Abstract

This paper explores the key factors which have dragged the East German integration process during the past decade and presents some arguments why there is good reason to expect that the convergence process might gradually catch up again during the forthcoming years. In particular, the adjustment problem in East Germany's construction sector should be largely overcome by now, the competitiveness of East German manufacturing vis-à-vis its trading partners has improved markedly during the past decade, and a number of significant labour market reforms have been implemented during the past few years. Against that background and provided that appropriate economic policies are followed and in particular that further structural reforms will be implemented, it appears too early to label East Germany as a second Mezzogiorno.