Berlin, 28 May 2026
The economy of eastern Germany is at risk of falling further behind the rest of the country, according to a new study by the Dresden-based Ifo Institute presented in Berlin on Wednesday.
Investment and Wealth Gaps
The "Wettbewerbsreport Ostdeutschland 2026" (Competitiveness Report Eastern Germany 2026) highlights that private investment and skilled workers are particularly lacking for economic growth. The gap between eastern Germany and the rest of the country threatens to widen again despite growing prosperity, "if politics and business do not now take decisive countermeasures," said Joachim Ragnitz, deputy head of the Ifo branch in Dresden.
Private-sector investment per capita in the east reached only about three-quarters of the western German level between 2019 and 2023, the report states. Gross domestic product per employed person in the eastern German states, excluding Berlin, now stands at around 84 percent of the western level, up from 78 percent a decade ago.
The number of employed persons in eastern Germany is projected to decline by seven percent by 2035, with some regions facing a drop of up to 25 percent. This demographic trend compounds the structural challenges facing the region's economy.
Achim Oelgarth, co-publisher of the report, pointed to the role of wealth disparities. "Wealth acts like an economic springboard," he said. According to Bundesbank data cited in the study, the median net wealth of eastern German households, including Berlin, was 35,900 euros in 2023, compared to 143,200 euros in western Germany.
Political Reactions
The federal government's Commissioner for Eastern Germany, Elisabeth Kaiser, underscored the importance of every job in the region. "Every single job in eastern Germany is enormously important to me," she said at the report's presentation in the Federal Ministry of Finance. She linked the investment gap to wealth differences: "Where own wealth is lacking, neither investment nor business start-ups are possible."
Despite the sobering figures, the report notes a small bright spot. GDP per employed person in the eastern German states reached about 85 percent of the western average in 2025, compared to 78 percent ten years ago. This indicates a slow but ongoing convergence process.
Saxony-Anhalt's Minister President Sven Schulze offered a cautiously optimistic view. "We have many companies here, even in difficult times, that have a future," he told the television channel Phoenix. He stressed the need to build future prospects and "not talk everything gloomy and bad."
Schulze also called for faster reforms from Berlin. "In the end, it is important that we look at what we can still afford," the CDU politician said. Mecklenburg-Western Pomerania's Minister President Manuela Schwesig added her voice to the reform debate, saying she wished for a stronger focus on economic growth and low energy costs.
Expert Recommendations
The Ifo experts recommend a series of measures to stimulate economic growth in the east. "It would make sense to focus much more strongly on technology transfer than before. This could overcome the structural innovation weakness of eastern German companies," Ragnitz explained.
Frank Nehring, another co-publisher of the report, suggested moving away from the term "catch-up process" and instead speaking of "future regions." The study is based on the "Ifo-Faktenmonitor," which contains around 250 indicators on economic activities for all German states.
The report paints a picture of an economy at a crossroads, where demographic decline and low investment threaten to undo decades of progress since reunification more than 35 years ago. Without targeted policy intervention, the economic divide between east and west could deepen once more.