Get this... with GDR's central planning, you had this system where say a municipality would be tasked with building housing units, and the central government would provide funding support. This was not a "loan" in any sense of the word. It's just how central planning works. State enterprises and co-ops were a part of this too.

So the West German government came in just said "these are loans now" and told the various enterprises and municipalities they owed that money back. The skeleton GDR government at the time agreed if the interest rate was kept at 0.5%. The West German government agreed but then promptly jacked up the interest rate to 10%, all while the new "debtors" had no ability to pay.

Reading about the annexation of the GDR is fascinating. Growing up, I had heard propaganda about how "rotten" the GDR economy was and it was just so bad and inefficient that unification has been difficult - that it was communism to blame for the economic woes of the former East Germans. So surprise, turns out it was bullshit. Despite some problems (what economy doesn't have some problems), the GDR economy was actually pretty good, but it was murdered by the West.

Another unrelated fact about the former GDR... there were so many academic and research institutions closed down and educators purged (illegally I might add) that over one million people in the former GDR with a college degree were left unemployed in the wake of unification - about HALF of the entire population with a degree!

  • hexaflexagonbear [he/him]
    ·
    3 years ago

    How did they justify it? Did they like charge east Germany for the aerial transports to west Berlin?

    • star_wraith [he/him]
      hexagon
      ·
      edit-2
      3 years ago

      I don't know exactly how they justified it, but since my professional background is in this area I think I understand what they did. They saw this transaction in the example I gave as the central government incurring an expense in order to get the housing unit built. And since the FRG was taking over the assets and liabilities of the GDR government, they saw this as money the municipality "owed" the central government, which was now them. Of course, this ignores how everything is connected in a centrally planned economy, and there isn't really a "debt" being incurred. You're just having the local govt chip in less so the people living there can pay less, presumably.

      I didn't give an example of this, but it's even worse with former state run enterprises. These would pay most of their profits back to the GDR government. But the enterprise would get like investment credits back in return. So the FRG said these credits were debts that the enterprise owed, despite the fact that these were just compensation for plowing profits back to the central government.

    • SoyViking [he/him]
      ·
      3 years ago

      I believe it was some legal sleight of hand where they claimed that loans were the closest equivalent of the socialist resource allocation system they had just conquered. And in the middle of all the celebrations people forgot to notice or wouldn't listen to those who noticed what was going on.