutschen Integration,” Die Weltwirtschaft 1 (1990), 49–59; Robert J. Barro and Xavier Sala-i-Martin, “Convergence Across States and Regions,” Brookings Papers on Economic Activity 1 (1991), 107–58. 5. In all fairness, we should note that not all forecasts in the list would have satisfied the elementary scientific criterion of replicability and hygienic standards, for quick-and-dirty calculations are hardly uniform for real-time policy work. Furthermore, scholars can honestly differ in their forecasts of other relevant factors. I consider the range of forecasts indicative of the difficulty of the forecasting problem when fundamental structural changes are involved. In contrast, putting together a narrative ex post that is consistent with the observed record is a much easier task. 6. Karl-Heinz Paqué, Die Bilanz: Eine wirtschaftliche Analyse der Deutschen Einheit (Munich: Karl Hanser Verlag, 2009). 7. George A. Akerlof, Andrew K. Rose, Janet L. Yellen, and Helga Hessenius, “East Germany in from the Cold: The Economic Aftermath of Currency Union,” Brookings Papers on Economic Activity, no. 1 (1991), 1–105. On average, it took about four East marks of costs to generate earnings of a single DM. 8. In the Treuhandanstalt, they actually described the preparation of East German firms for sale as “primping the bride before the marriage.” 9. To complete my allusion to the old saw: with the collapse of Soviet Empire the first two functions of NATO, that is, “to keep the Americans in [Western Europe]” and “to keep the Russians out,” slipped from being of existential importance to relative anachronisms. 10. I first made this argument in Collier, “The Twin Curse of the Goddess Europa and the Economic Reconstruction of Eastern Germany,” German Studies Review 20 (1997), 399–428. 11. Otherwise, the new states could only achieve parity of average living standards with the Western states through a permanent flow of transfers from the West. Needless to say there are limits to even West German solidarity and, as the economist Herbert Stein noted, if something can’t go on forever, it won’t. 12. Although the euphoria of German unification, enhanced by the World Soccer Cup won by Germany in 1990, could have arguably triggered a bullishness with respect to East Germany’s economic future, it is more difficult to figure what came first, the rapid deceleration of growth in the East or the mood swing from post-unification euphoria to the subsequent funk that has helped to keep alive the sundry successor parties to the former Socialist Unity Party (SED) of the GDR. 13. For more discussion about this particular episode interested readers are referred to Collier, “Instant Integration and Gradual Convergence: Program Notes to the Macroeconomic Drama of German Unification,” German Studies Review 16 (1993), 311–30, and Jonathan Zatlin’s chapter in this book. 14. Although there is nothing in principle to stop a central bank from buying foreign exchange, after all it has the capacity to create more of the domestic currency, there is only a finite amount of foreign exchange reserves in any one central bank’s books that can be used to compensate a fall in demand (or growth in supply) of its domestic currency on international markets.

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a splendid failure / 135 15 One is reminded of an earlier remark attributed to James Baker about Helmut Schlesinger and the monetarist clique in the Bundesbank apparently fearing that inflation was lurking under every rock. (“Dollar: Eine Bruchlandung ohne Beispiel,” Der Spiegel, November 9, 1987.) 16. The European story gets even more complicated as countries such as the United Kingdom and Italy showed themselves unwilling to accept higher interest rates (and associated economic pain) to maintain exchange rate stability and abandoned the EMS. 17. Fast-forwarding the Eurozone narrative to the present, we see that the potential for high political economic drama has not at all been reduced by the premature introduction of a common currency within an underdeveloped fiscal confederation of European states. Paul Krugman, “Can Europe be Saved?” New York Times, January 12, 2011, offers a wonderfully clear analysis of the current euro crisis and links it to structural weaknesses clearly identified long before the birth of the euro. 18. The decision was published in Amtsblatt der Europäischen Gemeinschaften, no. L 308 (November 29, 1996), 46–57. 19. Genscher’s op-ed essay in the Tagesspiegel of August 14, 1996, was reprinted in a press release of the FDP. Bundestagsfraktion dated August 13, 1996. 20. For details of the showdown between Saxony’s first minister president, Kurt Biedenkopf, and the EU commissioner responsible for competition policy, Karel von Miert, see Collier, “The Twin Curse,” 411–17. 21. These last two estimates taken from Paqué, Die Bilanz, 190.

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Ch a p t e r Si x Pol i t ic a l I nst i t u t ions a n d Ge r m a n Un i f ic at ion Ulrich K. Preuss

The fall of the Berlin Wall on November 9, 1989, marks a truly secular break in modern history. It was the first step in a series of events that entailed a profound redrawing of the global political map. Arguably, the dissolution of the Soviet Union in December 1991 was the single most important consequence of the fall of the Wall. It ended the Cold War between the then two superpowers and their allies, which had dominated politics, economics, and cultural discourses for more than four decades after the end of World War II. With the end of Soviet rule, the dissolution of the European empires ended in principle. The world of nation-states based upon the principle of sovereign equality as it had been designed by the United Nations was now completed, including within it the new states emerging from the dissolution of the Soviet Union and Yugoslavia. Thus, an originally European political construct, the “Westphalian System,” was finally established in the postimperial area and legitimized by the United Nations. In this context, German Unification seems to be the most “natural” event: a pure and simple normalization of a situation of the division of a nation, which had lasted more than forty years and which many had felt to be perverted and pathological. Obviously, this feeling had been widespread among the Germans at least in 1949 when the two German states—the Federal Republic of Germany (FRG) and the German Democratic Republic (GDR)—were established. Both constitutions, the Basic Law of the FRG and the constitution of the GDR, presupposed more or less explicitly the continued existence of the German nation as one political entity. Hence, German Unification was always regarded as and termed “reunification.” However, in the decades after 1949, this sense of belonging to one political nation gradually faded away especially among the younger generation; it

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was more and more supplanted by the perception of Germany as a cultural nation, divided into two states. This was certainly the case in the FRG, but I have the impression that this observation also largely holds true at least for the younger generation of the GDR. For instance, in the Monday demonstrations, which on the momentous day of October 23, 1989, amassed several hundreds of thousands of protesters in the streets of Leipzig, the dominating slogan was “We are the people,” demanding democracy from the ruling communist elite, rather than “We are one people,” demanding national unification. The largest mass manifestation, which took place in East Berlin on November 4, 1989, with more than half a million participants and which participants (as well as by observers) have regarded as the turning point in the overthrow of the regime, called for the realization of two articles of the GDR constitution: the freedoms of speech and of assembly. They desired the same amount of freedom that the citizens of Western democracies enjoyed; actually, they wanted to become a variety of a Western democracy. At that time, national unification was not at the top of their agenda. However this may be, in other respects, the project of German Unification was by no means a political matter, of course, in the months after the fall of the Wall. After all, formally Germany consisted of two independent states, both of which had become members of the United Nations in September 1973; independent statehood and widespread international recognition as such constitute important institutional facts in the world of politics and international law. Moreover, at the end of the 1980s, the development of the European Economic Community (EEC) began to spill over into the field of politics, and the first signs of Europeanization tended to relativize the importance of national unification. Last but not least, the continuing common responsibility of the four allies of World War II for Germany as a whole reminded the Germans of the truism that their national unification was not a domestic matter of the Germans alone but an international affair that was of utmost concern in particular of their European neighbors. As is generally known, German Unification was only possible because the two German states unambiguously declared in the Treaty on the Final Settlement with Respect to Germany of September 12, 1990 (the so-called Two-plus-Four agreement) that “the united Germany has no territorial claims whatsoever against other states and shall not assert any in the future” (Article 1 paragraph 3). True, in some other respects German Unification was only a further case of a general pattern, namely, the pattern of transition from an authoritarian communist regime to a system of liberal democracy cum market economy that pertained to the East and Central European states formerly under Soviet domination. Thus, for forty years, the GDR had been a

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member of the Council for Mutual Economic Assistance, the CMEA; it had shared the fate of the Soviet satellite states of economic neglect and mismanagement, which had produced utterly underdeveloped and inefficient economies in all these states. In this respect, the GDR is quite comparable with the other post-Soviet countries. However, on balance the GDR’s transition from communism to liberal democracy remains a special and unique case because it entailed the vanishing of this state through the merger with another state, the FRG. (The opposite case has been the dissolution of Czechoslovakia into two separate independent states.) Obviously, the German case meant a clash of very different economic, political, legal, in part also cultural, and mental patterns within one state. It is this particularity of transition that renders German Unification a special case worth studying. In what follows, I have selected three aspects: First, the institutional paradigm of unification: was German Unification founded upon a new social contract between the people of the two states or was it based upon the shared sense of common belonging to the German nation? Obviously this question pertains to the relationship between the nation and the constitution as two different modes of political integration. Second, I will discuss the tension, alleged or real, between the Basic Law’s simultaneous commitment to supranational integration and to the German nation-state. Third, and finally, I will deal with the thorny issue of “transitional justice” as one of the most haunting problems of all postcommunist societies.

The Institutional Paradigm of Unification As we know, from a purely technical point of view, there was no need to create a new constitution for the united Germany because the political leaders of the postcommunist GDR had decided to join the Federal Republic by accession and, as a consequence, to have the Basic Law extended over what had been the GDR. This option was offered by the version of Article 23 of the Basic Law then in effect, which defined the territorial scope of the Basic Law and stipulated that it had to be put into force “in other parts of Germany on their accession.” Thus, many problems that the other postcommunist transition countries had to solve on their own and from scratch found ready-made patterns of solutions provided by the proved and tested legal order of the Federal Republic. However, the availability of a successful constitution per se did not provide the answer to the question of how to adapt the basic parameters of the order of the GDR to the requirements

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of the Basic Law. Even more importantly, the desire of the majority of the populace of the GDR to accede to the Federal Republic was not a guarantee that their mental state was attuned to the implicit values and assumptions of the Basic Law and to the mental state of those who had lived under it for forty years. Empirical research suggests that democratic constitutions tend to be the more stable the more their “authority pattern is congruent with the other authority patterns of the society of which [they are] a part.”1 Of course, in free societies, one will never find a congruence in the strict sense of identity of public and societal authority patterns; what is required is “a pattern of graduated resemblances” that allows mutual responsiveness between the formal authority patterns of state and of civil society within a country.2 It was doubtful whether such a resemblance between the institutional solidifications and mental formations of the GDR and the structural requirements of the Basic Law in fact could exist. For it could be expected that forty years of communist rule (not to mention the impact of the preceding twelve years of Nazism) had left mental traces in terms of worldviews, expectations, habits, and attitudes that were discordant with essential premises of the Basic Law. After all, the West Germans had also needed two decades before they were able to fully internalize the innovative force of the Basic Law. In a word, the implantation of a ready-made constitution into a society that lacks experience in its operation, corresponding institutions, and responsive value orientations was probably a more difficult project than the challenge imposed on the other East and Central European states, which had to manage the transition of a nondemocratic into a democratic society solely with the help of their own resources. Let me briefly explain the implications of the GDR’s—at first glance so easy—path of transition through merger with the other German state. The accession of the GDR to the FRG was formally a unilateral act of the Volkskammer (parliament) of the GDR. Neither the government nor the people of the Federal Republic were allowed to participate in this decision, much less to reject the accession. However, it was admissible and in fact necessary that the terms of the GDR’s accession be specified in a mutual agreement of the two governments, which was codified two months before unification in the Unification Treaty of August 31, 1990. The two parties to the treaty were not equal, because the desire of the GDR to unify with the Federal Republic was almost unconditional. The FRG clearly held the upper hand in negotiation. The situation was paradoxical: whereas the West Germans had no say in the East Germans’ decision to form a common state with the West Germans, the East Germans had no say in the determination of the conditions under which they would live together with the West Germans; furthermore, after the implementation of the East Germans’ decision, their state would fade away, whereas the

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Federal Republic would continue to exist. Once the Easterners declared their accession to the Federal Republic, the quasi-automatic extension of the Basic Law over their country would be the immediate consequence. This constitutional construction did not look very much like the foundation of a new common polity by way of the fusion of the two partners into a new polity. This constitutional construction of the unification is not a mere technicality of constitutional law; it is of great political significance. It implies the unification of two states, not necessarily the formation of one political nation. The former, the unification of two states, requires the smooth technical operation of the institutions of public authority; the latter, the formation of one political nation, envisions the fruition of a shared understanding of why people want to live together in a common polity. It was this latter path to unification that the framers of the Basic Law had in mind in 1949 when they stipulated in its final article—Article 146—that the Basic Law shall cease to be in force on the day on which a constitution adopted by a free decision of the German people comes into force. Given the expectation of the framers that a united German nation-state would soon be reestablished, the transitory constitution of a transitory state—the Federal Republic—would lose its raison d’être once the whole German people was able to reconstitute itself as one polity. Against their hopes and expectations, this condition materialized only forty years later. Unsurprisingly, the conditions envisioned by the framers when they devised Article 146 had fundamentally changed by 1989. Now, more than one generation later, the constituent power of the German people that Article 146 presupposed as a matter of course comprised individuals who had been brought up and socialized in two very different social orders. Hence, despite the unequivocal will of the great majority of the citizens of the GDR to unite with the FRG, it was far from clear whether the peoples of the two German semistates shared the same ideas about the character and the objectives of their forthcoming common polity. On this view, Article 146 could turn out as an ambiguous legacy of the founding men and women of the Basic Law. For Article 146 authorized the constituent power to put an end to the Basic Law and to replace it with a completely new constitution without being bound by any preceding procedural or substantive rules. After the East Germans had overthrown the communist regime and opted for unification with West Germany, the situation had come about that the framers of the Basic Law had envisioned in 1949, and that situation endowed the whole German people with its original constituent power to create a new polity. But it surfaced with a delay of more than one generation, and this might have corroded the underlying premise of a persistent common understanding of how the united nation

