Whilst eastern Germany has been able to more than double its economic output, this figure is still nearly a third lower than that for the rest of Germany. In 2017, eastern Germany's per-capita GDP was roughly 27% lower than western Germany's. Labour productivity in eastern Germany currently stands at 78% of the figure for western Germany. The unemployment rate in eastern Germany reached a new record low in 2017, falling to 7.6%. However, this figure is still much higher than the 5.3% recorded in the west.
Much has been achieved, but the economic catch-up process in eastern Germany has slowed down a great deal in recent years. This is due to the fact that the economy in western Germany, which is closely integrated in international value chains, is also growing. The gap between the two economies is therefore very slow to close.
2018 Annual Report concludes that consistent funding for regions that are structurally weak is key requirement for inclusive society
The focuses on the challenges that the government is facing in its efforts to establish equivalent living conditions across the whole of Germany, and, by extension, to strengthen the social fabric.
The report shows that there have been some very encouraging developments on the labour market and where incomes and subjective life satisfaction are concerned, but also that are still considerable differences between the respective economic strengths of individual regions in Germany. Overall, gross domestic product per capita in eastern Germany amounted to 73.2% of the comparable figure for western Germany in 2017. This is mainly due to piecemeal economic structures in eastern Germany where only a small number of large corporations are headquartered, resulting in comparatively low levels of innovation. For these reasons, the economy in eastern Germany needs a boost, particularly for small and medium-sized companies. The relevant economic weaknesses are further compounded by adverse demographic change in the many rural areas of eastern Germany, which leaves them held back in their economic development and causes issues with essential public services and utilities. If there is to be a good supply, and the funding is to be secure in the long term, the services need to be tailored to changing needs. It is very important for quality of life and social cohesion that this is also achieved in regions that are structurally weak and particularly hard-hit by demographic change.
New funding scheme to replace the Solidarity Pact after 2020
Since reunification, the Federation has been supporting the New Länder (including Berlin) in their efforts to pay off extra costs that have accrued as a result of the division of Germany and to close the infrastructure gap that still exists between eastern and western Germany. The current fiscal equalisation system between the Federation and Länder, including the so-called Solidarity Pact II, will however expire in 2019. For this reason, the Federal Government agreed in the Coalition Agreement of 2018 to introduce a national funding system for structurally weak regions. In 2015, it had presented the first principles for the further development of regional policy for the whole of Germany. The implementation of certain measures, such as the pan-German programme “Innovation & Structural Change” and the extension of to cover all structurally weak areas has been documented in the . In these principles, all the ministries involved undertook to review what they are doing to achieve equivalent living conditions in Germany; this includes an integrated system of supplementary federal measures aimed at establishing equivalent living conditions in all structurally weak regions (in east and west) in accordance with uniform criteria. This integrated approach will ensure that the Federal Government's support for structurally weak regions is highly effective.
In future, all structurally weak regions are to participate in the integrated regional funding system in line with similar principles. Funding programmes for the new federal states are being reviewed as to what extent they can contribute to a pan-German funding system and gradually also be offered in structurally weak areas of western Germany. The question of how to deal in future with structurally weak regions arises for Germany as a whole, whereby the special feature of eastern Germany is that, with a few exceptions, the structural weakness still affects the entire area. Ultimately, people should have a good living environment throughout the country so that they can develop their lives, participate in society, work and live a healthy life.