VII.

Reunification

With the reform of Soviet society and economy introduced by Soviet leader Mikhail Gorbachev in the late 1980s, the Soviet-backed regimes of Eastern Europe began to lose control over their people. East Germany's Communist government fell in 1989, an event that profoundly altered relations between the two German republics. With the fall of the Berlin Wall and other emigration barriers, more than 200,000 East Germans streamed into West Germany. The West German government not only aided the new immigrants but also allocated a massive infusion of capital to shore up the ailing East German economy. West Germany and East Germany merged their financial systems in July 1990, and in October the German Democratic Republic (East Germany) dissolved and became part of the Federal Republic of Germany. The Christian Democratic coalition, led by Kohl, scored a decisive victory in elections for the new German government in December 1990, and Kohl became the 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 plagued 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 East European countries seeking asylum in Germany also strained the economy. By 1992 the unemployment rate returned to almost normal in the western states, but remained above 15 percent in the eastern states.