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of the Germans should look like in its political setup. The stakes were high, at least for the West Germans. After all, essential constitutional and extraconstitutional achievements of the West German state, particularly its integration into the inter- and supranational organizations of the West, could have been withdrawn by the constituent power of the whole German people. Given the desperate desire of the vast majority of East Germans to accept the West German model of society almost unconditionally, this potentiality seemed to be a purely theoretical concern. Still, these concerns did exist in some West German circles, and they played a role in the strategy to discard the path to unification predetermined by Article 146 and to opt for the alternative of Article 23, which allowed a mere unilateral accession of the GDR to the Basic Law. These concerns may not have been fully futile. For it could not be totally excluded that, once the constituent power of the people was released, the process could assume a dynamic resulting in highly unpredictable outcomes. New alliances and societal coalitions between the citizens of the GDR and of the FRG could produce new majorities with respect to some important constitutional issues and hence create constitutional facts that might diverge considerably from those embodied in the Basic Law. We can find examples when we look at the constitution drafted by a subcommittee of the Round Table and sanctioned by the Round Table shortly before its dissolution end of March 1990.3 The Round Table consisted of representatives of the old regime and of the different organizations and initiatives of the citizens’ movement and hence can be regarded as the political representation of the GDR in the period between the beginning of December 1989 and the formation of the first democratically elected government at the beginning of April 1990. Although the new Volkskammer of the GDR, elected in free and fair elections for the first time on March 18, 1990, refused to discuss this draft constitution because the deputies feared that a new constitution for the GDR could become an instrument for the continuation of the GDR as an independent state, its content may well give hints about what the people of the GDR might have considered as necessary elements of a common constitution. For instance, the draft constitution of the Round Table contained a list of economic and social rights (such as the rights to an appropriate lodging, to labor, and to education), a tough public control over natural resources, and a system of state financing of political parties that differed considerably from the system of the FRG. The details are no longer important, as obviously the political elites of the two German states dismissed the option of invoking the constituent power of the German people as a whole and chose instead the alternative offered by Article 23. This quasi-administrative solution promised a

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more even process of unification than the political path because it clearly enhanced its rapidness. Given the risk that the window of opportunity that had been opened in November 1989 could close at any time in view of the uncertain situation in the Soviet Union, there were good reasons for this choice. On the other hand, it must not be forgotten that a revolutionary process triggered in Germany at another ninth of November, namely, November 9, 1918, entailed the election of a constituent National Assembly and the enactment of a new constitution no later than in the following August of 1919. In other words, this process required less time than the seemingly smooth process of German Unification seventy years later. However, it is idle to speculate how a similar method of reconstituting the German nation might have looked in 1989 and 1990. Still, it must not be ignored that a price had to be paid for the nonutilization of Article 146. I will turn to this point shortly. The choice of Article 23 as the path to unification had the implication that only few amendments of the Basic Law were considered necessary and in fact enacted as a consequence of the accession of the GDR. Rather, the law of the GDR had to be adjusted to the normative requirements of the Basic Law. As to the Basic Law, a new Article 143 was inserted, which in its first paragraph established a time period of twenty-seven months for the adjustment of law of the former GDR to the requirements of the Basic Law. A prominent issue was the abortion law of the GDR, which diverged from that of the FRG in that it permitted the free choice of the woman to perform an abortion in the first three months of pregnancy. This interim period of two different abortion regimes in Germany lasted until June 1993, when the more restrictive regime determined by the rules of the Basic Law became binding in the whole country, as Peter Quint has noted in his chapter in this volume. Another implication of the path of Article 23 is worth mentioning, although it is less tangible. It involves the price that had to be paid for the smooth path to unification. Because the Germans in the East and the West lacked the experience of a joint venture to discuss with each other, to listen to each other, to argue and to compromise with each other, and finally to establish a shared constitutional fundament for their future common polity, feelings of mutual misunderstanding, distrust, and cultural alienation have played a considerable role in the last twenty years of the united Germany. In some parts of the population, both in the East and the West, these feelings persist and may even have been transferred into the next generation. The desire to rely upon the common national heritage in terms of a common language and culture that prevailed on both sides could not fully overcome the persistence of the different mental imprints, which forty years of division and of the experience of quite disparate social

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orders had created and which might have been reduced in the common experience to generate a political union among them. The Basic Law’s Simultaneous Commitment to Supranational Integration and to the German Nation-State As mentioned, the Basic Law was supposed to be the temporary constitution of an incomplete and transitory state—that is why it was called “Basic Law” rather than “Constitution.” Its life span was expected to be short: no more than a few years until unification came about with the eastern parts of the country then controlled by the Soviet Union and its German communist affiliates. This was the main reason why the founders refrained from two elements that they themselves actually thought necessary for a full-fledged constitution and which they therefore put off for the definitive constitution of a reunited Germany. First, they eschewed the design of a basic structure of the social and economic order (as laid down in all Länder (state) constitutions, which were created after 1945 and prior to the Basic Law), and second, they made no effort to sanction the Basic Law by a plebiscite. After forty years of West Germany’s continual progress to becoming a major economic power, a viable democratic society, and a respected member of the international community of nations, almost everybody inside and outside West Germany was convinced that time had made permanent the once self-proclaimed temporary and transitory character of the state and its Basic Law. Though the official state goal of reunification was never abandoned—not least due to the jurisprudence of the Federal Constitutional Court, which insisted that the other state organs stuck to this constitutional objective—there emerged a more or less tacit understanding that the Federal Republic was a full-fledged state with a full-fledged constitution that did not deserve any longer to be regarded and treated as a transitional phenomenon. This development was corroborated by another constitutional commitment of the Basic Law that seemed to point in a direction opposite to the objective of national unification. It was laid down in Article 24 paragraph 1 and stipulated that “the Federation may by legislation transfer sovereign powers to international organizations.” Note that according to traditional constitutional and state law, the transfer of sovereign powers of a state always required an explicit authorization through constitutional amendment; in the case of Article 24, by contrast, no more than a mere statute was required, which could be enacted with simple parliamentarian majority. By lowering the constitutional hurdles to a transfer of sovereignty, the framers of the Basic Law intended to emphasize the seriousness of the Federal Republic’s openness to the international community and its commitment to new forms of international cooperation.

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In fact, Article 24 of the Basic Law became the constitutional tool to integrate West Germany into the European Communities during the 1950s. There was an obvious tension between the goal of national unity and the goal of international integration, which became a key matter of political conflict in West German politics. During those years Chancellor Adenauer pushed toward West Germany’s integration in the West, including the North Atlantic Treaty Organization (NATO), against the vigorous resistance of considerable parts of the population, represented politically by the Social Democratic Party. The Social Democrats presumed that international integration would necessarily endanger or definitively frustrate national reunification. Even after the Social Democrats had finally come to accept West Germany’s international integration into NATO, the EEC, and other European supranational institutions, it was still widely held that national unification and international integration were ultimately incompatible under the given circumstances of the Cold War. Nobody could imagine that the Soviet Union would ever be prepared to permit unification without demanding in return that a united Germany abandon its integration into the different Western inter- and supranational organizations. It is not by accident that the West European allies of the Federal Republic were much less enthusiastic about German Unification than most of the Germans themselves. Although the majority of West Germans still appeared ready in the 1950s to pay a price of this sort for their national unity, it became evident in the 1970s that such a majority no longer existed. The generation born after World War II in particular could hardly imagine that there could be a potential tension that would force them to a painful choice in a “moment of decision.” In other words, among the three principal strategic options of West Germany’s politics—namely, (1) national unification at the expense of international integration into the West; (2) international integration into the West at the expense of national reunification; and (3) national unification and at the same time international integration—only the second seemed realistic and, given the circumstances, also desirable at least for most West Germans of the younger generation. The first alternative was disagreeable on several grounds: it could jeopardize the political and military stability of Europe and, moreover, if pursued, would probably provoke the resistance of the three Western allies. The third alternative seemed ideal for many but hopelessly unavailable. And yet, in the end, it was just this alternative, which nobody except some political dreamers had anticipated, that materialized and finally resolved the tension between these two main goals of the West German constitution. The European Currency Union introduced by the Maastricht treaty, which was signed on February 7, 1992, and took effect on November 1, 1993, was Germany’s

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major pledge that it would stick to and develop its integration into the institutional framework of the West. After all, it entailed the end of the deutsche mark (DM), in which many Germans took so much national pride. It is worth mentioning here that at the beginning of the 1990s, a reversal of the political frontlines of the 1950s surfaced in the Federal Republic. Although the majority of the Social Democrats and their candidate Oskar Lafontaine did not flatly oppose German Unification, in 1990 they argued for slowing down the process. Such caution was necessary because they unequivocally gave priority to West Germany’s roots in and commitments to the West European inter- and supranational organizations. Given Chancellor Kohl’s and the Christian Democratic Union’s (CDU’s) credibility in their fidelity to Germany’s integration in the West and Kohl’s simultaneous successful push toward unification, the Social Democrats’ position, asserting that these two claims were incompatible or that there was at least a serious tension between them, appeared a bit outdated to many German voters. Consequently, the Social Democratic Party (SPD) lost the first all-German elections in December 1990 by a wide margin. All this sounds very much like a happy end. However, the story is not yet over. Given the huge economic burdens that Germany, and most prominently the West German economy, had and still have to shoulder in order to establish “legal and economic unity, especially uniform living conditions” in the united country (see Article 72 paragraph 2 Basic Law), many Western governments, the EEC, and the international economic community at large were concerned that Germany might shift both its economic resources and its political attention to the reconstruction of its eastern states. They feared that Germany might become more unable and more reluctant to further the process of economic and political integration of (Western) Europe. Chancellor Kohl did not fully realize this problem, or, when he realized it, he minimized it. He contended that neither West German tax payers nor the EEC would suffer from his drive to immediate German Unification. It may be the case that national unification could only be achieved because political leaders simply neglected its economic implications. Given the more than 12 billion DM that had to be paid to the Soviet Union to buy the approval of its leaders, and given the more than 100 billion that had to be transferred to create approximately equal economic and social conditions in the old and the new Länder, it is not surprising to observe that the German economy has been under considerable stress in the last twenty years. Unsurprisingly, the red-green government that came to power in 1998 was the first German postwar government that, albeit moderately, played the card of economic patriotism vis-à-vis the European Union. And it is not by accident that the only German party represented in the Bundestag

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that rejects the Lisbon Treaty is Die Linke, basically the renamed GDR regime party Socialist Unity Party (SED), which is deeply rooted in the new Länder. Ironically, its co-chairman was Oskar Lafontaine, who left the SPD shortly after the red-green government under Gerhard Schröder took office and joined (and reshaped) Die Linke. The Issue of Transitional Justice The fusion of East Germany with West Germany did not mean an end to the problems that burden a society in transition from communist rule to a regime of liberal democracy. They were as difficult and the solutions as contested as they were in the other postcommunist countries of East and Central Europe. The transition from authoritarian regimes to liberal democracies (as they have occurred in Latin America and Latin Europe after 1974 and in Central East Europe and elsewhere—Korea, South Africa—after 1989) pose not just, after the rupture, the “forward-looking” problems of creating a new political order and promoting its consolidation. They also pose the “backward-looking” problem of “transitional justice.” I define transitional justice “as the conception of justice associated with periods of political change, characterized by legal responses to confront the wrongdoings of repressive predecessor regimes.”4 Transitional justice provides criteria for answers to the question of how to deal with the persons, events, and rights violations that occurred under the old regime, whose political, military, administrative, and academic elites are still around. These answers range from attempts to “draw a thick line” through amnesty and amnesia to practices known as “memoralization,” criminal prosecution of perpetrators, administrative purges (vetting, “lustration”), restitution, compensation and rehabilitation of victims, ban of organizations and media, confiscation of property, apologies, and acts of “political” and “administrative” (as opposed to “legal”) justice. The East Germans shared and share these problems with the other postcommunist societies of East and Central Europe, but they enjoy the unique advantage of not having to solve them all by themselves. However, some of these problems may have been aggravated rather than mitigated by the fact that overcoming the heritage of communist rule has to be managed within the framework of national unification under the aegis of the Basic Law. This applies particularly to the issue of the privatization of a vast amount of state property, which I will address first. After that, I will briefly turn to the field of reparations, restitution, and compensation for regime injustices, which caused damages of a more immaterial kind. The privatization of state-owned property, both real estate and businesses, presents one of the most serious difficulties in all postcommunist

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countries. The problem is not only one of developing adequate procedures for the transfer of huge assets to private owners and to prevent wild privatizations through large-scale theft of the old regime elites. An even more difficult problem is the protection of the legal acquirers of property against claims from former owners or, to put the problem the other way round, to satisfy the claims of former owners without deterring potential investors. The Unity Treaty made the important distinction between expropriations that had been conducted between 1945 and 1949, that is, before the existence of the GDR and hence under the auspices of the Soviet Union, and expropriations under the aegis of the GDR. The former were declared irreparable in the Unification Treaty. During the unification negotiations, the irreversibility of those expropriations was one of the essentials urged by the prime minister of the GDR, strongly supported by the Soviet Union. Interestingly, the Joint Declaration of the two German governments concerning the Regulation of Open Property Questions states that the Soviet Union and the GDR see no possibility of revising the measures taken between 1945 and 1949, whereas the federal government limited itself to the statement that “it takes note of this result in light of the historical development.” The immunity of this category of expropriations from restitutions is now protected by an amendment that incorporates their irreversibility into the constitution (Article 143 paragraph 3). In April 1991, the Federal Constitutional Court acknowledged this amendment as constitutional, but the Court insisted that within this framework, some kind of compensation had to be provided. In 1995, the Bundestag enacted a law that fulfilled this requirement and regulated the details of a compensation for the victims of the expropriations under the auspices of the Soviet Union. Until our days, it is a matter of dispute whether in fact the irreversibility of those expropriations was a strict and nonnegotiable condition of German Unification. Still, the German Federal Constitutional Court has repeatedly confirmed its opinion that Article 143 paragraph 3—that is, the irreversibility of the expropriations between 1945 and 1949—does not violate the essential principles of the Basic Law, for example, the guarantee of private property, which are afforded special constitutional protections by Article 79 paragraph 3. Although this is now definitively res judicata, the political conflict over this issue persists; the affected persons have a quite strong lobby. In contrast, expropriations by the formerly sovereign authorities of the GDR must be undone. Attachment III to the Unification Treaty, a Joint Declaration of the governments of the FRG and the GDR of June 15, 1990, established the principle that restitution of property to the former owners or their heirs had priority over compensation. Only if a return of the former property is not possible—for example, if the property has been

