After only a year on the ground in Europe as a young twenty-something correspondent, I was thrust into coverage that one knew was not only historic but would have grand implications for years and even decades to come.
I landed in Berlin two days after the fall of the Wall, but was fortunate enough to cover the IMF/World Bank meetings the year before in the same city. While the institutions are often criticized for not having their finger on the pulse, in this case they were well ahead of the curve on how events were going to unfold.
During those meetings, I ventured over to East Berlin to experience for myself the impact of the communist led economy. On countless occasions I was approached with whispers in my ears to swap dollars for East German marks on the black market. Border guards snapped photos of western visitors like me for their files knowing full well that this cat and mouse game was drawing to a close. One could only describe the experience as grey – from the look on East German faces to the buildings themselves.
That visit helped me draw a clearer “before and after” picture. Immediately after the Wall fell, West Germans embraced their neighbors, welcoming them in from the cold. That euphoria quickly faded when it came to paying the bill for reconstruction, welfare payments and years of double digit unemployment.
The political impact of the fall of communism has been well documented, but what has often been left out of the discussion is the economic domino effect that it triggered. First and foremost, East Germans were not willing to accept the original 5-1 exchange rate for their currency, nor the 3-1 that was quickly offered. They demanded parity and within two short weeks received it from German Chancellor Helmut Kohl. The move cost a fortune (an extra $50 billion) but in an historic context, the Chancellor made the right call.
Events were transforming so quickly, governments had difficulty keeping pace with change: German monetary union, the first all-German elections and fast on its heels the creation of the European single market – project EC (for European Commission)
Perhaps because we have the benefit of hindsight and experience, the leaders two decades ago seemed much better equipped, despite fears then of German dominance. Chancellor Kohl, Francois Mitterrand and Margaret Thatcher were the forces to be reckoned with. They were pushed and prodded along by European Commission President Jacques Delors who drafted up the blueprint for greater expansion of the EU.
They were thinking big at the time, you could sense that from the summits we covered. Despite internal fears and haggling that took place, they eventually delivered on their promises. The Euro is now a major force in global currency markets; the EU is home is 27 countries (albeit with a tinge of expansion fatigue) and it is a market of a half billion consumers.
Have reforms happened fast enough? The answer is clearly no. Is there an issue of illegal immigrants flooding in still through Eastern and Southern Europe? Ask those who live in Malta, Spain, Greece and Italy. And are the more mature economies of Europe adapting to increased competition after the lowering of trade barriers? Candidly no.
But if one takes a step back, many who doubted the decisions in 1989 and the years to follow must now say the European response and development post the fall of communism has been much more successful than originally thought, minus the labor reforms which today still hold back opportunities for the next generation.
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