East German economy at 79% of western Germany’s strength 36 years after reunification

The economic strength of Germany’s five eastern states reached only about 79% of the level of the western states in 2025, compared with slightly more than 78% in 2024, according to calculations by the German Economic Institute (IW), highlighting the persistence of the gap between the two parts of the country 36 years after reunification.

Convergence stalled since 2020

East Germany made substantial progress since 1991, when its economic strength stood at no more than 51% of the level of the western states. But the convergence process has stalled over the past five years, with the ratio ranging between 78% and 79% since 2020, and the East has yet to cross the 80% threshold.

The Unity Index measures East Germany’s economic catch-up since 1990 based on productivity, the size of the accumulated capital stock, the share of highly qualified people working in research and development, labor-market participation, unemployment and self-employment rates, as well as economic output per capita.

Gaps in research, employment and investment

The shortcomings are particularly concentrated in scientific research, with the number of people working in research and development in eastern Germany reaching only slightly more than 46% of the level in the West. The public sector, including universities and institutes, appears to be in relatively good shape, while companies and the wider business sector face a shortage of researchers because of the scarcity of large corporations in the East.

Labor-market participation as a share of the total population has also declined. After reaching about 89% of the western level in the East in 2010, it stood at only slightly more than 85% in 2025.

Investment has also stagnated, with the capital stock — including the value of machinery, factories, roads and buildings per person — showing little further convergence with the West over the past 15 years. The ratio rose from about 77% of the western level in 2010 to slightly more than 79% in 2025.

Population decline increases need for skilled workers

The German Economic Institute expects East Germany’s population to decline by more than one-fifth by 2045 if no migrants arrive, a much larger decrease than expected in the West. This will make the eastern states more dependent on attracting skilled workers from abroad.

The institute said that maintaining a pension system without deductions after 45 years of contributions, a position backed by several heads of government in the eastern states, would be counterproductive. It said the East’s demographic structure makes it particularly dependent on experienced employees remaining in the labor market for longer.