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assigned to public functions or dissolved into larger business units—was compensation to be paid instead of restitution. After unification, huge numbers of restitution claims were filed, especially with respect to real estate, and most of them came from the citizens of the former Federal Republic. Obviously, this created uncertainty and delayed urgently needed investment. Several laws were enacted, which aimed at mitigating this situation, but the burden of proof for the potential investor remained rather heavy. Together with other circumstances this contributed to a quite low rate of investment in the new Länder. The underlying constitutional problem in this area resides in the imperfect connection between the economic function of property and justice. The economic function of private property does not necessarily coincide with those principles of justice embedded in the principle of restitution. In a dynamic capitalist economy, property is best allocated to those who will make the most efficient use of it in the future, that is, to those who invest. By contrast, the principle of restitution is devoted to the goal of justice; property is assigned to those who deserve it because they or their families suffered injustice in the past. If the rectification of past injustice enjoys priority over the principle of allocation to potential investors, economic efficiency is likely to be severely restricted. It is one of the characteristics of all the East and Central European revolutions that they aimed simultaneously to achieve justice and to introduce a market economy. Now they must deal with the reality that the implementation of both principles simultaneously is not possible. Again, what at first glance seemed to be a particular advantage enjoyed by the East Germans in comparison with the other postcommunist countries, namely, their accession to the Federal Republic and their incorporation into an established economic, legal, and political order, may have made their problems even more difficult. The East Germans did not have the possibility of arriving at a pragmatic solution to the problem of restitution, because those who would be hurt by pragmatism—West Germans—were able to force the Easterners to adhere to those constitutional standards that embody a justice-based concept of property. In retrospect, in the field of transitional justice, the protection of property was clearly the predominant element. This becomes manifest if we compare the politics of property restitutions with the compensations afforded to the victims of injustice who did not lose property but rather immaterial goods such as freedom, health, the opportunity for a higher education, or a professional career according to their talents and skills. Article 17 of the Unification Treaty promised the legal regulation of the rehabilitation of those individuals who under the communist regime had become victims of arbitrary court decisions. This was a rather restrictive

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concept of rehabilitation, because victimization was not carried out primarily by the courts but by administrative institutions or by state-owned enterprises. After unification, the Bundestag took that into account and enacted laws that also grant compensation for victims of serious acts contrary to rule of law committed by administrative agencies, in cases such as forced evacuation out of the border area or the refusal of appropriate and available medical treatment. The Employment Rehabilitation Act established the right to compensation for those former residents of the GDR who had suffered serious discrimination and disadvantages in their professional career, such as prohibition to attend a university or to continue a career in the field of vocational and professional specialization. In both cases, the amount of compensation has remained quite modest, including the amount of the rights to old age pension, which the Employment Rehabilitation Act affords. Concluding Remark German Unification has been a uniquely huge social experiment. In contrast to scientific experiments, its effects cannot be confined to a laboratory. The transition from an authoritarian political regime and its concomitant command economy to a liberal democracy and a market economy is as unprecedented as the short-term integration of two extremely different societies, one liberal-capitalist and one authoritarian-socialist, into one nation-state. There is no constitutional pattern for either of these processes, much less so for the management of both simultaneously. Of course, in a way every historical situation is unparalleled, and it would be naive to expect any concrete conjuncture to fit into our traditional, accumulated wisdom. However, modern societies have developed a method for coping actively with the unexpected emergence of new experiences: namely, the creation of constitutions. Constitutions symbolize the foundation of a new polity; they contain the founding generation’s reflection of new social and spiritual experiences; and it is through constitutions that the distinctiveness of a historical situation is transmitted to succeeding generations. In this respect, the constitutional aspects of German Unification are somewhat tedious in view of the exciting and inspiring historical singularity of the events that opened the window for Germany’s unification in the first place. The procedure of unification was treated with utmost professional, administrative expertise and competence embodied in a sophisticated treaty between two states—but nothing in that treaty betrays the joyfulness of millions of people who for the first time in almost sixty years could proudly say, “We, the people, establish a democratic polity.”

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Notes 1. Harry Eckstein, Regarding Politics: Essays on Political Theory, Stability, and Change (Berkeley: University of California Press, 1991), 188. 2. Ibid., 191. 3. Full text at: http://www.documentarchiv.de/ddr/1990/ddr-verfassungsentwurf_ runder-tisch.html, accessed on March 17, 2010; developed further and defended in a Eine Verfassung für Deutschland. Manifest, Text, Plädoyers, ed. Berndt Guggenberger, Ulrich K. Preuss, and Wolfgang Ullmann (Munich: Hanser, 1991); see also the partial English translation in Konrad H. Jarausch and Volker Gransow, Uniting Germany: Documents and Debates, 1944–1993 (Providence, RI: Berghahn, 1994), 135–38. 4. Ruti G. Teitel, “Transitional Justice Genealogy,” Harvard Human Rights Journal 16 (2003), 69.

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Ch a p t e r Se v e n Ge r m a n Un i f ic at ion a n d t h e Fede r a l Const i t u t iona l Cou rt: A R e t ro sp e c t i v e Vi e w a f t e r Tw e n t y Ye a r s Peter E. Quint*

Background: Setting the Scene From the time of its founding in 1871 until after World War I, the German Empire (Reich) extended from Alsace-Lorraine, west of the Rhine, all the way to the Russian border in the northeast. After each of the two world wars, however, Germany lost significant portions of this extensive territory. At the end of World War II, for example, the Postdam agreement recognized the transfer of large sections of eastern Germany into the “administration” of Poland and the Soviet Union—in part, to compensate Poland for territory that had been annexed by the Soviet Union. Moreover, Germany was completely occupied by the victorious allies, whose governments agreed to administer German territory in four separate zones. The Potsdam agreement contemplated the eventual unification of these occupation zones, but with the coming of the Cold War—almost immediately following World War II—the prospect of unification appeared increasingly dim. Instead, the three western occupation zones coalesced to form the Federal Republic of Germany (West Germany) in May 1949, followed shortly thereafter by the creation of the German Democratic Republic (GDR or East Germany) in the Soviet zone. The framers of the West German Constitution (“Basic Law”) of 1949, however, were unwilling to accept the division of Germany as a permanent fait accompli. Accordingly, the Basic Law contained two separate methods of achieving unification of the Federal Republic and the GDR (Articles 23 and 146), and the desired goal of unification was proclaimed in the Preamble.

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Although the quest for German unification was sometimes derided as the “essential lie” (Lebenslüge) of the Federal Republic, the Constitutional Court of the Federal Republic of Germany clearly recognized that the goal of unification was one of the principal pillars of the Basic Law.1 Accordingly, when a great movement of history rather surprisingly opened the way in the years 1989–1990, German unification was swiftly accomplished under Article 23 of the Basic Law, which allowed the GDR to “join” the Federal Republic. This achievement could clearly be seen as the fulfillment of one of the central “state goals” of the Basic Law, and this fundamental fact set the tone for the decisions of the Federal Constitutional Court arising out of German unification. Because unification was a primary constitutional goal (and because it was overwhelmingly supported by the populace), it was clear that the Constitutional Court could not—either from the point of view of constitutional doctrine or from the point of view of practical reality—interfere in any serious way with the political movement toward unification. On the other hand, by 1990 the Constitutional Court had become one of the most powerful and highly respected of all governmental institutions in Germany, and it was therefore not to be expected that the Court would simply defer, without examination or analysis, to every choice that had been made by the political branches. Among other things, such a course might have looked too much like the adoption of an American-style “political question” doctrine, and most German constitutionalists have endorsed the view—correctly or incorrectly—that German constitutional law recognizes no such doctrine. Moreover, of course, the detailed settlement upon unification had conferred advantages and disadvantages on various groups and individuals, and there was certainly the possibility of undue oppression in some instances. The result of these contending factors was a carefully calibrated set of cases relating to German unification, which, broadly speaking, shared the following three characteristics: 1. The major political decisions relating to German unification were uniformly upheld by the Constitutional Court; there was no serious judicial interference with the process of unification; 2. Yet in a significant number of cases, the Constitutional Court required rather nuanced adjustments of the relevant rules for unification in a manner that granted a certain measure of protection to the losers in the unification process—whether, in any given case, the losers happened to be economically weak citizens of the former East Germany, or more prosperous former eastern landholders now living in the West;

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3. Overall, therefore, the Constitutional Court frequently acted as a type of mediator, accepting the basic principles of unification but seeking to ensure that the losers were not unduly disadvantaged in the process. In these cases, the Court also seemed to be serving notice that, even in the most sensitive areas of adjudication, the Court was still present and must therefore always be taken into consideration by the political branches. To illustrate these points, let us examine four important constitutional cases of the unification period that seem to follow this general pattern. Thereafter, we will look at one additional set of decisions which may not exactly fall into this pattern but which—at bottom—may not be much different from the others. Finally, in appropriate places, the discussion of cases of the unification period will be supplemented by reference to later developments that help illuminate the role of the Constitutional Court and its impact on German politics and society. The Case of the First All-German Election The first of these cases concerned the all-German Bundestag election of December 2, 1990, the first election that involved the merged territories of East and West Germany. The case considered whether the 5 percent cutoff rule, common in West German elections, could be constitutionally employed in this election. From the beginning of the Federal Republic, election statutes have required that, for a political party to be represented in the Bundestag, it must ordinarily receive at least 5 percent of the total popular vote. This rule is intended to discourage a proliferation of small splinter parties that could foster parliamentary instability in a system of proportional representation—with the type of dire consequences that occurred during the Weimar Republic. Accordingly, the statute establishing the first allGerman Bundestag election of December 2, 1990, extended the 5 percent rule to all parties in the election, including the new parties of eastern Germany—although it did make some attempt to provide a special regime for some of those parties. The Constitutional Court found the election statute unconstitutional.2 It noted that requiring the new parties of East Germany to obtain 5 percent of the total all-German popular vote would be to subject those parties to an almost impossible burden, in light of the fact that most of them had been in existence for less than a year. As a result, these small parties were being treated unequally in the view of the Constitutional Court.

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Yet the Court obviously did not want to stand in the way of this crucial election, and so its opinion carefully explained how the election could be conducted in a constitutional manner. The Court declared that, for the purposes of this election, it would be permissible for the Bundestag to impose separate 5 percent rules in the East and in the West. Doubtless grateful for this guidance, the Bundestag immediately enacted a statute that followed the advice proffered by the Court. Thus, the effect of the Court’s decision was not to interfere with the election overall but rather to adjust aspects of the election in a manner that gave the small East German parties an equalizing advantage—which remained in effect for one election cycle only—so that they might have a better chance of establishing themselves in the total electoral landscape of unified Germany. Indeed, the separate 5 percent limit in the East allowed the reformed Communist Party (PDS) as well as the eastern Greens—allied with certain reform parties of the East German citizens’ movement—to enter the Bundestag in the election of 1990, although they would not have satisfied a 5 percent limit for all of Germany.3 But thereafter—when confronted with the nationwide 5 percent rule in subsequent elections—these East German parties have encountered rather diverse fates in the attempt to convert this one-time constitutional advantage into permanent electoral strength. On the one hand, the small parties of the East German citizens’ movement (Bündnis 90) have been swallowed up by their allies, the larger Greens Party, and they have failed to establish an independent presence. Although the Greens have done well in the last two parliamentary elections (8.1 percent in 2005 and 10.7 percent in 2009), it seems that “little remains” of the influence of Bündnis 90 within the structures of the unified Greens party.4 In contrast, the PDS in recent years has been considerably more successful. By 2002, for example, the PDS had participated in formal or informal coalition governments in three eastern states.5 After hitting a low point in the federal election of 2002, the PDS merged with disgruntled left-wing elements of the SPD (led by the charismatic former chancellor candidate Oskar Lafontaine) to form the Left Party (Die Linke).6 The combined party made strong showings in 2005 (8.7 percent) and 2009 (11.9 percent), with its greatest strength in the territory of the former GDR.7 Indeed, the Left Party is now “the most popular party in eastern Germany, and is in coalitions with the Social Democrats in the regional governments of Berlin and Brandenburg.”8 Some observers even speculate that the SPD might enter into a national coalition government with the Left Party in the future. In its decision on the election statute of 1990, the Constitutional Court extended a measure of equalizing assistance to the smaller parties of the

