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!

  • star_wraith [he/him]
    ·
    3 years ago

    You're not going to believe this but.... private West German banks who "bought" the debt on a discount! Shocking I know!

    • TheLepidopterists [he/him]
      ·
      3 years ago

      I googled this because of this post and apparently they bought it so cheaply that the first year's interest was more than they payed to acquire the newly privatized East German banks.

      What a travesty. "The communist economy of the GDR is a complete failure and repudiation of communism," screeches a West German banker who is probably a literal Nazi, as he siphons money out of the East.

      In all, ‘four major western banks, which had acquired the East’s banks for DM 824.3m, found themselves in possession of DM 40.5bn of debt’ (1). The interest alone, which had gone from less than 1% to more than 10% in a year, amounted to several times the acquisition price. Such are the wonders of capitalism.

      https://mondediplo.com/2019/11/08germany-box