The economy of the former East Germany has transformed and grown since the defunct communist state reunited with the much wealthier West Germany in 1990, but decades later, it still lags behind the West in ​some key areas.

While the once huge gulf in unemployment rates has closed, households in the former East still have around half as much wealth on average. People earn less, although they ⁠can also spend less on outgoings such as rent.

Some ⁠residents in the East view such lingering differences as a sign that they remain “second-class citizens.”

The disparities have helped the rise of the far-right Alternative for Germany (AfD) party in the region. After its victory in this ​month’s Saxony-Anhalt state election, it is hoping to make gains in Mecklenburg-Western Pomerania on Sept. ​20.

Following ⁠is a look at where the eastern German economy has largely caught up with the West – and where it hasn’t.

Employment mostly converged

For the first 15 years after reunification, Germany’s defining economic fracture was access to work after the collapse or painful restructuring of state-owned industry in the East.

Eastern German unemployment peaked near 20% – almost double the western rate in the late 1990s. As the economy stabilized, the gap narrowed, and by 2025, registered unemployment in the East stood at 8.6%, compared with 6.4% in the West.

Employment rates show even more convergence. By 2025, 75.9% of those of working age in the East were in employment, trailing the West by just 1.6 percentage points. Among women, the gap has closed entirely: 74.1% in the west are in work versus 74.0% in the east.

Household incomes come closer, but West still ahead

Household incomes in eastern Germany ⁠have ⁠risen substantially since 2008, and faster than in the west. In 2008, median disposable income in the eastern states, including Berlin, was about 82% of the western level. By 2024, it had climbed to roughly 92%.

But a meaningful gap remains. Median disposable income in the eastern states, including Berlin, was about 25,900 euros ($29,710) in 2024, compared with roughly 28,100 euros in the West – a difference of around 2,200 euros a year.

In 2025, median gross annual earnings for full-time employees were 46,013 euros in the east, excluding Berlin, compared with 55,435 euros in the west – a gap of 9,422 euros.

While households in eastern Germany earn less on average, living costs are also lower, particularly for housing. Asking rents in eastern states such as Saxony, Saxony-Anhalt and Thuringia are around 30%-40% below the national average, helping to ⁠partly offset the income gap.

A wider gap in wealth

The east-west wealth divide remains far wider than the gap in household income or employment.

In the eastern states, including Berlin, average net household assets, including property, investments, pension savings and goods, rose from 61,200 euros in 2013 to 125,500 euros in 2023. In the former western ​states average net assets increased from 140,300 euros to 257,100 euros over the same period.

Eastern households therefore held just under half – around 49% – of the ​average wealth of western households in 2023, a gap of around 132,000 euros per household.

The disparity is also likely to persist across generations.

East population continues to shrink

The demographic legacy of reunification is most visible in the population. The east ⁠has lost a ‌far larger ‌share of its working-age residents due to the post-reunification exodus of younger people, combined with lower ⁠birth rates and faster aging.

This means eastern employers are trying to recruit ‌from a smaller pool, while a larger share is beyond working age.

In 2022, people aged 18 to 64 made up 57.5% of the population in the ​eastern states excluding Berlin, compared with 61.6% ⁠in the west.

From 1991 to 2024, net migration from east to west totalled about 1.2 million ⁠people, excluding Berlin. Since 2015, the east’s population has continued to decline while the west’s has grown.

Lower private investment adds to ⁠the challenge. East German firms invest ​around a quarter less per worker than those in the west, according to the Ifo economic institute.

The east’s older, shrinking workforce and weaker investment could make the remaining gaps in pay, wealth and economic capacity harder to close.

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The Bank of England (BoE) left the benchmark interest rate unchanged at 3.75% in a meeting on Thursday, even though inflation in the Britian has risen to a five-month high as the fallout from the Iran war continues to ratchet up fuel prices.

The decision was widely anticipated, with six members of the Monetary Policy Committee (MPC) voting to keep rates unchanged, while three backed a quarter-point increase to 4%.

Though borrowing rates were kept on hold, financial markets think it’s more likely than not that the bank will back an increase at one of the next two policy meetings, either in November or December.

“So far, higher global energy costs have had a limited effect on price and wage setting in the U.K.,” said BoE Governor Andrew Bailey.