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East. It probably cannot be determined with certainty whether this decision had a lasting effect in German politics; but it is an irony of history that—to the extent that the decision did have such an effect—its benefits have accrued to the PDS (in its present form as a major constituent of the Left Party) and not to the small parties of the eastern citizens’ movement, which many observers believe were the authentic heroes of the East German revolution of 1989. The Fate of the East German Civil Service When the GDR joined the Federal Republic under Article 23 GG, a massive restructuring of governmental institutions was required in the East. First, as we have seen, eastern citizens became entitled to vote in elections for the all-German parliament. Moreover, the Unification Treaty divided the territory of the GDR into five new Länder, which in some cases reflected the re-creation of historic German states. In addition, East and West Berlin were merged to form a single state of the Federal Republic. In measures that affected hundreds of thousands of eastern citizens, unification also required massive changes in the structure of the civil service in eastern Germany. These changes were of two basic types. First, as a result of the constitutional and political imperative of full employment in East Germany,9 the civil service of the GDR was considerably larger than was necessary to perform required tasks. It also employed many more workers than could be compensated in accordance with western salary scales. Accordingly, unification required the abolition of a very large proportion of the East German civil service, representing hundreds of thousands of employees. Second, the civil service also contained many employees who may have been politically compromised by their involvement with the East German Communist Party (SED) or by their contacts or collaboration with the secret police (Stasi). Thus, an elaborate system of review was established for the purpose of excluding politically compromised individuals from the civil service. Similar elaborate structures were created to examine teachers and university professors, as well as judges and prosecutors, with respect to their SED or Stasi affiliations—and also for the purpose of evaluating their ability to perform adequately in the new academic and judicial systems imported from the West. Moreover, certain university departments, thought to be particularly subject to political indoctrination under the GDR, were completely dissolved and then reconstituted largely with western personnel. In one of its most important decisions on German unification, the Constitutional Court upheld the first of these programs—the abolition of hundreds of thousands of jobs in the East German civil service.10 At the

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outset, the Court rejected the government’s sweeping argument that—because the GDR state had come to an end—the government of the Federal Republic bore no continuing responsibility for the former East German civil servants. Rather, the Court declared that the plan to dismantle much of the eastern German bureaucracy must be tested against the provisions of Article 12 GG, which provides a right of individuals to choose their employment—and, by extension, a right to retain employment that they already possess. Yet the Court indicated that the right of Article 12 is not absolute, and it found that, in this instance, the right was outweighed by the subordinating interest of the German state in creating a viable governmental and economic system after unification. Under this argument, therefore, the basic program abolishing a large part of the East German civil service was upheld.11 And yet, in accordance with the pattern of adjudication outlined above, the Constitutional Court was not willing to grant the government carte blanche in this connection. The Court suggested that certain measures of governmental assistance, provided by the Unification Treaty to those who lost their jobs, were constitutionally required, and it went on to mandate further protection for particularly disadvantaged persons whose jobs were imperiled, as well as assistance for mothers and pregnant women pursuant to a special provision of the Basic Law.12 In this way, the Court did not impair the basic actions of the government in this essential aspect of unification, but it did intervene to grant certain compensating advantages to some of the losers in this process. The Court did not have occasion to hand down a major decision with respect to exclusions of members of the civil service (including teachers and professors) on the ground that they may have been compromised by their past political affiliations in the GDR. Historically, the most important decision in this area was the “Radicals Case”13 —a dubious decision of the Cold War period, which imposed on civil servants a very stringent standard of loyalty to the state and its constitutional values. But in certain postunification cases on this subject, the Constitutional Court expressly relaxed the stringency of the earlier Radicals Case, thus offering a measure of protection to some of those who otherwise would have been the losers in the unification process.14 The Court indicated that, in the context of unification, exclusion from the public service would generally require special circumstances, such as participation in repressive governmental actions or the holding of a high civil service position under the GDR or full-time Communist Party activity. These cases suggest that with the Cold War over, and the perceived threat from the Soviet Union a thing of the past, the Court was willing to take a somewhat more relaxed position on the political attitudes and affiliations of civil servants in the East. The Court

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also noted that the postunification goal of integrating East and West required that there be a less stringent standard in this context. The massive reduction of the East German civil service, upheld by the Constitutional Court, naturally left its residue of bitterness—as did a system of individual review that had the effect of replacing many eastern judges, as well as university teachers and other civil servants, with personnel from the West. Moreover, those eastern civil servants who retained their positions were subject to other disadvantages. A statute of parliament, for example, provided that former GDR civil servants and judges would receive lower salaries than those who had served all or part of their careers in western Germany—although eastern salaries would gradually rise in the direction of parity. The Constitutional Court held that the differential salaries were justified, for an interim period, by lower economic standards and lower productivity in eastern Germany.15 Yet the Court also made clear that this difference could not be permanent. Similarly, the Constitutional Court approved significantly reduced pensions for former GDR officials. Yet following the pattern described above, the Court indicated that it would not accept statutory programs that were seriously out of balance. In one case, for example, the Court generally upheld significantly reduced pensions for former members of the notorious secret police (Stasi). But the Court also found that the amount of the required decrease was disproportionately great and therefore held that the decrease itself would have to be reduced.16 The Property Settlement upon Unification The government of the Soviet occupation zone and the subsequent government of the GDR were perceived in the West as “injustice regimes,” governments that deprived their citizens of human rights on a broad scale. One of the principal goals of the federal government upon German unification, therefore, was to provide some sort of redress for widespread violations of human rights that had occurred in the East. Accordingly, the parliament of unified Germany instituted a plan of “rehabilitation” and compensation for individuals who had been imprisoned in the GDR, or had been deprived of education or employment, for political reasons or in violation of general principles of the rule of law.17 A quite different mode of redress was provided in the prosecutions of East German border guards and other officials, for violent and otherwise oppressive actions against GDR citizens (a subject that will be discussed in detail below). Finally, the federal government sought to provide a measure of redress for people whose property in eastern Germany had been confiscated in violation of western concepts of property rights. In accordance with this

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program, which was set forth in a Joint Declaration (and accompanying statutes) incorporated in the Unification Treaty, eastern citizens whose houses had been confiscated by the GDR government when they fled to the West were generally entitled to restitution of that property after unification. But if the house had been sold by the GDR state to a good-faith purchaser, the former owner generally received compensation instead.18 In contrast, however, persons whose property had been confiscated under the Soviet occupation regime during the period 1945–1949 were to be totally excluded from the program of restitution. According to the Unification Treaty, these persons might possibly receive a measure of compensation, but that decision was left to the discretion of the parliament. The treaty negotiators thought that the denial of restitution for Soviet-era expropriations was so important that the Unification Treaty contained an amendment of the Basic Law for the purpose of according constitutional reinforcement to this rule.19 Why was the property confiscated by the Soviet occupation regime treated differently from the property confiscated by the GDR state? The property confiscated by the Soviet occupation regime comprised the major industrial plants in the East, as well as farms of more than 250 acres (100 hectares)—which included (among other holdings) the vast aristocratic estates of the so-called East Elbian Junkers. Some argued, perhaps cynically, that the unified German government wished to retain ownership of much of this property in order to help finance the costs of unification. The government maintained that the Soviet Union (which possessed a legal veto over unification) had insisted that this property be excluded from restitution—although whether the Soviet Union had actually imposed such a condition has been subject to vigorous debate, with disputes on this point arising even among former high Soviet officials of the period. East German negotiators may have feared that the return of this property could jeopardize the ownership claims of thousands of GDR citizens with respect to small pieces of agricultural property received by them (or their parents or grandparents) in the land reform (Bodenreform) of the Soviet era. But, at bottom, the decision most likely rested on the view of officials, in the East and perhaps in the West as well, that it would be unthinkable to re-create even a shadow of the quasi-feudal economic and social structures of much of rural eastern Germany in the nineteenth and early twentieth centuries—which, many thought, provided important support for the rise of Nazism. A deeper look into the historical circumstances, moreover, may suggest significant moral differences between the claims of the two groups. The individual houses of persons fleeing to the West—which constituted much of the property seized by the GDR regime—had probably been acquired

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by these individual owners through ordinary purchase in accordance with the general requirements of the rule of law. This type of property, seized by the GDR, was generally subject to the regime of restitution. In contrast, the huge quasi-feudal estates of the eastern German aristocrats, originally acquired in past centuries, may well not have been acquired or maintained in a manner that satisfies contemporary concepts of the rule of law; moreover, the large industrial plants were, most likely in every case, deeply involved in the Nazi war machine. These forms of property—expropriated by the Soviet occupation government—were not subject to the regime of restitution. The exclusion of the Soviet expropriations was challenged in the Constitutional Court as a violation of rights of equality, as well as certain affirmative constitutional obligations of the government under the Basic Law. But the property settlement was certainly one of the most fundamental decisions of German unification, and the Court was obviously unwilling to interfere with it in any significant way. Thus, in one of the major decisions on unification, the Court upheld the exclusion of the Soviet expropriations from the regime of restitution.20 In its opinion denying restitution to the former owners, the Court found that the expropriations had been legal under the law of the Soviet occupation government and that they were not subject to effective challenge under the international law of that era. Moreover, the Basic Law (which did not even exist during most of the period) was not applicable to the Soviet expropriations. Finally, the exclusion of these lands from restitution was necessary to achieve unification (given the demands of the Soviet Union), and thus the exclusion of these lands from restitution did not violate the general principle of equality. Yet the Court did not stop there. Rather, following the general pattern suggested above, the Court made one significant adjustment in favor of the former owners of property seized during the Soviet occupation. The Court concluded that the regime of compensation, which had been left to the discretion of the parliament in the Unification Treaty, must be made mandatory—to avoid an undue disparity (or inequality) between the treatment of the former large landowners and the compensation or benefits that had been received after unification by other victims of the GDR regime. Yet, on the other hand, the Court also indicated that the parliament would have substantial discretion in determining the level of compensation to be received by the former landowners, and ultimately that level was set at a rather low amount. Thus, the Court required that the “losers” in this aspect of unification (the former large landowners) be given more than they received under the Unification Treaty, but this redress was not enough to impair the government’s ability to put into effect the core decisions of unification.

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In the years following this major decision of the German Constitutional Court—a case that set the tone for its later cases in this area—the Constitutional Court (and, eventually, the European Court of Human Rights) rejected further challenges to the property settlement brought by the former eastern landowners (or their heirs). In 1996, for example, the Court reiterated its view that the German government could reasonably have believed that the Soviet Union insisted on nonrestitution of the Bodenreform lands as a condition of German unification—even though some high Soviet officials (including Mikhail Gorbachev) seem to have disputed that account.21 Then, in a very important decision in 2000, the Court rejected a challenge to the considerably lower rate of compensation received by the former owners of Bodenreform lands, in comparison with the value received by certain other owners whose property had been returned after unification. The Court emphasized the broad discretion possessed by the parliament in providing compensation for the various classes of victims of the Soviet and East German regimes.22 Finally, in a wide-ranging decision in 2005, the European Court of Human Rights rejected challenges to the exclusion of prior owners of Bodenreform lands from the regime of restitution.23 The European Court acknowledged “the exceptional context of [German] reunification and the enormous task faced by the German legislature in dealing with all the complex issues that inevitably arose . . . ” The European Court also emphasized the “wide margin of appreciation”—i.e., discretion—that it was prepared to extend to a legislature that sought to provide redress for acts of a prior nondemocratic regime.24 These judicial decisions on East German property, and the underlying events and legal developments of unification, have had significant social and economic effects—particularly with respect to agricultural life and landholding in eastern Germany. As was true in the case of the eastern civil service, many more agricultural workers were employed by the GDR enterprises than was economically justifiable. Accordingly, the years since unification have seen breathtaking reductions in employment in the agricultural sector in eastern Germany. These losses, which appear to be permanent, contribute significantly to depressed economies in rural areas of the East. At the time of German unification, many experts believed that the eastern collective farms, predominant under the GDR, would generally be dissolved and that eastern farmers would adopt the western pattern of relatively small family farms. To a significant extent, however, this general development has not occurred. Instead, many of the former collective farms of the GDR era remain substantially intact—no longer in the form of “collective property” (genossenschaftliches Gemeineigentum) of the

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former East German legal system,25 but rather as farm cooperatives owned in common by numerous holders of small pieces of property, much of which was originally received in the Soviet Land Reform (Bodenreform) of 1945–1949. Alternatively, some of the collectives were transferred into corporate form. Ignoring political pressure to adopt the West German agricultural ideology of small-scale farming, members of the former collectives often preferred to preserve these larger units as cooperatives or corporations— perhaps out of familiarity with the social and economic structures of the old collectives and perhaps also anticipating that greater efficiencies of scale would be possible in this manner.26 Furthermore, many eastern farmers, with little access to capital and with decades of experience in collectivized farming, were reluctant to go out on their own.27 In the years following unification the successors of the old collectives have faced numerous difficulties, such as the burden of debts carried over from the GDR period (Altschulden), financial disputes with former members of the collectives, and claimed discriminatory treatment by the federal government. On the other hand, these successor organizations have benefited from various subsidies including payments under the Common Agricultural Policy of the European Union.28 But even after numerous vicissitudes, the successor organizations of the old collectives remain dominant in eastern Germany “in terms of the amount of acreage that they have under cultivation.”29 In many cases, these capitalist cooperatives have been operated by the same managers who directed the enterprises as collective farms during the GDR period.30 Some observers claim that these so-called Red Barons of GDR agriculture employed forms of manipulation to retain and extend their power.31 In contrast, however, others had more favorable assessments of these managers, pointing out that they were often well qualified and were trusted by the members of the collectives with whom they had worked for years.32 In any case, this was an exceptional instance in which eastern elites were not replaced by western elites upon German unification.33 Indeed, as has been noted more generally, “agriculture was one of the few areas of the eastern German economy where major aspects of GDR economic institutions persisted and, in fact, remained dominant.”34 That is not to say, however, that the postunification cooperatives constituted anything like the sole form of agricultural organization in eastern Germany. Instead, unification brought a very diverse mixture of forms of agricultural ownership to the East.35 In some cases, for example, eastern German farmers withdrew their property from the cooperative, to form independent farms. In other cases, individual or corporate purchasers from the West (often aided by legislative incentives) established their own farms in the East.

