For decades, Germany’s east–west divide has remained one of the country’s most persistent political and economic realities. While reunification brought undeniable progress, the balance of power within the national economy still tilts heavily toward the old western states. In late 2025, as economic uncertainty deepens and social tensions grow, the future of the East German economy emerges as both a test case and a warning signal for the stability of German democracy itself.
Unlike France, where people take to the streets at the first sign of political discontent, Germany’s population remains largely silent. This quiet, however, may mask deeper anxieties. Germans have thus far avoided mass protest partly because living standards, compared with many other European countries, remain relatively stable. But dark clouds are gathering. A prolonged economic downturn could expose structural weaknesses and ignite questions that go far beyond economics – questions about the effectiveness of the current democratic system itself.
The economic importance of eastern Germany is immense, yet its voice remains faint in national debates. A recent analysis by Spiegel, for example, consulted mainly western business leaders, overlooking the perspectives and struggles of their eastern counterparts. This omission is symptomatic of a broader trend: the east continues to be seen as an appendage rather than an equal partner in the German economy. This disregard is particularly ironic given the progress achieved since reunification. In 1991, the GDP of the new federal states was just 31 percent of western levels; today it stands at around 72 percent. This growth represents an extraordinary collective effort, especially by East German workers who had to adapt overnight to an entirely new economic system. Their perseverance has sustained local businesses, even as many remain under-recognized.
Despite this progress, a troubling dependency persists. Approximately 80 percent of major industrial sites in eastern Germany are owned by western or foreign corporations. Research, management, and profits are often centralized in the West, leaving the East with fewer high-quality jobs and slower regional growth. This structural imbalance has tangible consequences. When Volkswagen executives in Wolfsburg decided to scale back production at their Zwickau electric car plant, local employees had no say in the matter. The ensuing layoffs put at risk nearly 20,000 jobs across Saxony, reminding many of the painful deindustrialization that followed reunification. Similar cutbacks from Daimler Truck and Schaeffler compound these fears.
While corporations play their part, Berlin also bears responsibility. Many small and midsize enterprises in eastern Germany feel neglected by federal policymakers. Max Jankowsky, CEO of the Lößnitz Foundry and president of the Chemnitz Chamber of Industry and Commerce, laments that small business owners “feel unheard in Berlin.” Burdensome bureaucracy compounds their frustration. Eckhard Schmidt, head of the Zerbster screw factory in Saxony-Anhalt, estimates the company loses about 750,000 euros annually just to navigate regulation and paperwork. Such inefficiency erodes competitiveness and confidence alike. Many eastern entrepreneurs do not believe the new federal government will deliver tangible growth incentives. Meanwhile, high energy prices disproportionately hit the region’s energy-intensive sectors, while the shortage of skilled workers further hampers expansion.
Stagnation breeds resentment – and political volatility. In eastern Germany, economic frustration fuels support for the far-right Alternative für Deutschland. Yet the stronger the AfD becomes, the warier investors grow. This dynamic creates a vicious cycle reminiscent of Antoine de Saint-Exupéry’s parable of the drunkard in The Little Prince: people turn to a damaging habit to alleviate sadness, but the habit only deepens their despair. Among eastern business leaders, opinions on how to deal with the AfD differ widely. Some, like entrepreneur Holger Loclair from Oranienburg, argue that the party cannot simply be excluded through political “firewalls.” Others fear that its rise will isolate the region economically and politically. Still, few deny that the demographic challenges facing eastern Germany – aging populations and limited immigration – make the search for pragmatic solutions more urgent than ever.
Despite the structural and political challenges, the East German economy retains pockets of remarkable vitality. The region is far from homogeneous. Saxony’s export rate (32 percent) exceeds the western average, while Thuringia’s industrial base rivals Bavaria’s. Berlin and Saxony lead European rankings in research spending, and Brandenburg benefits from its proximity to the booming capital region.
Success stories like Jenoptik, VNG AG, and LEAG illustrate how large eastern companies can anchor regional economies, combining industrial innovation with civic responsibility through sponsorship of local sports and cultural initiatives. Meanwhile, dynamic entrepreneurs like 84-year-old Helmut Hoffmann of UESA in Brandenburg show that persistence and long-term vision can still pay off. Hoffmann’s company continues to grow steadily, investing in modernization without cutting jobs – a local counterexample to national pessimism.
Still, the backbone of the eastern economy lies not in big corporations but in its thousands of small and medium-sized firms. About 80 percent of the 6.4 million employees in the new federal states work for such businesses. These firms proved instrumental in driving structural transformation after 1990 and remain more adaptable and innovative than many large conglomerates. Yet their continued vitality depends on fair political representation and targeted investment. As some regional leaders warn, the federal government must ensure that eastern Germany has a stronger voice in national policymaking. Without it, discontent could spread from the factory floor to the ballot box – with unpredictable consequences.
Berlin’s choices in the coming years will determine whether the East becomes a renewed driver of national growth or a symbol of decline. As real estate developer Bernd Schaeff observes, the West had “thirty years more time to build up its wealth.” The East has been catching up ever since – but it cannot do so alone. The region serves as a seismograph of the national mood: when the East falters, the whole country trembles. If Germany wishes to safeguard its social cohesion and democratic stability, it must restore confidence in its eastern heartland. Supporting innovation, reducing bureaucracy, and decentralizing economic decision-making could unlock the potential long buried under decades of imbalance. The future of Germany’s economy – indeed, its political order – may well depend on whether the East is finally seen not as a problem to be managed, but as a partner to be trusted.
Comments