This project has received funding from the European Research Council under the European Union’s Horizon 2020 research and innovation programme
(Grant Agreement n. 669194)
(Grant Agreement n. 669194)
The Socialist Unity Party of Germany’s (Sozialistische Einheitspartei Deutschlands or SED) major concern was staying in power and ensuring the permanent existence of the GDR. The more prosperous Federal Republic of Germany (FRG) represented a permanent existential threat, a challenge that required the GDR to achieve a certain level of economic competitiveness. The New Economic System reform of the 1960s aimed at achieving this goal but it retained the concept of a centrally planned economy and did not prove effective. Instead of reducing dependence on the West, imports financed with loans increased the GDR’s indebtedness. The reform was abandoned in 1970/71 and its failure prevented further reform experiments and also open party discussions about economic policy.
Economic decisions were taken by Erich Honecker’s “small circle”. This consisted of the Politburo members responsible for economic policy and leading functionaries in the state apparatus. The most notable figure in this circle was Günter Mittag, the SED’s almost almighty economic secretary. Honecker’s consumerist turn reduced the financial leeway to counteract the decried increasing dependency on the West. Growing debt immediately provoked internal criticism by economic experts, but it fell on deaf ears among the party leadership. At the beginning of the decade there was hope that the investments would pay back and time would work in favour of socialism. Modernisation through imports based on loans was initially regarded as a temporary necessity but it soon developed into a permanent strategy. In 1977, confronted with a worsening balance of payments, Mittag joined forces with the Chairman of the State Planning Commission, Gerhard Schürer, and demanded changes in trade policy. Honecker reacted furiously and silenced their criticism. Other top-level members of the party did not dare to openly voice their profound disagreement with the economic strategy. Instead, they channelled it to the Ministry of State Security and the Soviets. During the 1970s, cheap Soviet crude oil allowed the GDR to earn hard currency by selling refined products. Additionally, non-trade-related money flowing in from West Germany eased the life of the SED leadership. During the debt crisis of the early 1980s, the Politburo opted to stay solvent (successfully in the short term) regardless of the resulting greater dependence on the West.
Among relations with the West, the FRG mattered most. Special relations with West Germany facilitated the financial stability of the GDR, not the least because intra-German trade was not affected by the founding of the European Economic Community (EEC). In the first two postwar decades, the SED had denounced every form of West European integration as directed against the socialist camp and consistently argued that the project would fail due to the “contradictions of imperialism”. In the late 1960s, the SED top level had come to terms with the EEC as a reality but refused to recognise it as a political entity. However, the Community’s economic efficiency and political attractiveness were acknowledged internally. In the discussions within the Council for Mutual Economic Assistance (CMEA), the GDR followed the Soviet position of non-recognition of the EEC. The SED leadership was conscious that the import-led growth strategy of the socialist states had to be paid for by exports, but it did not expect any easing of trade from Brussels. The SED demanded a deeper integration of the CMEA and a coordinated policy toward the EEC. However, it gradually had to adapt to reality. In 1975, facing the full implementation of the EEC’s Common Commercial Policy, the Politburo accepted the advice from the state bureaucracy and approved the establishment of technical contacts between GDR companies and institutions and the EEC organs. When the EEC introduced its Common Fisheries Policy in 1977, a substantial East German economic interest was impaired. The Politburo agreed to talk to the EEC Commission and Honecker personally authorised every step during the negotiations. These finally failed because the EEC insisted on the Berlin clause, according to which the agreement would also apply to West Berlin. In 1979, the impotence of the CMEA to negotiate a treaty with the EEC frustrated the SED’s CMEA working group and its head, Horst Tschanter, suggested that the GDR should consider revising its approach. However, the SED’s already inconsistent policy of non-recognition did not change and bilateralism in relations with the West prevailed. The EEC was not the field over which the SED leaders intended to quarrel with the Soviets, who were already massively complaining about the GDR’s dependence on the FRG. Nevertheless, perceptions of West European integration had changed remarkably. Honecker regularly referred to the achievements of West European integration and regarded the EEC as a desirable role model for the CMEA.
* This text summarises some of the research findings of PanEur1970s team member Maximilian Graf, which are published as a chapter in PanEur1970s’ academic edited book. For a link to the e-book, please see the GDR’s “Overview” webpage of this map.