“But the longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise bank rate to ensure that inflation falls back to our 2% target.”

Like other central banks, the inflation outlook will be key. Some have already decided to start raising borrowing costs again, including the U.S. Federal Reserve (Fed) on Wednesday.

The minutes accompanying the Bank of England’s decision showed that inflation is now expected to rise to around 4% in the first quarter of next year from the current 3.1% as households face another increase in their domestic energy bills. That would take inflation further above the bank’s target rate of 2%.

Interest rates in the U.K. had been trending downward from a 15-year high of 5.25% until the U.S. and Israel attacked Iran in late February. The Iran war led to sharp increases in oil and gas prices, partly because the crucial Strait of Hormuz has been largely closed to traffic ever since.

As well as impacting the cost of personal loans and mortgages, the uptick in interest rate expectations is a growing problem for the British government, as the servicing of its debt accounts for a higher proportion of its spending.

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Boeing is nearing finalization of a delayed order for 150 737 Max aircraft after Turkish Airlines had threatened to abandon the high-profile deal amid a dispute over maintenance with engine maker CFM, a report said Wednesday.

Part of a 225-jet package unveiled after a meeting between President Recep Tayyip Erdoğan and Donald Trump last year, the deal has been stalled by disagreement over the airline’s demand for an industrial arrangement covering engine maintenance.

But the agreement is back on course and may be signed next week, Reuters said Wednesday, citing sources familiar with the matter.

Boeing and engine maker CFM, co-owned by GE Aerospace and France’s Safran, declined ⁠to comment. Turkish Airlines did not respond to a request for comment.

Squeezed by recent supply chain shortages and rising spares prices, ​airlines are increasingly negotiating long-term engine deals at the same time as ordering new jets, injecting greater complexity into headline-generating aircraft deals.

Turkish media reports said Erdoğan and Trump are expected to meet again next ​week, coinciding with United Nations General Assembly gatherings in New York.

At the heart of the dispute is who should bear the most risk on the cost of long-term repairs, ‌industry sources ⁠said.

‘Premier’ maintenance plant

Turkish Airlines is one of the world’s largest carriers with a mixed fleet of more than 400 Boeing and Airbus jets.

Weeks after announcing the broader Boeing deal last year, it threatened to ditch the 150 Max jets included in the order and switch to Airbus, citing a dispute with CFM over prices.

Industry sources later said the airline also wanted to open its own ​maintenance plant for engines that ​power the 737 Max by ⁠directly joining the top tier of CFM partners, a move that would grant accelerated access to the latest repair technology.

It was not immediately clear whether the two sides had reached agreement on the ​so-called “Premier” maintenance plant.

On Monday, a senior Turkish Airlines executive told an industry conference that the carrier continued to weigh more aircraft orders to feed the rapid expansion of its ⁠Istanbul ​hub.

The airline is studying regional jets such as the Embraer E2 or Airbus ​A220 while also comparing the much-larger Boeing 777X and Airbus A350-1000, Okan Baş, senior vice president in charge of finance, told the International Society of Transport Aircraft Trading (ISTAT) meeting.

He declined ​to comment on the pending Boeing Max order.

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The U.S. Federal Reserve raised interest rates by 25 basis points Wednesday, delivering its first hike in three years as persistent inflation outweighed President Donald Trump’s repeated calls for lower borrowing costs.

The move lifted the Fed’s benchmark rate as policymakers sought to curb renewed price pressures despite political pressure for monetary easing.

The central bank also signaled that another rate increase could follow before the end of the year, underscoring concerns that inflation remains too high to justify a shift toward looser policy.

The decision marks a sharp turn in the U.S. monetary policy outlook after the Fed had previously moved toward lower rates. Recent inflation readings and resilient economic activity had strengthened expectations that policymakers would resume tightening.

Trump has repeatedly pressed the Fed to cut interest rates, arguing that lower borrowing costs would support economic growth. The rate increase instead highlights the central bank’s focus on bringing inflation under control.

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A top European Union official cautioned again on Wednesday about unsustainable trade with China, pledging to use “all tools” available to counter the growing deficit.

The EU’s trade talks with China must deliver results, European Commission President Ursula von der Leyen said, warning that the bloc would “use all tools at our disposal to rebalance our relationship.”