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Moreover, a certain number of aristocratic former large landowners (or, more likely, their heirs) leased or purchased farms or other property in eastern Germany.36 As we have seen, these individuals were prevented by the settlement on unification, and the decision of the Constitutional Court, from receiving restitution of their former property holdings. They did, however, receive a measure of compensation, and the government agency in charge of state-owned GDR lands (a successor of the Treuhand) eventually agreed, in some cases, to lease portions of the previously owned land to the prior owners or their heirs. Thus, in the case of the agricultural map of eastern Germany, the result seems to reflect a measure of compromise. In a rather surprising development, the successors of the old GDR collectives, now in cooperative or corporate form, retain a dominant position—although not nearly the dominance that they exercised under the GDR. In contrast, a broad variety of individual and corporate farms have also been established, owned by eastern farmers who have withdrawn their property from the former collectives and by westerners who have established farms in the rather different agricultural circumstances of the East. Finally, even some of the descendants of the former aristocratic owners of property dispossessed in the Soviet Bodenreform have been able to make their way back into eastern Germany. But their presence, although not insignificant in some areas, remains far from the dominance that their landholdings exercised in great areas of eastern Germany in the nineteenth and early twentieth centuries. The Revised Law of Abortion The exclusion of the Soviet expropriations from the principle of restitution was one of the few important areas of the Unification Treaty in which the GDR negotiators held firm on their position and ultimately prevailed. A similar result was achieved with respect to the liberal rule on abortion that had been adopted in the GDR. Because this liberalized rule had become the basis of a social institution in the GDR, the eastern negotiators were reluctant to give way on this point. After a number of complex developments, therefore, the GDR’s rule on abortion—or something very much like it—ultimately made its way into the law of unified Germany. To understand this point fully, we need a bit of history. In its first abortion decision in 1975,37 the West German Constitutional Court held that, as a general matter of constitutional principle, the state was obligated to criminalize abortions, in order to protect the life of the fetus. In reaching this conclusion, the Court found that a fetus was entitled to the right to life contained in Article 2(2) of the Basic Law, and that the state was

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obligated to protect this right, pursuant to the guarantee of human dignity in Article 1 among other reasons. The Court also advanced the argument that, because the Nazi regime had disregarded human life on a vast scale, the Basic Law recognized a special obligation to protect human life, including, specifically, fetal life.38 Although many commentators applauded this argument, to other observers it could seem like the cynical instrumentalization of the fate of the Nazis’ victims, in order to achieve a present political or judicial goal.39 Although the Constitutional Court thus emphasized the right of the fetus in its 1975 decision, the Court also recognized that this right was not absolute. The Court acknowledged that the pregnant woman had countervailing rights of the free development of her personality under Article 2(1) of the Basic Law. As a result, the Court concluded that abortion would be permissible—as an exception to the state’s general obligation of criminalization—in four sets of circumstances 1. when pregnancy would threaten the life or health of the pregnant woman; 2. when the pregnancy was the result of rape or incest; 3. when the fetus was threatened with a serious birth defect; or 4. when the birth of a child would lead to undue social distress for the woman. The last of these criteria was obviously quite elastic and was interpreted broadly in some liberal German states, but it was viewed much more narrowly in states with conservative governments. Even with these exceptions, however, the Court’s decision drew an extended dissent from Justices Wiltraud Rupp-v. Brünneck and Helmut Simon,40 who had become the “great dissenters” of this period of the Court’s history. The dissenters argued that constitutional rights were intended to protect individuals from undue criminal prosecutions and that to impose a constitutional requirement that the state prosecute individuals under certain circumstances—as the majority’s opinion had done— reflected a fundamental misunderstanding of the nature of constitutional rights. According to the dissenters, the state’s obligation to protect fetal life could be adequately fulfilled by requiring that the pregnant woman receive counseling before deciding on an abortion. But these were minority views, and the majority’s decision of 1975 represented the status of West German constitutional law on abortion at the time of German unification. In contrast with the more restrictive West German abortion regime, an East German abortion statute of 1972 basically allowed the free choice of abortion by a pregnant woman during the first twelve weeks of pregnancy,

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and this freedom of abortion—apparently resting on ideas of gender equality—had become embedded in the social institutions of the GDR. Accordingly, the GDR representatives were intent upon preserving this abortion regime in the negotiation of the Unification Treaty. Ultimately, the Treaty itself contained only a temporizing compromise, but after a long period of controversy, the unified Bundestag eventually enacted a new abortion statute, which, in important respects, closely resembled the GDR abortion provisions.41 In its consideration of this new statute, the Constitutional Court retreated from its earlier view (set forth in the 1975 case) which required that, in order to protect the right to life of the fetus, an abortion must remain subject to criminal penalties (with certain exceptions noted above). Rather, in its 1993 decision,42 the Court accepted the view of the new statute’s proponents—and of the dissenters in the 1975 case—that the life of the fetus may be equally well protected through a regime of counseling instead of criminal penalization. The Court did, however, insist on a regime of very tendentious counseling, which would be directed toward dissuading the pregnant woman from having an abortion. The Court also found that in many instances, an abortion freely chosen in the first twelve weeks of pregnancy remained technically “illegal” and thus could not be subsidized through the ordinary health insurance system; accordingly, the state could only pay the costs of such an abortion if the pregnant woman was unable to pay the costs herself. Notwithstanding these qualifications, this was one of the few instances in which the ultimate legal resolution upon unification moved significantly in the direction of former GDR law. Thus one might say that, here again, the Court (as well as the all-German legislature) conceded something to the overall “losers” in the unification process—especially under circumstances in which a different result might have evoked unrest in the former GDR and thus have impaired the process of “inner unification.” At present, after more than a decade and a half, the compromise reflected in the Court’s abortion decision of 1993—as well as subsequent statutes enacted in conformity with the decision—seems reasonably well accepted as an adequate resolution of the bitterly debated abortion issue in Germany. Some attempts to limit the Court’s decision were made by the Government of Bavaria, the most conservative of the German states; but the Constitutional Court invalidated the Bavarian statute on the ground that parliament had intended Federal legislation to be a full regulation of the problem, thus ruling out variations or asserted “improvements” enacted by the individual states.43 Yet it would be going too far to say that the ideological passions raised by this issue have completely subsided, and, indeed, the Court’s 1993

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abortion decision has given rise to controversy in a rather unexpected quarter. In an interesting development, the Court’s endorsement of counseling as a method of reducing abortions has led to serious international tensions within the Catholic Church, involving the German bishops and the Vatican.44 The German bishops believed that religious counseling could be particularly effective against abortion, and therefore they established church-sponsored offices to furnish counseling to pregnant women as contemplated by the Court’s 1993 decision. But the Vatican took a less accommodating view and, in 1998, Pope John Paul II banned these offices on the grounds that providing this counseling (and certifying that the counseling had taken place, a prerequisite for an abortion) constituted undue involvement of the church in the German abortion regime. Certainly, the question for the church was whether the decrease in abortions, posited by the German bishops as a result of church counseling, would justify ecclesiastical officials in signing documents that would allow pregnant women to obtain an abortion. Apparently, the bishops thought that, in this way, the counseling would be justified; but they were overruled by the pope. After some resistance, the bishops complied with the pope’s order and closed their offices. In response, however, Catholic lay groups have worked to reestablish a number of counseling centers and have sought to resist continued pressure from the Vatican to suspend their abortion counseling activities as well.45 These and other debates have persisted at the margins of the abortion question in Germany, and in 2009, the German parliament enacted some new regulations relating to late-term abortions in case of birth defects and related dangers to the health of a pregnant woman.46 Yet even with these debates and marginal changes, the main thrust of the Court’s 1993 decision—which, as we have seen, comes close to adopting the GDR’s rule on abortions—seems to remain securely in effect. Thus, the ultimate German abortion regime marks a rare instance in which the law of the GDR has made a substantial contribution to the law of united Germany. Criminalizing the GDR Regime The final cases that we will consider—dealing with the criminal responsibility of GDR border guards and other officials—do not fall precisely into the structures outlined above. In any event, they do not seem to have arisen from an essential aspect of the political settlement upon German unification—in contrast, for example, with the fate of East German property or the dismantling of the GDR civil service. Indeed, the principles ultimately governing these cases seem to have been developed almost

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completely by the judiciary—rather than by the parliament—and they were apparently not the subject of significant negotiation in the debates on the Unification Treaty. In one of these cases, for example, the Constitutional Court held—in an elaborate argument apparently made out of whole cloth—that East German espionage agents who had operated entirely in East Germany (e.g., higher espionage officials who directed agents in the West but did not travel to the West themselves) could not be prosecuted for espionage after German unification.47 According to the Court, espionage was a morally neutral activity employed by all governments; therefore, to impose liability on East German agents who could reasonably have relied on nonprosecution because they remained in the East, would be an unconstitutional example of disproportionate treatment in violation of the Basic Law. One might view this result as an added “benefit” extended to certain “losers” in the unification process—although the East German espionage officials might not seem to be the most eligible candidates for this form of mediating adjustment. In a separate set of cases, however, the Constitutional Court upheld the criminal convictions of East German border guards who had used deadly force at the Berlin Wall (and elsewhere along the East German border), against persons seeking to escape from the GDR. In these cases, the courts seemed to disregard the provision of the Unification Treaty which stated that, after unification, the law applicable to criminal prosecutions for acts that had been committed in the East should be either West German or East German law, depending upon which law was “milder.” Since the official use of firearms at the border was, in most instances, legal under East German statutes—a regime that, accordingly, constituted the “milder” law—a straight application of the Unification Treaty should have resulted in acquittals of the East German border guards in most cases. Rejecting this result, however, the postunification courts invoked natural law concepts and reinterpreted East German law in accordance with techniques that would never have been employed by the East German courts of the old regime. Moreover, the Constitutional Court argued that the principle of nonretroactivity should be accorded diminished respect in the case of criminal statutes enacted by an undemocratic state. The result was that many East German border guards were convicted of manslaughter, and a number of high East German officials (in several instances, former members of the Politbüro) were convicted of complicity in manslaughter.48 But even here the courts seem to have built an implicit adjustment into the results, because in almost all cases, the border guards received suspended sentences and so were not penalized in a very concrete manner. A number of the higher officials, in contrast, did serve relatively modest jail sentences. Overall, however, these prosecutions and convictions did not

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really seem to serve any of the traditional goals of the criminal law. Rather, the principal result of these cases seems to have been little more than a rhetorical result—that is, placing the stamp of criminality and illegitimacy on the actions of the prior GDR regime and thus retrospectively calling into question the legitimacy of the GDR state itself. Conclusion The Constitutional Court of the Federal Republic of Germany has had numerous dramatic and important moments in its sixty-year history. Many of these instances were dramatic and important because the Court invalidated statutes of parliament or judgments of the “ordinary” civil or criminal courts. In the famous Lüth case,49 for example, the Court—striking down judgments of the ordinary civil courts—extended the Constitution into the domain of private law and opened up broad prospects of rights of free expression. In a dramatic series of cases in the 1970s, the Constitutional Court engendered considerable controversy by invalidating various reforms enacted by Social Democratic governments of the time.50 In contrast, in the mid-1990s, the Court seemed to open new paths in the development of constitutional rights of religious freedom and freedom of expression, in cases that were bitterly criticized by conservatives in Germany.51 More recently, in noted decisions, the Court has struck down statutory measures of electronic surveillance52 and invalidated a law authorizing the shooting down of civilian aircraft being used for terrorist purposes.53 In the aftermath of German unification, in the early and mid-1990s, the Constitutional Court also handed down a number of dramatic and important decisions. But these decisions were important in a somewhat different manner. Instead of permanently striking down significant legislation, the Court upheld the basic political decisions on unification. Yet, at the same time, the Court also sought a degree of social integration through attempts to mitigate the burdens imposed upon some of the inevitable losers in the unification process. Notes * For earlier writings of the author discussing themes considered in this chapter, see, for example, The Imperfect Union: Constitutional Structures of German Unification (Princeton, NJ: Princeton University Press, 1997); “The Constitutional and Legal Framework of German Unification,” in Der Vereinigungsschock. Vergleichende Betrachtungen zehn Jahre danach, ed. Wolfgang Schluchter and Peter E. Quint (Weilerswist: Velbrück Wissenschaft, 2001), 19–38; “60 Years of the Basic Law and its Interpretation: An American Perspective,” Jahrbuch des Öffentlichen Rechts der Gegenwart 57 (2009), 1ff. See also note 48, infra.

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170 / peter e. quint 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

19. 20. 21. 22.

23. 24. 25. 26.

