VII.

The End of the GDR

Communist rule unraveled in 1989 after Hungary, suspending a 20-year-old accord with East Germany, allowed thousands of East German citizens to cross the border from Hungary into Austria and thence to West Germany, where they received asylum. As the political crisis mounted in 1989, Honecker was forced out of the presidency in October, and Egon Krenz became president and party leader. In November the Berlin Wall was opened, other barriers to emigration dropped, and tens of thousands of East Germans streamed into West Berlin. Meanwhile, revelations of corruption among high officials during the Honecker era left the Socialist Unity Party in turmoil.

In the face of rising popular discontent, Krenz lost his state and party posts, and in December 1989 the Socialist Unity Party, bowing to demands by opposition groups, agreed to hold free elections for a new People's Chamber, to consist of 400 members. This transitional body, freely elected in March 1990, was charged with working out the constitutional arrangements under which the GDR (East Germany) would merge with the FRG (West Germany). The two republics merged their financial systems in July 1990, and in October the GDR dissolved. The Christian Democratic coalition, led by West German Chancellor Helmut Kohl, scored a decisive victory in elections for the new German government in December 1990, and Kohl became chancellor of the unified Germany. The newly elected Bundestag (the legislative body of the German parliament), representing both East and West, named Berlin the capital of Germany on June 20, 1991. The transfer of administration from Bonn, the capital of the former West Germany, was expected to take several years.

Although the economy thrived in what was formerly West Germany, unemployment and failing businesses continued to plague what was formerly East Germany. To fund investment and welfare programs in the East, the government raised taxes, generating opposition among citizens of the West who resented having to support the East Germans. The influx of more than 200,000 ethnic Germans from other East European countries seeking asylum in Germany also strained the economy. By 1992 the unemployment rate had returned to about normal in the western states, but remained high in the eastern states.