“Our trade deficit with China is now 1 billion euros ($1.2 billion) a day. It has reached a tipping point,” she said during a speech to the European Parliament in Strasbourg, France.

“Some say the second China shock is looming. But it’s already here,” she added.

She went on to say that this shows “in our communities and in factories” across the union, adding that it leads to deindustrialization in the industrial heartlands of Europe.

“This is unsustainable,” von der Leyen said.

“Let me be clear – we will use all the tools at our disposal to rebalance our relationship. Words are good. But deeds are better.”

However, she also pointed to dependencies on China, noting that the bloc is more than 80% dependent on China for many critical raw materials

“We have done a lot. But we are not the only ones trying to diversify. We need to urgently procure and build up our reserves,” she said.

“No country can do this alone. So we need to think differently. This is why we will establish a new European Corporation on Critical Raw Materials,” she added.

“It will help us obtain and stockpile what we need. For electric cars, chips and batteries, clean tech and defence. And so much more.”

FTAs, Middle Corridor

The EU chief also mentioned the recent free trade agreements (FTAs) the bloc has agreed upon, suggesting that in this age, prosperity and security “will not only be built at home.”

“This year, we have signed free trade agreements with India, Mercosur, Mexico, Australia and Indonesia,” she said.

“We now have trade deals in place with more than 80 countries,” she added.

She also provided details on planned investments for the international connectivity project.

“It will link the South Caucasus and Central Asia directly to the European market – what we call the Middle Corridor,” she noted.

“Through Global Gateway, we will aim to crowd in up to 12 billion euros ($13.8 billion) in public and private investment. Our goal is to diversify routes, triple trade flows and slash freight transit times by 2030.”

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Türkiye’s disinflation process has been successful but is moving more slowly than desired, Treasury and Finance Minister Mehmet Şimşek said Wednesday, attributing the slowdown to a range of domestic and external factors.

“If there had been no war this year, inflation would be at least 7 percentage points lower as of today,” Şimşek told the private broadcaster Bloomberg HT.

He added that the conflict had affected not only oil and natural gas prices but also commodity prices more broadly, creating stronger pressure in Türkiye because the country’s inflation rate remained relatively high.

The annual consumer price index (CPI) in Türkiye eased for the third consecutive month in August to 31.5%, from 31.8% in July, while monthly inflation was 1.84%.

The downward trend that started in mid-2024 had stalled this year following a sharp rise in energy prices caused by the Iran war.

Inflation inertia remains challenge

Şimşek said inflation had shown more persistence than the government’s economic model had anticipated, citing strong backward indexation in rents, education and wages.

He said exchange-rate pass-through in Türkiye was between 30% and 40%.

“There is no change in the direction or framework of our policies,” Şimşek said, adding that the government’s targets were largely on track.

Earlier this month, the government unveiled an updated Medium-Term Program (MTP), which projects a year-end inflation of 28.4%, compared to 16% estimated last year.

Officials said the war in the Middle East had played a key role in the upward revision.

Inflation is projected to fall to 21% next year, 13.5% in 2028 and 9% in 2029, according to the MTP.

Şimşek said disinflation does not mean prices are falling, but that the pace of price increases is slowing.

Şimşek said monetary policy had been more effective in reducing core goods inflation. Services inflation had also begun to respond, although it had initially shown considerable inertia, he added.

Without the war, year-end inflation would have been around 21% to 22%, Şimşek said, adding that the timeline initially envisaged by the government could be extended somewhat.

“Cost-of-living pressures are our biggest priority,” he said, adding that the government would not abandon disinflation during the election process because it was necessary for sustainable growth.

The next elections in Türkiye are scheduled for May 2028.

Authorities have been pursuing tight monetary and fiscal policies to balance domestic demand and combat high inflation, putting pressure on economic growth.

The Central Bank of the Republic of Türkiye (CBRT) has kept its benchmark policy rate at 37% in the last four policy meetings as ⁠it monitors Iran war fallout.

Fiscal targets remain on track

Şimşek said the Medium-Term Program had two main functions: serving as a binding policy commitment for the government, particularly in budgetary terms, and providing a road map for the private sector.

He said the government had maintained its policy framework for three years and had performed better than its target for the budget deficit as a share of gross domestic product.