See, for example, 36 BVerfGE 1 (1973) (Basic Treaty Case). 82 BVerfGE 322 (1990). Quint, Imperfect Union, 349 n. 28. M. Donald Hancock and Henry Krish, Politics in Germany (Washington: CQ Press, 2009), 130, 135. For 2009 election results, see “The German Election’s Biggest Winner,” Spiegel Online, September 27, 2009. Peter Barker, “The Party of Democratic Socialism as Political Voice of East Germany,” in United and Divided: Germany Since 1990, ed. Mike Dennis and Eva Kolinsky (New York: Berghahn Books, 2004), 55. Hancock and Krish, Politics in Germany, 129. Ibid., 130–31, 134. “Is Germany’s Left Party a Threat to Democracy?” Spiegel Online, July 22, 2010. See Const. GDR (1974) Article 24. 84 BVerfGE 133 (1991). In similar decisions, the Constitutional Court upheld the dissolution of the GDR Academy of Sciences as well as other significant East German research institutions. 85 BVerfGE 360 (1992); 86 BVerfGE 81 (1992). Article 6 (4) GG. 39 BVerfGE 334 (1975). 92 BVerfGE 140, 156–57 (1995); see also, for example, 96 BVerfGE 152 (1997); 96 BVerfGE 171 (1997). 107 BVerfGE 218 (2003); see also 107 BVerfGE 257 (2003). 100 BVerfGE 138 (1999). See Quint, Imperfect Union, 216–28. Similarly, in instances in which return of property was impossible, compensation would be awarded. Moreover, provisions for the restitution of property were subject to complex (and sometimes shifting) exceptions favoring persons who presented practical plans for economic development. Individuals whose property in the East had been expropriated by the Nazis between 1933 and 1945, for racial, political, religious, or ideological reasons, were also generally entitled to restitution. See Imperfect Union, 128–32. See Article 143 (3) GG. 84 BVerfGE 90 (1991). 94 BVerfGE 12 (1996). 102 BVerfGE 254 (2000). Accordingly, the Court upheld the deferral of certain compensation, as well as the reduction of percentage payments for former owners of particularly extensive holdings (although the Court upheld aspects of the latter provision by a split 4–4 vote). See also 1 BVerfGK 227 (2003) (upholding exclusion of land expropriated under the Soviet occupation regime from restitution under an administrative rehabilitation statute). Von Maltzan and Others v. Germany, 2005–V Eur. Ct. H. R. 397. Ibid., 428–29. See Const. GDR (1974) Articles 10 and 13. See, for example, Axel Wolz, Michael Kopsidis, and Klaus Reinsberg, “The Transformation of Agricultural Production Cooperatives in East Germany and Their Future,” Journal of Rural Cooperation 37 (2009), 5, 15–16.

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the constitutional court / 171 27. See Hans C. Buechler and Judith-Maria Buechler, Contesting Agriculture: Cooperativism and Privatization in the New Eastern Germany (Albany, NY: SUNY Press, 2002), 305. 28. John Eidson and Gordon Milligan, “Cooperative Entrepreneurs? Collectivisation and Privatisation of Agriculture in Two East German Regions,” in The Postsocialist Agrarian Question: Property Relations and the Rural Condition, ed. Chris Hann et al. (Münster: LIT Verlag, 2003), 60. 29. See John Eidson, “Collectivization, Privatization, Dispossession: Changing Property Relations in an East German Village, 1945–2000,” Max Planck Institute for Social Anthropology, Halle/Saale, Working Paper No. 27 (2001), 24. 30. See Wolz et al., “Transformation,” 14. For discussion of an interesting example, see Buechler and Buechler, Contesting Agriculture, 23–29. 31. See, for example, “Belogen und Betrogen,” Der Spiegel 24/1995, 132–43. 32. See Wolz et al., “Transformation,” 14. 33. Ibid. 34. Buechler and Buechler, Contesting Agriculture, 17; see also 118. 35. See generally ibid., 119–273. 36. See, for example, “Gefühl von Heimat,” Der Spiegel 36/2006, 48–50; Buechler and Buechler, Contesting Agriculture, 230–32; see also 317–19. 37. 39 BVerfGE 1 (1975). 38. Ibid., 66–68. 39. For the use of this argument in German parliamentary debate, see Joyce Mushaben, Geoffrey Giles, and Sara Lennox, “Women, Men, and Unification: Gender Politics and the Abortion Struggle Since 1989,” in After Unity: Reconfiguring German Identities, ed. Konrad H. Jarausch (Providence: Berghahn, 1997), 156–57. A similar argument was employed by opponents of the liberalization of abortion in France in the 1970s. See Simone Veil, Les hommes aussi s’en souviennent. Une loi pour l’Histoire (Paris: Stock, 2004), 71–73. 40. 39 BVerfGE at 68–95. 41. For an interesting discussion of the Bundestag debates on the new abortion statute, see Mushaben et al., “Women,” 149–58. 42. 88 BVerfGE 203 (1993). 43. 98 BVerfGE 265 (1998). 44. See, for example, Alan Cowell, “Obeying Pope, German Bishops End Role in Abortion System,” New York Times, January 28, 1998. The full story is recounted in Mary Anne Case, “Perfectionism and Fundamentalism in the Application of the German Abortion Laws,” in Constituting Equality: Gender Equality and Comparative Constitutional Law, ed. Susan H. Williams (New York: Cambridge University Press, 2009), 93. 45. Ibid., 105–06. 46. See, for example, Daniela Reitz and Gerd Richter, “Current Changes in German Abortion Law,” Cambridge Quarterly of Healthcare Ethics 19 (2010), 334. 47. 92 BVerfGE 277 (1995). 48. For important decisions of the German courts in these cases, see, for example, 95 BVerfGE 96 (1996) (Constitutional Court); 39 BGHSt 1 (1992) (BGH: Federal Supreme Court). The European Court of Human Rights also found

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49. 50. 51. 52. 53.

that convictions based on these arguments did not violate Article 7(1) of the European Convention of Human Rights, prohibiting retroactive criminal conviction. See Streletz, Kessler, and Krenz v. Germany, 2001-II Eur. Ct. H. R. 351. See also Baumgarten v. Germany, Communication No. 960/2000, UN Doc. CCPR/C/78/D/960/2000 (2003) (statement of UN Human Rights Committee finding that conviction of the chief of GDR border guards on similar arguments did not violate the International Covenant of Civil and Political Rights). For the author’s views on the German cases, see, “The Border Guard Trials and the East German Past—Seven Arguments,” American Journal of Comparative Law 48 (2000), 541ff.; “Judging the Past: The Prosecution of East German Border Guards and the GDR Chain of Command,” Review of Politics 61 (1999), 303ff. 7 BVerfGE 198 (1958). See, for example, 35 BVerfGE 79 (1973) (striking down university reform measure); 39 BVerfGE 1 (1975) (first abortion decision). See, for example, 93 BVerfGE 1 (1995) (prohibiting crucifix in public school classrooms). 109 BVerfGE 279 (2004). 115 BVerfGE 118 (2006).

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Epi lo g u e Th e En d of D ic tator sh i p a n d It s A f t e r m at h: P e r sona l R e f l ec t ions of t h e Fede r a l Com m i s sion e r for t h e R ecor d s of t h e Stat e Sec u r i t y Ag e nc y of t h e Ge r m a n D e moc r at ic R e p u bl ic 1 Marianne Birthler

First of all, I would like to thank you for the honor of being invited to speak here on this special occasion, twenty years after the fall of 1989, which changed not only Germany but all of Europe. I will start with some personal memories and impressions of the days and weeks in fall 1989. After that I would like to explain in detail how Germany has addressed its German Democratic Republic (GDR) past. The main point of my statement will be to try to clarify how we use the files of the former State Security Service and what effect that has on our society. But now back to fall 1989. Most people in the world remember the pictures of the fall of the Berlin Wall, and they regard this day as the most important event, which brought freedom and democracy to the East German people. Well, it really was a big day and an unforgettable night. But the fall of the Wall did not bring freedom and democracy. It was the other way around. The freedom that the people had demonstrated and fought for in the months and weeks before was the precondition for breaking down the Wall. And of course this did not take place only in the GDR. Walls came down in the summer and at several places. In Poland, when Solidarność triumphed. In Hungary, when Imre Nagy was honorably buried in Budapest and when the Hungarian government cut the barbed wire. In the Baltic countries, where, in August 1989, a 600-kilometer-long human chain through Estonia, Latvia, and Lithuania reminded the world of the Hitler-Stalin-Pact fifty years before.

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And if you ask those East German people who were part of the civil movement (Bürgerbewegung) of the GDR, they all will mark October 7–9 as the most important and decisive days, when many thousands of people demonstrated, facing heavily armed police and security forces, while a lot of people were already imprisoned. No one knew how it would end. We all remembered very well the news from Beijing three months before, when hundreds of nonviolent students were killed by the armed forces. We remembered too that Egon Krenz, a leading politician of the GDR, had welcomed the news from China. Over the preceding months, the Monday demonstrations in Leipzig had become stronger with each passing week, beginning with prayers in the large city center churches and spreading to the ring, the major street surrounding the city center. In many other cities, thousands of people came together, primarily in churches, the only places available for such gatherings. Most of those who met there were not Christians. They came to meet kindred spirits, to have access to information, and to share their hopes and fears. They talked, shared information, sang, and prayed. The hymn Dona nobis pacem (“Grant Us Peace”) was among the most popular songs, and people—Christians or not—took each other’s hand and sang together. Perhaps one reason there was no violence on the part of the demonstrators was that people who join hands and stand shoulder to shoulder while singing Dona nobis pacem can’t pick up and throw paving stones. October 9, 1989, was a Monday, the day of the traditional peace prayers in Leipzig. Thousands of people intended to demonstrate after leaving the churches, although they knew that highly armed police and soldiers were ready to control the streets. I spent this evening in the overcrowded Gethsemane Church in Berlin, where thousands of people met like every evening—although it was a little bit difficult to get there because police and security had blocked off the surrounding streets. We waited for news from Leipzig. During the day, we had received information about closed schools and kindergartens there, about hospitals put on emergency status, and about units of stored blood kept in stock. Finally, after hours of fear and sorrow, we got the good news: 70,000 Leipzig people had demonstrated unmolested; the police and the army had retreated. We felt relieved and enthusiastic and went out. As in Leipzig, the streets around the church in Berlin were suddenly free of police forces and illuminated by hundreds of candles. Later in the evening, someone climbed up the church steeple and rang the bells. They had given way, we were free. Four weeks later, on November 4, some 100,000 people demonstrated in Berlin for freedom and democracy. I had the honor to be among the speakers, and my subject was the violence of the police and security some

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weeks before. There were still people in prison that day. A few days later the Wall came down; one year later, we celebrated German Unification. I hope very much to have made it clear why we, the members of the former GDR opposition, insist that October 9 is the decisive day, the key date of the democratic revolution. Now, twenty years later, not everyone looks back feeling lucky and thankful. More than a few of those who lived in the former GDR are disappointed. Of course, most of the East German people welcome the developments of the last twenty years; they make use of their opportunities and esteem freedom and democracy. But an important minority does not. Perhaps disappointments were unavoidable. The longer people dreamt of the free, rich, and promising Western world during the forty years of the GDR, the more they were disillusioned by reality. My predecessor Joachim Gauck put it this way: “We dreamed of paradise and woke up in North Rhine-Westphalia.” Now, nearly twenty years after the democratic revolution in the GDR, numerous external signs of the decline of “real socialism” have gradually faded from view. As I mentioned, most of the East Germans, particularly the younger generation, take democracy and an open society for granted. Even the natural environment is making a slow recovery: this past summer, I was able to swim in a lake in which swimming was strictly prohibited only twenty years ago. But other less visible damage caused by the dictatorship cannot be remedied by construction measures and will remain perceptible for a long time to come. When a country has had no critical general public and no free media for more than half a century; when free speech has been banished from schools and universities; when civil awareness, the will for freedom, powers of self-organization, and diversity of opinions have been suppressed; and when religion has been discriminated against and plurality repressed: that damage will be perceptible for several generations to come. The gradual repair of this damage requires not merely patience, but also dedicated effort and enlightenment. The Germans have taken and are taking various steps to meet this challenge. Institutions that concern themselves with the history, effects, and legality of the Socialist Unity Party (SED) dictatorship are mostly a result of the civic commitment of the East Germans. First, I would like to give you some general information on activities and measures as well as challenges or problems in this field. After that I will focus on my work as the Federal Commissioner for the Records of the State Security Service of the Former German Democratic Republic, for short the “BStU.” In 1992, primarily on the initiative of East German members of parliament, the first all-German Bundestag passed a resolution on the formation

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of an Enquete commission “to address the history and consequences of the SED dictatorship in Germany.” Debates concerning the range of tasks of this study commission were already quite heated. In his final major address to parliament, the former German chancellor Willy Brandt warned against spreading “the cloak of concealment over a grave injustice” in the merging of East and West. He described the elucidation of history and coming to terms with the past as “a task incumbent upon all Germans, and a contribution to reconciliation.” Two years later, the commission submitted its comprehensive initial report, which comprised approximately 300 pages—along with records of proceedings and experts’ reports, which themselves amounted to nearly 15,000 pages. It was discussed and applauded by all parliamentary factions—with the exception of the Socialist Unity Party-Party of Democratic Socialism (SED-PDS), today’s Linke Party. At the same time, it became apparent that the work to be done was not yet finished. A second commission was appointed, which submitted its report in October 1997, recommending at the same time the establishment of a government-funded organization devoted to the examination and reappraisal of the communist dictatorship in East Germany. A corresponding law was enacted with a large majority by the Bundestag on April 2, 1998; in November 1998, the Stiftung zur Aufarbeitung der SED-Diktatur, or the Foundation for the Reappraisal of the SED Dictatorship, began its work. It mainly supports projects, private archives, victims’ organizations, scientific research, and political education. In addition, several laws deal with the GDR past by redressing the injustices committed by the SED. These measures were undertaken in the interest of the victims. A law on criminal rehabilitation, for example, regulates the reversal of politically motivated, unjust verdicts. Another addresses administrative decisions that contravened the rules of law. Yet another law compensates for politically motivated interference in one’s profession or education. Finally, a law passed in 2007 grants those who were imprisoned for at least six months for political reasons, and are needy, the right to a so-called victim’s pension. Memorial places also aid in the ongoing examination of the GDR past. A wide variety of sites and institutions for remembrance and commemoration have been established. There are small-scale and locally based associations dedicated to the preservation of memorial sites, privately operated museums and archives, large-scale memorial sites in former prison locations such as Berlin-Hohenschönhausen or Bautzen, and the Gedenkstätte Berliner Mauer (Berlin Wall memorial), all of them primarily the result of citizens’ initiatives. The federal and state governments generously subsidize most of these sites.

