Deindustrialization in East Germany: New approaches instead of billions in investments

Deindustrialization in East Germany: New approaches instead of billions in investments

In East Germany there is concern about possible “complete deindustrialization”. Despite positive developments such as the establishment of the chip factory in Magdeburg and Tesla's “Gigafactory” in Brandenburg, experts urge caution. The region was already characterized by the arrival of large companies such as BMW, Porsche and DHL in the noughties, which led to an economic boom.

However, the over-reliance on the auto industry and logistics companies such as DHL points to potential risks. If economic indicators deteriorate, especially in the transformation process of the automotive industry, renewed deindustrialization could occur. The management of these companies usually focuses on the interests of shareholders, which could have a negative impact on the regions in eastern Germany.

Social peace is beginning to falter, particularly in economically disadvantaged areas. An example of this is the Thuringian district of Sonneberg, where high low wage rates lead to tensions. Although the increase in the minimum wage to twelve euros in 2022 helped many employees, economic challenges remain and are encouraging the rise of extremist parties such as the AfD.

In view of past undesirable developments, such as the failure of the “Solar Valley” in Saxony-Anhalt, it is recommended not to place all hopes on individual large-scale projects such as the planned establishment of Intel in Magdeburg. Experts recommend dividing the billion-dollar investments into a number of smaller projects. By diversifying industries in the East, possible renewed deindustrialization could be contained in order to avoid serious political consequences.