Two cheers for Germany!

As I have explained here before, I have an uncanny — and, for a jounalist, unfortunate — ability to be in the wrong place at the wrong time.

Twenty years ago, I was on holiday on the Canary Islands when the Berlin Wall fell. But watching the celebrations on television this week made clear once again what a momentous day the 9th November 1989 was.

As Andrew Rawnsley wrote in The Observer last Sunday: "Twenty years on, the planet is richer, freer, more multipolar, less predictable and still pretty scary — but not quite as terrifying and definitely to be preferred to the world that was divided by that cruel wall."

Politically, there is no doubt that the fall of the Berlin Wall — and the reunification of Germany a year later — was a hugely positive event. Those who opposed — or still oppose — reunification were, and are, simply wrong.

This doesn't mean, of course, that everything about the way reunification took place was perfect. Indeed, economically, reunification was handled very badly.

Replacing the old East German currency with the West German Mark at too high a rate of exchange was economically disastrous, although it was politically unavoidable. East German wages also increased too rapidly towards West German levels, again for political reasons.

The result was a massive loss in competitiveness. This is probably the main reason why economic development in Germany's "new states" has been so much worse than in other central and east European countries, despite massive financial transfers of well over €1,000 billion from the old West German states.

Twenty years after the fall of the Berlin Wall, economic parity remains, as the Financial Times wrote, a "distant dream". Gross domestic product in the east is still only around 70 per cent of that in the west. However, an interesting article by German economist Klaus Zimmermann suggested that this has more to do with the low population density in the eastern states than the legacy of communism.

So, I say two loud cheers for the new, reunified Germany. The third cheer will come when the economic (and political) divisions are no longer as evident as they still are today.