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The field of GDR research had been rather underdeveloped in the old Federal Republic but was given new momentum in 1989, primarily because the archives became accessible. Several research institutes have made GDR research one of their main focuses or have been established for the express purpose of conducting GDR research. In the meantime, such a wide array of publications has become available that it is difficult to present an overview. Civic education addressing GDR issues is an extremely important aspect of coping with the past. In Germany, the federal states are normally responsible for education. But federally operated institutions are also involved—the Bundeszentrale für politische Bildung (German Federal Agency for Civic Education), the Stiftung Aufarbeitung, and the Federal Commissioner for the Stasi Files. Last but not least, artistic interpretations have also sought to cope with the past. Novels, narratives, films, and plays that deal with life in the GDR by artistic means should not go unmentioned. Interestingly, those books and films that ridiculed life in the GDR were the first to become popular. In the meantime, though, this fad has given way in favor of a more serious manner of confrontation. I must bring this incomplete enumeration to an end. To sum up, it can indeed be said that the Germans—with regard to both dictatorships— decided politically and socially not to remain silent and forget. Of course, there are also deficiencies and problems. The issue of how we in Germany should come to terms with the SED dictatorship was a controversial one from the very beginning. There were, and still are, numerous forms of resistance to this process, and not only from those who played a direct role in and reaped the benefits of the GDR system. Others, among them former politicians from the federal parliament, feared that it would be harmful for us to concern ourselves too intensively with the past. Looking back would divide our society, endanger its inner peace, and tie up too much of the energy needed for reconstruction work in the East. We know, by the way, that similar arguments arose after 1945. In the meantime, resistance to this work of remembrance has diminished, but of course there are some voices that say that after twenty years, there should finally be an end to the process. Another more important point is that several organizations and associations exist that strive to rehabilitate the GDR. The active core of these groups usually consists of former Stasi officers, who dedicate their well-paid existence as pensioners to the struggle for the last word on the interpretation of the GDR. In addition, various schools of thought that still maintain that the GDR was a legitimate, albeit misguided, attempt

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to create a more humane society may have an even greater impact on the public discussion. Let me mention still another point. It is obvious that efforts to come to terms with the past, as well as resistance to these efforts, are more widespread in the East than in the West. It was in the East that people experienced the dictatorship, and the East is where the memorial sites are located. Yet for several reasons, there can be no doubt that the SED dictatorship is not a regional issue confined to Eastern Germany but that it has significance for Germany as a whole. However, we are still far from taking the GDR as a part of German history for granted, just as the history of the Central and Eastern European countries formerly under communist rule are also not part of the picture of European history when viewed from Paris, Stockholm, or Rome. Let me quote Jorge Semprun, who four years ago, as a former prisoner of the nearby Buchenwald concentration camp, gave a speech on the sixtieth anniversary of the liberation of the concentration camps: The recent accession [to the European Union] of ten new countries in Central and Eastern Europe—the “other” Europe, which was caught in the trap of Soviet totalitarianism—can culturally and existentially only really take place when we have pooled and shared our memories. Let us hope that at the next commemoration service in ten years time, in 2015, the experience of the Gulag has been integrated into our collective European memory. Let us hope that “Narratives from Kolyma” by Warlam Schalamow will have taken its place alongside books by Primo Levi, Imre Kertész or David Rousset. On the one hand, this would mean that we would no longer be paralysed on one side, and on the other that Russia will have taken a decisive step on the path to democratisation.2

Many people also have trouble accepting the fact that the responsible party officials, leading Stasi officers of the State Security, and others who aided and abetted the dictatorship went mostly unpunished. They were not punished because a basic principle of the rule of law prohibits retroactive legislation: a deed can only be punished if it was defined by law as a criminal offense before it was committed. This principle of the rule of law is indispensable to democracies. However, it has fatal consequences when applied to crimes perpetrated by a dictatorship. In the GDR, for instance, there were several laws that provided the basis for people to be discriminated against and persecuted in violation of human rights. Let me also mention another aspect that is a constant source of annoyance, particularly for the victims of the dictatorship. Although they themselves often have to live on the breadline, at the very latest when they reach retirement age, those who worked in the administration, the army, the police force, or for the Stasi receive handsome old-age pensions.

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In the remainder of my talk, I would like to go into details about the institution of the Federal Commissioner for the Stasi files: about the genesis of an institution created expressly for this work, about its work, and about the experiences we have had. It was the people in the GDR who took over the offices of the Eastern German Ministry for State Security (Stasi) in the winter of 1989/1990. Without the determination of those who did not hesitate to act, the files kept by the Ministry, insofar as they still exist, would not be accessible today. Yet the BStU does not only owe its existence to civil courage; it is also the offspring of the rule of law in the Federal Republic. It was this successful combination of the spirit of the democratic revolution and the rule of law, developed in the Federal Republic over forty years, that led to the success of this institution, for which there was no precedent anywhere in the world. With the Stasi Records Act (StUG), new ground in jurisprudence was broken. Never before had files maintained by a secret police been made accessible to the public. The original plan to hand the Ministry for State Security records over to the German Federal Archive was abandoned in favor of a specific legal regulation. There were several reasons for this decision. Because of the illegal nature of their compilation, and the fact that they were particularly worthy of protection, the Ministry for State Security documents required more stringent rules for their storage and use than normal administrative or party files do. At the same time, they had to be made accessible promptly and without retention periods. They also had to be safeguarded from political influence and from misuse in a manner that would seem credible to the public. This meant, among other things, having an independent commissioner elected by the German parliament and not being supervised by a government ministry. The Stasi Records Law has stood the test of time, despite all the prophecies of doom. The BStU has protected the files from destruction, released information from them that has helped East Germans cope with their past, and, to the best of its ability, guarded against the misuse of files for political purposes. The sheer quantity of files in our archives is difficult to imagine. They encompass approximately 158 kilometers of documents (including 39 million file cards). In addition, there are approximately 15,500 sacks containing torn documents that, when they have been reconstructed, will amount to an additional four to six kilometers of files. Moreover, there are approximately 1.6 million information carriers (photos, videos, and electronic data media) in our archives. One of the most important intentions of the law is to give every individual citizen concerned the right of access to their files, to find out if

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they have been investigated, manipulated, or persecuted. People also have the right to be informed about the identity of the informers who spied on them and gave the information to the Stasi. So far, 1.7 million people have availed themselves of this right. Last year (2008), there were around 87,000 requests, and in 2009, there will be about 100,000 of them. When the Record Act was discussed in the German Bundestag, many politicians feared that the right to have access to the files would cause retaliation and revenge or a social climate of hate. But no such thing happened. People who had to learn about the treachery of their colleagues, close friends, or even relatives remained levelheaded. The significance of this access to the files hardly needs to be further explained. The victims of the dictatorship are given back their individual sovereignty when they find out the truth about their personal history and can freely decide how to deal with this knowledge. They are placed in a position to “reclaim their own biographies,” as my predecessor put it. But even beyond this specific issue, the confrontation with one’s “own” file—even the consideration of whether one wishes to concern oneself with it at all—is part of dealing with history. In this context, the StUG has brought about hundreds of thousands of individual confrontations with the past, along with countless discussions among families and friends about the benefits and drawbacks of the inspection of records or about the content of the documents themselves. The checks of public service employees to find out previous unofficial collaboration with the Ministry for State Security, often called “lustration,” have often been the focus of public attention in the past few years; the debate surrounding possible Stasi connections by public figures is among the topics the media like to seize upon. Yet the era of spectacular disclosures is nearing its end, a fact that I consider a welcome development, because the sensational aspect of the matter has often distorted one’s view of important and interesting details. I would like to point out that the Federal Commissioner makes no decisions on these matters. We only give information if there is evidence in the files about collaboration with the Stasi. We do not evaluate; we do not judge. The legal possibility to conduct these checks on public service staff expired at the end of 2006. Since that time, it only applies to a small group of people in particularly important public functions. Researchers who need the Stasi files for research purposes often find, to their disappointment, that the procedures are more difficult than in other archives. However, the more complicated conditions of access are the price for being able to use the files at all. The Federal Administrative Court established these conditions in connection with a legal dispute that

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lasted for many years, involving the release of documents concerning a former chancellor. According to this verdict, the documents kept by the Stasi should remain closed because of the sensitive personal data they contain. The only exception to this principle would be for the purpose of coming to terms with the dictatorship, and this exception itself was subject to stringent conditions in terms of data protection. These stringent rules could be slightly liberalized because of an amendment passed in 2007. In principle, however, certain restrictions on access will remain for a longer time. These restrictions, however, have not reduced demand: from year to year, the number of applications from the fields of research and media has been on the increase. In 2008 alone, more than 1,400 enquiries were received, some of which require highly comprehensive research. Not only does our institution release documents to external researchers, it also has its own Research Division in which twelve scholars are currently employed. On the one hand, research conducted by the BStU is necessary because files are not yet available to the general research community, due to the need to protect private information. On the other hand, it performs service functions by enabling external researchers to draw on the results of their basic research. However, the BStU’s research is not aimed merely at the mechanisms of power and repression. It is equally important to describe what day-to-day life was like under the conditions imposed by a dictatorship, how people adapted to these conditions or utilized certain freedoms, and how some became traitors and others refused to cooperate with the Ministry for State Security. The Stasi files not only tell of shame or treachery but also tell of moral courage and self-respect. Without these reports and stories, partly from the 1940s and 1950s, these times would be forgotten. And they are of great value: first, because those people who opposed the communists and often remained imprisoned for many years must not be forgotten. And second, we ourselves need these stories, because they serve as models for bravery and decency. In addition to this, the Stasi documents comprise an indispensable source of information on many other issues and are sometimes even the only source. The BStU also has the legal mandate to spread historical and political knowledge of the second dictatorship in Germany and to inform the public about the structures and the mode of operation of the Stasi. In this process, it benefits from the circumstance that the Institute for Stasi Documents houses an archive, a research center, and an education center all under one umbrella. Institutional research provides the basis for its work in the fields of education and public relations, and the archives offer a wide array of material on the characteristic traits of a dictatorship and

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on people’s lives under the conditions imposed by a dictatorship. And at the same time students can gain experience in dealing with source material critically. Meanwhile, in several Central and Eastern European countries, there are institutions dedicated in various ways to coming to terms with communist dictatorships. In December 2008, institutions from seven countries (Poland, Hungary, the Czech Republic, Slovakia, Bulgaria, Romania, and Germany) formed a network to link our work and exchange practical experience. The aim of this network is to research the system of communist rule, and particularly that of communist secret-police forces, not only in relation to the individual countries involved but also in their international interdependencies. Sometimes people ask me why we spend so much money and time dealing with the past. Perhaps you can find the answer in a German saying that “a half truth is a full lie.” I am sure that a nation only has the right to be proud of its successes, efforts, and achievements if it does not refuse to look at the other side of the coin, regarding those historical episodes that make us feel guilty or sad. I am deeply convinced that living with history and trying to come to terms with the past is very important to become—or to stay—a free, democratic, and self-confident society. Notes 1. The following consists of lightly edited remarks delivered by Marianne Birthler on October 31, 2009, at a special luncheon for the conference on German Unification: Expectations and Outcomes. 2. Jorge Semprum, “Niemand wird mehr sagen können: Ja, so war es,” Die Zeit, April 14, 2005.

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I n de x

abortion, 9, 143, 164–67 Adenauer, Konrad, 45, 55, 77, 145 Afghanistan, 31, 47, 48, 52–54 agriculture, 162–64 Akerlof, George A., 124 Anderson, Jeff, 25 Anti-Ballistic Missile Treaty (ABM), 34 Artzt, Matthias, 102 asylum policy, 11, 55 Bahr, Egon, 46 Baker, James A., III, 1, 2, 3, 4, 7, 12n. 9, 15, 24, 26, 27, 28, 29, 48, 82, 135n. 15 Balkans, 2, 49, 50, 51, 137, 166, 177 Barro, Robert J., 122, 134n. 4 Basic Law (Grundgesetz), 2, 5, 8, 13n. 26, 51, 137, 139–46, 153–72 passim Berlin Wall, vii, 1, 3, 5, 7, 8, 15, 19, 20, 21, 24, 29, 33, 36, 37, 61, 62, 64, 65, 66, 68, 90n. 34, 104, 115, 137, 138, 168, 173, 176 Biedenkopf, Kurt, 130, 132 Birthler, Marianne, viii, 10 Bismarck, Otto von, 23 bloc parties, 102, 117n. 8 Blüm, Norbert, 108 border guards, GDR, 159, 166–68 Bosnia, 50, 166 Brandt, Willy, 46, 176

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Bretton Woods system, 63, 72, 80, 95n. 82, 128 Breuel, Birgit, 113 Bucur, Maria, 81 Bündnis 90, 156 Bundesbank, 61, 62, 63, 64, 67, 71, 72, 74, 76–80, 82, 83, 95n. 78, 95n. 82, 97n. 90, 101, 104, 107, 125–26, 128, 132 Bundesrat, 9 Bundestag, 23, 82, 113, 146, 148, 150, 155–57, 166, 167, 175, 176, 180 Bush, George H. W., viii, 3, 4, 16, 17, 18, 21, 23, 24, 25, 28, 31, 32, 33, 34, 35, 42, 43, 52, 86n. 8 Carter, Jimmy, 31 Catholic Church, 167 Central Bank of the GDR, 65, 78 Chechnya, 2 Chernyayev, Anatoly, 26 China, 174 Christian-Democratic Union (CDU), 10, 69, 86n. 9, 91n. 42, 146 in GDR, 69, 70, 106, 121 citizenship law, 55–56 civil rights movement (GDR), 65–66, 102, 174–75 civil servants in GDR, 157–59 Clinton, Bill, 49

