Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, July 2, 1990 TAG: 9007020216
SECTION: NATIONAL/INTERNATIONAL PAGE: A/1 EDITION: EVENING
SOURCE: Associated Press
DATELINE: EAST BERLIN LENGTH: Medium
Many East Germans were snatching up long-desired goods with their new West German marks, but some were shocked by higher prices.
Workers at two East German factories staged warning strikes today, in the first of what was expected to be a wave of work stoppages.
On the first business day since economic union, long lines formed at most grocery stores and other shops.
The official ADN news agency, reporting from Potsdam just southwest of Berlin, said prices for East German-produced butter and cheese were about the same as before, but the price of milk had more than doubled.
It said consumers were comparing prices and shopping carefully.
One shopper, 70-year-old Werner Ludwig of East Berlin, said he saw Western electronic goods of lower prices and better quality than those available before: "But on the other hand, things that you need daily, like bread and flour, are much more expensive. How often do you buy a color TV? You need bread every day."
Today's work stoppages - at the Ludwigsfelde automobile parts plant just south of Berlin and the Brandenburg steel works west of Berlin - were for better pay and working conditions, ADN said.
East German workers are demanding to be brought up to parity with their rich neighbors in West Germany. Others were expected to strike in a bid to keep their factories from closing.
Both East and West German officials predict the next few months will be difficult, mostly because many of East Germany's 8,000 state-owned companies are expected to close.
Burdened by heavy debt and unable to generate enough sales to pay their employees in West German marks, many East German factories and businesses are expected to fold even before they can convert to private ownership.
There has been speculation some would file for bankruptcy as early as today. One company, Elektrowerk Electronicon of Gera, was quick to announce that a quarter of its 5,000 workers would have reduced shifts beginning today.
The sobering reality contrasted with the outburst of euphoria that greeted the economic merger.
At the stroke of midnight Saturday, the West German mark became the official East German currency and the West German central bank took control of East Germany's money supply. Border controls were eliminated.
East Germans cheered, honked horns and set off fireworks to welcome the currency they had long coveted. West German businessmen - everyone from furniture salesmen to travel agents offering tours to Rio de Janeiro - rushed in to tempt them.
At border crossings that were impenetrable before the Communists fell from power in last fall's democratic upheaval, smiling families walked, drove and bicycled back and forth without a policeman in sight.
Although full political union with West Germany remains months away, for most East Germans Sunday was the long awaited day of unification, ending a failed 40-year experiment with socialism.
Under the economic merger, most East Germans were able to exchange up to 4,000 East German marks in private savings at a 1-1 rate, receiving the equivalent of about $2,400. Additional "Ost" marks could be converted at 2-1.
There is fear of mass unemployment as East Germany, a country of 16 million people, tries to quickly shift to a free market.
There have been predictions that up to 4 million could be thrown out of work as the country struggles to rebuild an economy ravaged by decades of Communist mismanagement and inefficiency.
The Credit Reform Economics Institute of West Germany predicts that more than half of East Germany's businesses will fold.
Still, East Germany is likely to achieve prosperity much more quickly than other East European countries making the transition to capitalism, including Poland and Hungary.
An average East German earns about 1,200 West German marks ($720) a month, less than half the average West German salary. However, East German rents and other basic items will be kept low for a while to help compensate.
by CNB