Eastern Germany’s economic success leaves voters cold

Statistics show that Germany’s east has done fairly well in catching up with the wealthier west over the past decade but that success has done little to dispel economic pessimism that has helped fuel the rise of anti-establishment parties.

Ahead of elections in three eastern states starting on Sept 1, two parties -- one far-right and one economically far-left -- are polling together between 40 per cent and 50 per cent, with a recent study showing half of east Germans convinced their region was economically stagnating.

The study, by economic institute IW also showed a fifth of people in the east felt they were being left behind.

Economic data tell a different story. Over the past decade economic output per capita has risen more in the east than the west, unemployment there declined while it inched up in the west, and workers in the east have seen bigger wage increases.

Yet that is not how voters see it.

“The economy in Thuringia is pretty weak, particularly in Eisenach,” said Louis Huettig, a 20-year-old student, in the market square of Eisenach, while he waited for a party event of the populist party Buendnis Sahra Wagenknecht (BSW), that combines social conservatism with left-wing economics.

Economists say the narrative of the formerly communist-run eastern Germany as a perennial poor relative even decades after reunification is just no longer true.

“This old story that eastern Germany is economically much worse off than West Germany is to a significant extent outdated,” says Berenberg’s chief economist Holger Schmieding.

Why then are mainstream parties and the central government in Berlin struggling to change people’s perceptions?

Not for want of trying. Politicians from established parties have in recent years been touting the progress the region has made, highlighting upgrades to its public infrastructure and speaking of its ‘industrial revival’ driven by hi-tech investments.

One reason such message falls flat is that the income and wealth gap between the west and the east may have narrowed but is not gone yet, and progress is a harder sell when the neighbour is still better off.

Economists note how average monthly wages have risen between 2014 and 2022 735 euros in the east compared with 585 euros in the west, and how lower costs of living were bringing real incomes even closer.

However, eastern workers' median gross pay of 3,013 euros per month, remains below the 3,655 euros workers in the west get.

“The wages are still far too low compared to wages in the West for the same work,” Dieter Laudenbach, candidate of the far-right Alternative for Germany (AfD) for the district of Gera, told Reuters.

Unemployment in eastern Germany also remains higher at 7.8 per cent compared with 5.1 per cent in the west, even though it has fallen 1.7 percentage points since 2013, while the western jobless rate ticked up 0.2 points, IW data show.

The gap in accumulated wealth also remains, with 98 per cent of all inheritance tax paid in the west, according to the DIW economic institute.

Another factor is Berlin’s green policies that make the unpopular coalition government even less popular in the east.

Eastern Germany is more rural than the rest of the country with over 10 per cent of its labour force active in agriculture and forestry compared with national average of 1.2 per cent and the push for clean energy is seen as a threat to the farming sector.