| Abstract: | Unification posed a new challenge to the Federal Republic ofGermany. Two economically different areas were united into onefederal polity. Due to the constitutional command to safeguardequivalency of living conditions throughout the republic, thefederal government as well as the "old" Länder were supposedto support the "new" Länder of East Germany. Until 1994,provisional regulations served to finance East Germany; in 1995,the new Länder were integrated on an equal footing intothe "financial constitution" of the Basic Law. Unification wasnot used for constitutional reform as had been demanded by someLand leaders. Concerning intergovernmental fiscal relations,one can speak of "budgetary adaptation" only. It was not possibleto resolve long-lasting constitutional issues together withthe challenge of unification. German unification has been, andwill be, very costly. Public debt rose from roughly 900 billionGerman marks in 1989 to more than two trillion in 1995. Theargument about burden sharing between the federation and the"old" Länder continues, and the formulas of fiscal equalizationhave been challenges by Bavaria and Baden-Württemberg. |
