World Economy

25 years after the Berlin Wall: What’s changed?

Germans will amass in Berlin on Sunday to celebrate the 25th year anniversary of the most momentous event in recent German history: The fall of the Berlin Wall. Among other tributes, illuminated balloons set along the path of the wall that stood for 28 years will be released to the strains of Beethoven's Ninth Symphony.

CNBC looks at how Germany's economy and its role in Europe have changed since West and East reunified a quarter of a century ago, in a day that has come to represent the triumph of democracy and freedom over communism.

Balloons mark the location of "Checkpoint Charlie" for the 25th anniversary of the fall of the Berlin Wall.
Kulturprojekte Berlin_WHITEvoid / Christopher Bauder, Photo: Daniel Büche

Germany at center of Europe

Since 1989, Germany has resumed its place at the heart of Europe, politically, economically and even geographically—reunification and the expansion of the European Union eastwards has seen Germany move from the eastern edge of Europe to its center.

"We beat the Germans twice and now they're back," then-British Prime Minister Margaret Thatcher reportedly said after the Wall fell, fearing renewed Teutonic dominance in Europe.

Thatcher proved astute. Despite this year's economic slowdown, Germany is the euro zone's undisputed "economic strongman", representing roughly one quarter of the area's economy. Analysis published by PwC on Wednesday suggested that euro zone output would have been smaller by around 2.7 percent compared to its pre-crisis level, had Germany not grown at all since 2008.


East-West difference remain

With reunification, West Germany began the major task of bringing the standard of living in the former German Democratic Republic into line with its own, and incorporating its controlled economy into the West's modern capitalist one. This has proved a lengthy and sometimes difficult process that continues to this day.

"East and West Germany were like a couple that had rushed into marriage with very little understanding of what it would be like to live together, merge finances (and) come to joint decisions," said John Feffer of the Institute for Policy Studies in a blog post for the think tank last month.

Gross Domestic Product per capita in former East Germany has more than doubled over the past 25 years but remains at about two-thirds of the level of the old federal states of West Germany.

Then and now: This combo of two photos shows on (L) East and West German policemen standing near the Brandenburg Gate in Berlin on December 22, 1989 and (R) the Brandenburg Gate at the same spot on September 24, 2014.
Patrick Hertzog,Odd Andersen/AFP/Getty Images

Similarly mixed progress has been made in combating unemployment, which averaged 870,000 in eastern Germany in 2013—the lowest number since reunification, according to the annual official "German unity" report. At an average of 10.3 percent in 2013, unemployment in the region remains far higher than in western Germany, however, where it stood at 6.0 percent.

Efforts to bring the East's economy into line have been extremely costly and not always effective.

Social assistance payments and funds to promote economic development and infrastructure flow from western to eastern Germany to this day, and are expected to continue until 2019. The German government has steered clear of revealing exactly how much money has been spent in this way, but estimates suggest it is over 1 trillion euros ($1.2 trillion) since 1990.

The region has also benefited from billions in funds from the European Union.

25 years since the fall of the Berlin Wall


East-to-West migration has tumbled since the original rush in 1989-1990, when almost 600,000 people left the GDR (roughly 3.7 percent of the population), according to the Max Planck Institute for Demographic Research in Germany. Free elections in East Germany in March 1990 saw the fear of missing the opportunity to migrate wane, and the stream for the West start to decline.

Over the last few years in particular, East-West migration has dropped considerably. Several eastern German cities such as Dresden and Jena have even registered net gains, although rural regions continue to hemorrhage inhabitants.