Prosperity Elusive in Eastern Germany

The rows of concrete houses in this desolate former military town are partly boarded up. Unused jets, once the pride of East Germany’s air force, molder in the vast grounds where the Nazis developed their notorious V-2 rocket.

A decade after German reunification, Peenemuende is among those places in the formerly communist east that are most in need of an economic boost.

It’s not all bad news here on Usedom island. Freshly restored 1920s villas in neighboring resorts show the Baltic island is gradually regaining its place as a vacation paradise.

But the prosperity has shallow roots. Like much of eastern Germany, the area has been slow to attract new industries that might keep ambitious young people at home.

“Young people here are looking for prospects--and if they don’t see prospects in tourism, they leave,” says Peter Guenther, manager of Usedom Tourism.

Information technology and service industries thrive in parts of the east. But some traditional industries--particularly construction--remain mired in a slump.

An estimated 260,000 people leave Germany’s eastern states each year, largely to find training and jobs in the western part of the country.

About 242,000 western Germans and foreigners move in, but they’re generally less skilled, so the east is bleeding “human capital,” says Udo Ludwig, an expert at Halle University’s Institute for Economic Research.

At Peenemuende, closed to the outside world in its decades as a military base, the picture of blight is particularly extreme.

About 4,000 jobs disappeared here after East Germany’s army was disbanded in 1990. All that remains is a ghost community of about 400 people, most retired or unemployed.

At the center of the village’s efforts to rebuild itself is a museum that is meant to balance the technical effort in creating the V-2 rocket of World War II against the human tragedy associated with the weapon. The first ballistic missile, it helped pave the way for space travel but killed thousands in London and elsewhere.

Usedom and its western neighbor, the island of Ruegen, have resources many places in eastern Germany do not--natural beauty, sandy beaches and a long-established tourist industry. But they haven’t achieved former Chancellor Helmut Kohl’s famous promise of “blooming landscapes” following unification.

Many of the east Germans who used to vacation here have returned, following an early 1990s slump in tourism after the overnight conversion to capitalism. But west Germans are only slowly discovering the region, and foreigners account for only about 2% of visitors.

The jobless rate across the east has hovered for years between 16% and 19%, more than twice the rate in the west.

More than $540 billion in federal aid already has gone from west to east. In June, state officials and the national government agreed on a new aid package aimed at equalizing the standard of living that will send $134 billion to the east over 15 years starting in 2005.

East Germany has moved further and faster than its former Soviet bloc comrades. But people here compare themselves with Western countries.

“It’s something typically German that people dwell on the negative and moan,” says Ludwig, the Halle University researcher. “That just reinforces this feeling of resignation.”

The parliament president, Wolfgang Thierse--a prominent easterner--warned earlier this year that “the economic and social situation in eastern Germany is on the brink.”

Benefiting from the disillusionment are the former communists, the Party of Democratic Socialism, which in May won the leadership of the local government here after a decade of conservative rule, promising a new push to attract investment.

“Particularly in terms of fostering the economy, not much has happened” in recent years, says Astrid Zimmermann, the party’s manager in nearby Greifswald.

“You can’t live from tourism alone,” she says. “We have to do something in this area to bond young people with the region.”

Not everyone agrees the exodus is a bad thing.

East Germans’ willingness to go where the jobs are is a welcome sign of flexibility in a country that isn’t famed for it, argues the head of the Industrial Investment Council, an arm of the German government whose job is to reel in investment from abroad for the east.

Christoph von Rohr says east Germany should play up its advantages to attract businesses--wages that average more than 20% below those in the west and a relative lack of labor regulation.

“This is a kind of three-quarters society,” von Rohr says. “A quarter of the people are lagging behind, haven’t arrived yet in the new competitive environment.”

The companies that did survive the traumatic transition to capitalism “are the very fittest,” he says.