View from the East: German currency union goes into effect

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In the week before July 1, the date for the introduction of the West German D-Mark as the official currency for East Germany, there was no need to clear the supermarket shelves in preparation for the new shipments of western goods already waiting in the stock rooms for DM-Day. Customers in East Germany (GDR) took care of that themselves.

In preparation for higher prices (up to 400 percent higher for staples like bread), East Germans literally bought everything in sight. Many also found themselves burdened with devalued money since "additional savings" (balances of over 2000 Mark-GDR for minors, 4000 M-GDR for adults, and 6000 M-GDR for pensioners) were slated to lose half their value on July 1.

With traditional German orderliness and efficiency, the armored cars delivered sufficient supplies of the crisp new currency to the banks on time and the show windows were filled with freshly unpacked consumer goods. Monday morning brought a few surprises as the stores opened for business. Most depositors withdrew small sums (200-300 DM) from their bank accounts to meet current expenses and limited themselves to window shopping.

It wasn't until the second week that the spending spree began. TV-sets, microwave ovens, washing machines, and other substantial purchases were on the order of the day. In West Germany the prices on the used car market rose sharply as automobile-hungry East German families bought up everything they could drive away.

Meanwhile East German goods were either unsalable—no one wanted to pay 12,000 DM for a two-cylinder Trabant (the GDR's woefully inadequate answer to the VW-or else they were offered at giveaway prices.

Another surprise was the prices. Everyone in East Germany expected "western" prices to go along with western goods, but, in fact, prices were running 20 percent to 30 percent higher than in the Federal Republic. Distributors claimed that "high start-up costs" were responsible for the discrepancies, but the natural monopolies which arose through the takeover of eastern outlets by western firms certainly played a major role.

In Magdeburg, for example, a city of about 300,000, there is only one department store. When it was taken over by the West German Kaufhof chain, comparison shoppers had nowhere to go.

Plant closures on horizon On other fronts, East German Labor Minister Regine Hildebrandt announced two weeks after phase one of the "social, political, and economic union" took effect, that approximately 30 percent of East German enterprises are already unable to meet their financial obligations. In a discussion with construction workers on July 17, she maintained that the demands raised by the unions were "exaggerated and wrong-headed."

The market, she said, would decide the fate of the insolvent concerns, and wage increases and job guarantees were the wrong way of dealing with the problems of unemployment. The way to save jobs was to increase simply endanger the solvent concerns.

Considering that East German industrial workers earn on the average one-third of what their West German counterparts make and that unemployment is increasing at the rate of 40,000 jobs lost per week (up 60 percent from July 1), the minister's statement is hardly likely to restore confidence.

Attacks on many fronts On the agricultural front things look dismal as well. Massive imports of raw agricultural products into East Germany in recent weeks have driven many of the Agricultural Production Cooperatives (LPGs) to the brink of ruin. Werner Wühist, a leader of the East German Bauernverband (Farmers' Association), announced large-scale protests for the weekend of July 20 if a midweek emergency meeting with GDR Prime Minister Lothar winning respect and support all over the world."

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