German economy struggles to stabilize West feels strain of trying to prop up the backward east

November 17, 1991|By Ian Johnson | Ian Johnson,Special to The Sun SUN GRAPHICS

Berlin -- When the Berlin Wall stood tall, Robotron was an imposing, industrial giant.

One of the Eastern bloc's main computer and office equipment manufacturers, the enterprise boasted 21 factories across East Germany, about 45,000 employees and up to $7 billion in annual revenues.

Today, most of Robotron's factories are closed, its work force reduced to 8,000 and its revenues down to an estimated $300 million. And more streamlining is planned -- Robotron is expected to lay off another 4,000 employees by the end of the year in a desperate bid to become profitable.

"We're cutting back and cutting back. It's our only hope to stay competitive," said Michael Kresse, who heads Robotron's cash register factory in the town of Soemmerda.

For Mr. Kresse, who stands to lose his job next year if the factory does not become profitable, the "crash into the market economy" has been a shock. "We knew that we didn't produce the best in the world, but to see our products sitting unsold in the storage room is depressing."

Robotron, the victim of poor technology and poor productivity, illustrates the problems that have sapped strength from Germany's unified economy. Eastern Germany has a work force equal to 29 percent of the western German total but produces goods worth only 8.3 percent of the western total, according to government statistics.

And much of the progress being made in the east has come at the expense of western German taxpayers and businesses. This year alone, an estimated $110 billion is expected to flow east to support retraining programs and to rebuild the region's infrastructure.

The seesawing of the nation's economy is expected to stabilize over the coming year -- but only if the worldwide economy picks up. And as the world's largest exporter, Germany's future is closely tied to trade talks under way at The Hague.

World leaders are trying to complete a five-year effort to reshape international trade. The 108-nation round of talks, under the auspices of the General Agreement on Tariffs and Trade, broke down late last year after the European Community rejected deep cuts in farm subsidies. Talks have resumed, and negotiators say they were nearing agreement on the troublesome farm trade issue.

Meanwhile, the economic situation is precarious for Germany because the western German economic boom is slowing down rapidly. Economic growth dipped from 4.5 percent last year to 3 percent this year, and forecasts call for a 2 percent drop next year.

At the same time, the eastern economy is picking up, but largely on the back of government-financed construction programs. Most economists predict that the eastern gross national product will rise 10 percent next year after plummeting 13 percent in 1990 and 20 percent this year. If the positive forecasts hold true, it would be the first time since unification that both economies grew.

Hope in the east is centered around Berlin and the southern state of Saxony, which borders Czechoslovakia and Poland. The state's industrial triangle of Dresden, Leipzig and Chemnitz was one of Germany's traditional industrial heartlands before 1945, churning out cars, toys, machinery, optical instruments and world-famous Meissen porcelain.

Much of the equipment in Saxony's factories seems to stem from their prewar heyday. But the area's most important asset -- its skilled workers -- and an array of promotion programs are combining to attract investment and help for some of the 40,000 small businesses that have started up. So far, more than $15 billion has been pledged by companies such as Volkswagen, Siemens and major banks.

Unemployment in Saxony and the rest of former East Germany, however, remains at 12 percent. This is expected to increase to more than 20 percent next year, when the state privatization agency closes down money-losing factories and special work programs run out.

One such program: the 500 "employment companies" created by state and local governments to give work to about 200,000 people. Workers often are given tasks that help retrain them or that meet a social need, such as cleaning up contaminated production sites.

Peter Buhl from east Berlin, for example, worked for the Hennigsdorf Steel Works before being fired last summer. Since then, he has helped demolish old buildings and cleaned up the sites so they are more attractive to investors. "In the long term, I hope to leave this and get a better job. But for the next year or two, it will help us out at home and give me experience," Mr. Buhl said.

More than half of the $110 billion in aid to eastern Germany is being borrowed by the central government. With inflation expected to hit 5 percent early next year, the federal central bank, the Bundesbank, has warned that accompanying high wage settlements could send inflation even higher and force the Bundesbank to put on a credit squeeze.

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