The economics of a united Germany
Article Abstract:
The major economic impact of German reunification is likely to be increased inflationary pressures and the raising of official interest rates by the Bundesbank to counteract these pressures. The full effect of the monetary union between East and West Germany will be a 58% expansion in West Germany's M3, the broad money aggregate, which is well in excess of the additional GNP East Germany will add to West Germany's economy. If this monetary overhang is not absorbed by saving schemes or higher interest rates, the result would be inflation. Pent-up demand from East German consumers will also add to inflationary pressures, and while West Germany has a large trade surplus to offset the resulting increased demand for imports, this too will add to inflationary pressures. West Germany's debt will increase from 0.9% of GNP in 1989 to two percent of GNP in 1991 as it absorbs East Germany's deficit, and West Germany plans to finance infrastructural improvements with 115 billion Deutschemarks worth of bonds. Germany's outlook in the middle of the decade remain excellent as the Bundesbank will likely raise interest rates to contain inflation.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1990
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Asian shock waves buffet Eastern Europe
Article Abstract:
Eastern Europe is not expected to suffer the same fate of the Far East economies, where currencies serially tumbled after years of phenomenal growth. Currency misalignment in the Eastern Europe bloc is not as uniform as that found in Asia just before it was mired in crisis. The Polish and Russian curriences are most in danger for reasons both fundamental and market-perceived. Meanwhile, the Czech crown is more secure because the government has ensured a soft landing against the Deutschmark when its currency suffered against the dollar in May 1998. The most stable in the region is the fairly valued Hungarian forint. A highly competitive level against the dollar offets a minor overvaluation against the Deutschmark. Given the inconsistent conditions of the currencies, a contagion effect is not likely to take place in Eastern Europe.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1998
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Is there a cure for post-reunification blues?
Article Abstract:
German reunification has given rise to severe short-term economic problems. Former East Germany's gross national product (GNP) contracted by 15% in 1990, and is expected to decline by another 20% in 1991. This, in turn, has placed a growing financial burden on the former West Germany, which has been forced to raise taxes and public borrowings to keep up its massive transfer payments in the east, given primarily in the form of development grants and social benefits. Two factors will be crucial to any improvement in the economic situation in the east: wage increases matched by productivity improvements, and more private sector investment in the eastern states.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1991
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