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184 / index Cold War, vii, 1, 2, 3, 4, 10, 12n. 9, 15–39 passim, 42, 47, 48, 49, 56, 137, 145, 153, 158 Collier, Irwin, 7 Conference on Security and Cooperation in Europe (CSCE), 3, 11n. 3, 23, 29, 34 constituent power, 140–44, 150 Constitutional Court, 8, 9, 51, 52, 144, 148, 153–72 passim constitutional moment in international relations, 16, 18, 32n. 37 Conventional Forces in Europe Treaty (CFE), 34–35 Cornelsen, Doris, 65, 73 coronation theory of currency unification, 63, 72, 87n. 13 Council for Mutual Economic Assistance (CMEA), 125, 139 Council of Economic Experts (Sachverständigenrat), 73, 74–75, 101 Council of Europe, 29 Council of Ministers (GDR), 101, 106, 110 currency union, European, see European Monetary Union; Maastricht Treaty currency union, German, 5–6, 61–98 passim, 100–109, 111, 115–16, 121, 122, 124–25, 128 Czechoslovakia, 139 Czech Republic, 49, 182 Delors, Jacques, 25, 125, 128 de Mazière, Lothar, 70–71, 106, 115 Democracy Now, 102 deutsche mark (DM), 61–71, 73–74, 77, 78, 83–84, 103–104, 107, 109, 124–25, 128, 129, 146 Dub ček, Alexander, 7 Du Bois, W. E. B., 121

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Dulles, John Foster, 48 Dumas, Roland, vii, viii, 1, 3 Erhard, Ludwig, 122 Estonia, 54, 173 euro, 43, 44, 48, 64, 65, 75, 82, 84, 87n. 13, 125–26, 128–29, 130–31 European Central Bank (ECB), 64, 83–84 European Community (EC), 2, 6, 15, 16–17, 19, 20, 21, 23, 22, 24, 25, 26, 28, 29, 36, 70, 72, 145 European Court of Human Rights, 162, 171–72n. 48 European Economic Community (EEC), 62, 63, 72, 84, 138, 145, 146 European Exchange Rate Mechanism (ERM), 63, 64, 72, 80, 81 European Monetary System (EMS), 63, 70, 76, 80, 81, 128–29, 135n. 16 European Monetary Union (EMU), 25, 62–64, 72, 76, 78, 81–84, 128, 145 European Security and Defense Policy (ESDP), 44–45, 47–48 European Union (EU), 29, 43, 44, 46–48, 52, 54, 55, 57–58, 83, 129, 130, 132, 163, 178 Falin, Valentin, 27 Federal Commissioner for the Records of the State Security Service (BStU), 175, 179–82 Federal Republic of Germany (FRG), 5, 6, 8, 9, 15, 23, 24, 26, 27, 42, 43, 45–46, 55, 56, 62, 66, 67, 68, 69, 70, 75, 76, 77, 103–104, 106, 107, 121–22, 126, 128, 129, 137–39, 140, 141, 142–43, 144–46, 149, 153, 164–65

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index / 185 Fischer, Joschka, 57 France, vii, viii, 3, 15, 22, 25, 31, 43, 52, 54, 57, 80, 82, 83, 103, 116, 126 Free Democratic Party (FDP), 51, 69, 130 French Revolution, 8 Friedrich, Jorg, 52 Garthoff, Raymond, 25 Gauck, Joachim, 175 Gebhardt, Gerd, 102 Genscher, Hans-Dietrich, vii, viii, 23, 69, 86n. 8, 92n. 53, 130 Georgia, vii, 2, 10, 54 German Democratic Republic (GDR), vii, 1, 4–6, 7, 8, 15–16, 19, 25, 55, 61, 62, 63, 64–71, 72, 73, 75, 78, 80, 99, 101–11, 115, 116, 124, 130, 133, 137–39, 140–41, 142–43, 148, 153, 154, 157, 158, 159–60, 162, 163, 164, 165–66, 167–69, 173–74, 177, 179 Gorbachev, Mikhail, viii, 2, 3, 11n. 7, 16, 18, 19, 20, 21, 22, 24, 26, 27–28, 29, 30, 31, 33, 34, 38, 86n. 9, 103, 118n. 13, 162 Great Britain, vii, viii, 3, 15, 22, 31, 52, 54, 57, 72, 80, 103, 116, 126 Great Depression, 80, 116n. 1 Greece, 41, 64, 65 Greens, 9, 50, 156 Grimm, Dieter, 8 Grosser, Dieter, 5, 6 Grünhold, Karl, 102–103 Hampton, Mary, 4 Haussmann, Helmut, 61 Hessenius, Helga, 124 Hitler, Adolf, 46, 173 Hoffmann, Lutz, 73, 74 Holocaust, 55, 86n. 9

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Honecker, Erich, 5, 19, 64, 67 Hungary, 19, 49, 125, 173 Hurd, Douglas, viii Ikenberry, John, 4 Intermediate Range Nuclear Forces Treaty (INF), 34 Iraq, 43, 50, 52 Ischinger, Wolfgang, 51 Issing, Ottmar, 132 Italy, 80 Jarausch, Konrad, 70 Jochimsen, Reimut, 84 Johnson, Peter A., 95n. 82 Junkers, 160–61, 164 Kaelberer, Matthias, 83 Kaminsky, Horst, 78 Katzenstein, Peter, 46 Kertész, Imre, 178 Kettenacker, Lothar, 89n. 23 Keynes, John Maynard, 82, 126 Kissinger, Henry, 4, 11n. 2 Kohl, Helmut, viii, 15, 17, 19, 20, 23, 24, 25, 26, 27, 41, 42, 43, 44, 48, 50, 51, 58, 61–98 passim, 100, 103, 106, 108, 113, 116, 117n. 13, 121, 126, 128, 130, 132, 146, 180–81 Korea, 147 Kosovo, see Balkans Kozyrev, Andrei, 30 Krause, Wolfram, 101, 104, 105, 109 Kreile, Michael, 93n. 59 Krenz, Egon, 174 Krupp, Hans-Jürgen, 74 Länder, 112–13, 144, 146, 149, 157 Lafontaine, Oskar, 13n. 21, 70, 146, 147, 156 land reform of 1945–49, 160–64 Leipzig Monday demonstrations, 61–62, 138, 174

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186 / index Levi, Primo, 178 Linke, 9, 100, 147, 156 see also Party of Democratic Socialism; Socialist Unity Party Lisbon Treaty, 47, 147 Lüth case, 169 Luft, Christa, 78, 88n. 17, 101, 104 Luxembourg, 130 Maastricht Treaty, 25, 44, 63, 82–84, 128–30, 145 Marsh, David, 81–83 Matlock, Jack, 31–32 Matthäus-Maier, Ingrid, 5, 69–70 Meckel, Markus, vii, viii, 1, 7 Merkel, Angela, 43, 52, 53, 54, 57, 132 Metternich, Klemens Wenzel von, 4 Milošević, Slobodan, 50 Mittag, Günter, 87n. 14 Mitterrand, François, vii, 12n. 9, 20, 22, 24, 38n. 13, 82–83, 86n. 8, 117n. 13 Modrow, Hans, 65, 66, 68, 101, 102, 103, 108, 109, 110 Moens, Alexander, 21 Moisi, Dominique, 45 Monnet, Jean, 45 Mundell, Robert A., 72, 75, 92n. 51 Muslims in Germany, 4, 41, 57–58 Nagy, Imre, 173 National Socialism, 6, 55, 111, 140, 160–61, 165, 170n. 22 New Forum, 66 North Atlantic Treaty Organization (NATO), 2, 3, 7, 10, 11n. 3, 15–39 passim, 43, 47–54, 82, 118n. 13, 126, 145 Ostmark (East German currency), 66–71, 73, 74, 77 Ostpolitik, 46

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Padoa-Schioppa, Tommaso, 87n. 13 Paqué, Karl-Heinz, 124, 131 Party of Democratic Socialism (PDS), 8, 99–100, 105–106, 156–57, 176 see also Linke; Socialist Unity Party Pauley, Stefan, 53 peace movement, 30–31 people’s property, 101, 105–106, 108–109, 162–63 Petersberg Tasks, 46 Platzeck, Matthias, 99–100 Pöhl, Karl Otto, 61, 78, 79–80, 96n. 86, 128 Poland, 43, 49–50, 62, 86n. 9, 153, 173 Pond, Elizabeth, 23, 44 Pope John Paul II, 167 Potsdam Agreement, 153 Powell, Charles, vii, 1, 3 Preuss, Ulrich K., 8 privatization, 6, 147–50 see also Treuhandanstalt property rights and restitution, 132, 147–49, 159–64, 170n. 18, 170n. 27 Putin, Vladimir, 54 Quint, Peter E., 9, 143 Radicals Case, 158 Rappe, Hans-Hermann, 113 Reagan, Ronald, 3, 18, 29, 30, 31, 34, 82, 86n. 9 Rexrodt, Günter, 130 Rice, Condoleeza, 82 right radicalism, 7 Rödder, Andreas, 88n. 22 Röller, Wolfgang, 71, 74 Rohrschneider, Robert, 9 Rohwedder, Detlev Karsten, 71, 74, 91n. 46, 110–11 Rose, Andrew K., 124 Round Table, 8, 10, 58, 65, 91n. 42, 101–102, 105, 115, 116, 142

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index / 187 Rousset, David, 178 Rühe, Volker, 50 Ruehle, Michael, 49 Rumsfeld, Donald, 53 Rupp-v. Brünneck, Wiltraud, 165 Russia, 3, 4, 10, 12n. 15, 43, 49, 54 Sala-i-Martin, Xavier, 122, 134n. 4 Sarkozy, Nicolas, 57 Sarotte, Mary, 20 Sarrazin, Thilo, 56, 60n. 31, 85n. 3, 91n. 40 Schäuble, Wolfgang, 85n. 3, 132 Schalamow, Warlam, 178 Schlesinger, Helmut, 67, 78, 79, 84, 135n. 15 Schmidt, Helmut, 77, 82 Schröder, Gerhard, 43, 46, 52, 53, 57, 147 Schumann, Robert, 45 Seehofer, Horst, 85n. 3 Seibel, Wolfgang, 6 Selznick, Philip, 112 Semprun, Jorge, 178 Shevardnadze, Eduard, vii, 1, 21, 26, 27 Siebert, Horst, 75, 93n. 61, 122–23 Simon, Helmut, 165 Social Democratic Party [of GDR], 7, 70 Social Democratic Party (SPD), 5, 9, 46, 50, 51, 69, 70, 113, 145, 146, 156, 169 Socialist Unity Party (SED), 7, 64, 66, 67, 69, 91n. 38, 101, 105, 106, 134n. 12, 144, 147, 157, 158, 175, 176, 177, 178 see also Linke; Party of Democratic Socialism Social Market Economy, 122 Solidarność, 49, 173 Soros, George, 77, 80, 81, 97n. 101 South Africa, 147

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Soviet Union, vii, 2, 3, 15–39 passim, 42, 48, 61, 62, 103, 117n. 13, 125, 137, 138, 139, 143, 144, 145, 146, 148, 153, 158, 160–62, 164, 178 Spain, 64 Staatsvertrag (Intergovernmental Treaty), 101, 106–109, 121, 122 Stalin, 66, 173 START I Treaty, 34 Stasi Records Act (StUG), 179–80 Stasi (State Security Agency), viii, 10, 65, 157, 159, 173–82 passim Stolpe, Manfred, 113 Szabo, Stephen, 20–21 Teltschik, Horst, 82, 85n. 1, 85n. 2 terrorism, 2, 33, 42, 47, 49, 71 Thatcher, Margaret, vii, viii, 1, 3, 12n. 10, 15, 22, 24, 38n. 13, 81, 86n. 8 Tietmeyer, Hans, 76, 79, 83–84 Trade unions, 6, 112–14, 128 transatlantic alliance, 4, 17, 22, 23, 24, 29, 41, 43, 47, 48–54 transitional justice, 139, 147–50 Treaty of Rome, 129–30 Treaty of the Final Settlement, 16, 138 see also Two Plus Four Talks Treuhandanstalt, 6, 85n. 3, 105–14, 125, 164 Turkey, 41, 57 Two Plus Four Talks, 3, 17, 21, 22, 26, 27, 35, 138 Ukraine, 2, 10 Ullmann, Wolfgang, 102, 104 Unification Treaty, 140, 148, 149, 157, 158, 160, 164, 166, 168 United Nations, 35, 51, 137, 138 United States, viii, 4, 15–39 passim, 42, 43, 44, 50–52, 53, 63, 103, 116

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188 / index Volkskammer, 8, 65, 71, 73, 99, 102–103, 106, 109, 115, 140, 142 Volkswagen, 129–30, 132 Waigel, Theo, 61, 79, 85n. 1, 96n. 86, 107, 117n. 12, 132 Warsaw Pact, vii, 3, 7, 28, 34, 35 Weimar Constitution, 143 Weimar Republic, 155

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Willgerodt, Hans, 74 Wilson, Woodrow, 4, 18, 48, 59n. 22 Wörner, Manfred, 49 Yellen, Janet L., 124 Yugoslavia, see Balkans Zatlin, Jonathan, 5 Zelikow, Philip, 11n. 7, 82 Zoellick, Robert, 29, 38n. 29

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