Türkiye this year launched a sliding-scale tax adjustment system, implemented to limit the impact of rising oil prices and inflation on ⁠consumers. Authorities last month removed diesel from ⁠the system, while gasoline and liquefied petroleum gas (LPG) will remain until Oct. 1, when the mechanism is ⁠set to be abolished.

The government gave up significant tax revenue with the system, said Şimşek. Despite this, the government expects the budget deficit to reach 3.1% of GDP, compared with a target of 3.5%, he added.

Türkiye had removed a special consumption tax on diesel until the end of August and reinstated it this month. The tax will rise incrementally by TL 3 each month until it reaches about TL 13.1 per liter on Jan. 1, the same level as before the removal.

Şimşek said the government had achieved many of its targets under the Medium-Term Program, including the gradual exit from foreign-exchange-protected deposits. He also said reserves were no longer a major concern and that growth remained moderate but reasonable compared with the global economy.

Flexible exchange rate regime not currently possible

Şimşek said Türkiye’s normal preference was a floating exchange rate regime, but current market conditions did not allow for a more flexible approach.

He said sustained demand for the Turkish lira could lead to excessive appreciation if the currency were left entirely to market forces, while intervention could create pressure in the opposite direction.

“A more flexible exchange-rate regime could be considered once inflation reaches single digits,” Şimşek said, adding that current conditions did not permit such a move.

He warned against reducing all economic discussions to the exchange rate, saying the government would pursue a comprehensive approach focused on reforms and productivity.

Türkiye does not face a problem securing raw materials, he said, but energy markets remained highly sensitive, particularly for oil and natural gas derivatives.

New support for manufacturers

Şimşek said access to finance remained a key issue for the real sector and that the government was providing substantial targeted support while taking competitiveness into account.

The average interest rate on loans provided to farmers is 12%, he said, adding that the government covers 70% of the interest cost for nearly 1 million farmers.

The government has also increased rediscount loans and provided significant export-related support to manufacturers, Şimşek said.

The capital of Türkiye’s Eximbank has been increased sevenfold, allowing it to provide $60 billion in loans this year, he added.

Since the end of 2023, the government has identified 284 products eligible for investment support. Companies producing these products can access investment loans with maturities of up to 10 years and a total planned size of TL 750 billion, Şimşek said.

He also said monthly wage support of nearly TL 5,000 per employee was being provided in several sectors.

The government will introduce working-capital support for the manufacturing industry, beginning with TL 250 billion this year and potentially increasing the amount later, Şimşek said.

He added that targeted policies were being used to ease pressure on the real sector without undermining the broader monetary-policy framework.

No election economy

Şimşek rejected claims that the government would adopt an election-driven economic policy.

“Those who say we will implement an election economy have either not read the Medium-Term Program or do not understand mathematics,” he said.

He added that the government had met its budget targets over the past three years and had often performed better than planned.

The government has largely completed housing projects in the southeastern region struck by devastating earthquakes in early 2023 and plans to build 750,000 social housing units annually over the next few years, Şimşek said.

About TL 250 billion will be allocated for the program in the budget, he added.

Tax revenues expected to rise in 2027

Şimşek said there were no plans for new indirect tax measures beyond efforts related to corporate income tax, personal income tax and balancing the current account.

The number of income taxpayers has increased to 5.5 million as part of the government’s campaign against the informal economy, Şimşek said.

Tax revenues are expected to increase in 2027 due to GDP growth, the assumption that the sliding-scale mechanism will not continue and further efforts to combat informality, he added.

Net exports the only drag on growth

Şimşek said growth had slowed relatively in recent years but remained in line with the global economy.

Türkiye is growing 1.5 to two times as fast as its trading partners, he said, adding that the government’s economic program had contributed to the slowdown but was designed to ensure more sustainable growth.

Growth is still expected to reach 3.3% this year, according to Şimşek. The economy expanded 2.3% year-over-year in the second quarter, following a 2.6% expansion in the first ⁠three-month period.

The war has been the biggest global shock since the 1970s and has lasted for an extended period, affecting investment decisions, Şimşek said.

External conditions are currently having a significant impact on growth, he added, stressing the importance of balanced, high-quality and sustainable expansion.

“Net exports are the only factor pulling growth down,” Şimşek said.