Personal memorandum on the consultations of the SED Politburo on 09.08.1983
BArch, DE 1/58704 | Bl. 272–277
In this meeting of the “small circle” after the first “Strauß loan,” Honecker remarked: “The Milliardenkredit is not here to bridge gaps in the plan. No minister can rely on this. We have to act as if we would not have the money.” He pointed to the necessity of reducing short- and medium-term loans as well as continuity in the policy of reducing imports and increasing exports. Honecker was fully aware that the prolongation of the extreme foreign trade strategy would face opposition in the West, however, at that time there was still no alternative to reducing imports and selling oil on the world market. Nevertheless, pointing to developments in other Socialist countries, Honecker stated: “I want to put on record, that our economic system is altogether in best order. It just depends on using the advantages of socialism properly. I am saying this, because there is talk about reforms in many countries.” Even tough, the GDR had just prevented bankrupty, there was no intention to change the failed economic policy. The leadership opted for a continuous muddling-through. - Available only in the archive: https://www.bundesarchiv.de
Memorandum on the discussion of the draft of the five-year plan 1976–1980 presided by Honecker
BArch-DDR, DE 1/58633
In this meeting of the “small circle” in November 1976 dealing with the next five-year plan the Chairman of the State Planning commission, Gerhard Schürer, stated: “The gap between imports and exports has widened further but it has to be closed by all means. That is a fateful question for the GDR.” In the following discussion some thought about rigorous import cuts, others reasoned about the causes within the CMEA and problems on the Western sales markets. Nevertheless, Günter Mittag and Erich Honecker also highlighted positive examples of trade relations with the West and the growing Western acceptance of countertrades. Honecker concluded that the plan 1976–1980 is shaped by the enforcement of the “Unity of Economic and Social Policy,” which he did not intend to change. Honecker did not expect any progress in CMEA integration, expressed his worries about the balance of payments, and advocated increasing exports to the West and developing countries as well as cooperation on third markets if they earned hard currency. - Available only in the archive: https://www.bundesarchiv.de
Current status of the GDR’s balance of payments with the West in 1978/79
BArch-DDR, DL 226/1248 | Bl. 220–238,
This assessment of the GDR's balance of payments produced by the Chairman of the State Planning commission, the Minister of Finance and the country's leading bankers analyzed the causes and consequences of East Germany's growing indebtedness since the early 1970s. Their conclusion stated the obvious: “This spiral cannot be prolonged.” It was entirely clear that “without the willingness of foreign, and especially capitalist banks to provide further loans in the amount needed, the planned imports and the due payment obligations cannot be realized.” Without a fundamental turnaround in the GDR’s trade balance with the West, debt was expected to skyrocket until the mid-1980s. - Available only in the archive: https://www.bundesarchiv.de
Letter by Horst Tschanter to Paul Verner
SAPMO-BArch, DY 30/IV 2/2.036/71 | Bl. 93–94
In the late 1970s, Horst Tschanter was frustrated about the CMEA’s inability to negotiate a treaty with the EEC and recommended a reevaluation of the GDR's position toward the EEC. - Available only in the archive: https://www.bundesarchiv.de
Brief assessment of the EEC
SAPMO-BArch, DY 30/J IV 2/2A/1578 | Bl. 119–122
On 29.02.1972 the Politburo approved the GDR's standpoint on relations between the CMEA and the EEC. The Politburo template contains a "brief assessment of the EEC" which despite prevailing traditional ideological patterns of capitalism-analysis shows a rather realistic assessment of European integration and its potential future development. - Available only in the archive: https://www.bundesarchiv.de
Politburo Template. Decision on the estabishment of technical contacts between companies and institutions of the GDR with EEC organs
SAPMO-BArch, DY 30/J IV 2/2A/1864 | Bl. 65–75
When the EEC's Common commercial Policy went into effect, it immediately showed repercussions on East German exports to the common Market. Against this backdrop, on 11.03.1975 the Politburo reluctantly agreed to commence "technical contacts" with the EEC Commission as suggested by the proposal originally developed in the Ministry of Foreign Trade. - Available only in the archive: https://www.bundesarchiv.de The decision of the Politburo is available in the digitalized final version of the protocol.
Minutes from Memory. Conversation Erich Honecker - György Aczél
SAPMO-BArch, DY 30/J IV 2/2A/2551 | Bl. 192–212
In this conversation Honecker speaks frankly about his perception of the EEC in comparison with the CMEA. Clearly, in his view the EEC had become a desirable role model for the CMEA. - Available only in the archive: https://www.bundesarchiv.de
Horst Sölle to Erich Honecker, Information on a meeting of the ministers during the fifty-first session of the CMEA Executive commitee's Standing Commission on Foreign Trade
SAPMO-BArch, DY 3023/1276 | Bl. 199–203
In December 1977, the European Council had decided that all countries exporting steel to the Common Market had to conclude bilateral agreements so that the EEC could impose price discipline. The GDR held the view that these sectoral agreements on quotas and minimum prices would go beyond “technical contacts.” Again, East Berlin hoped for concerted action by the CMEA members. At the next meeting of the CMEA Executive Committee’s Standing Commission on Foreign Trade, Foreign Trade Minister Horst Sölle proposed to consider if the threat or actual shifting of the CMEA’s steel imports from the Common Market to other suppliers could be used as a means of commercial policy. - Available only in the archive: https://www.bundesarchiv.de [Maybe digitalized in the future]