Prices Soar in East German After Economic Merger
Jul. 07, 1990
WEST BERLIN (AP) _ Katrin Matthes got out of bed before dawn Saturday, left her home in southern East Germany and drove three hours to West Berlin to find food she can afford.
She was among hundreds of East Germans crowding into a West Berlin store to buy meat, butter and milk that, paradoxically, are suddenly cheaper in the wealthy West than the struggling East.
The 17-year-old factory worker from Dresden paid 102 German marks ($60) for groceries she said will feed her and three Dresden families in the next few days.
''It would have cost 300 marks ($180) in East Germany,'' she said.
The stunning rise in prices just days after the German states merged their economies has created a scandal in both countries and sent droves of East Germans into Western grocery stores.
After the two nations unified their economies on July 1, East German stores began filling their shelves with Western products.
But because East German stores face substantially less competition, their prices are not only three or four times higher than before economic unification, but also often higher than the same goods sold in West Germany.
German media reported a flood of East Germans heading West on Saturday, the first shopping weekend since the economic merger and the first Saturday of the month, when West German stores by law are allowed to stay open longer.
At one store, a pound of salt was selling for 21 cents, while in East Berlin it was selling for 72 cents.
Anna Neitman, a 22-year-old student from the southern city of Leipzig, said the East German stores that were once state-owned and sold food at government- set prices are now taking advantage of their captive markets.
''We have to buy what they sell, unless we come here,'' she said as she stood outside a West Berlin supermarket.
Andries Kurjo, a West Berlin economist and a leading expert on the East German agricultural economy, said consumers will have to rebel to bring prices down.
''The consumers won't accept these high prices,'' he said. ''They have to pay for bread that is four times higher. They can get the same things in some West German shops much cheaper.''
Prime Minister Lothar de Maiziere of East Germany criticized the price increases last week, and government officials asked consumers to begin reporting instances of price gouging.
The East German Parliament on Friday passed a law intended to break up the two large grocery chains that hold a virtual monopoly in the East German food business.
The law would allow communities to sell the formerly state-owned stores in their towns.
Kurjo, however, said he expected few takers. ''Who has the money to buy them? Who has the knowledge to run such a store?'' he said.
The two grocery store chains, HO and Konsum, made deals with eight large West German companies in March to sell Western products, which now dominate the marketplace.
Konsum, in a statement on Saturday, denied that it was a monopoly and sharply criticized the law passed Friday by Parliament.
The chain's board said the property rights of the company are ''protected and inviolable,'' according to a statement carried by the East German news agency ADN.
It said that 1,500 stores were being run by private proprietors and that there were applications to run 600 others. The statement claimed the chain is not a monopoly because it is not owned by its wholesalers.
Kurjo, however, said the chains were monopolies because they dominate their markets with little competition, and the products they sell are strictly regulated by their agreements with the West German firms.
''HO and Konsum were glad to get into these agreements, but it has led to this monopoly,'' Kurjo said.
''Now they are under the control of the Western food chains. There is no real competition. The lack of competition is so bad that (East German) producers are not allowed to offer their products in these shops,'' he said.
Many stores in smaller towns sell East German agricultural products, but many of those prices also are higher because the government has eliminated the state subsidies of the old Communist regime, he said.
Kurjo said consumers can bring prices down only by refusing to buy outrageously priced products buying in West German stores that sell cheaper goods, because they face more competition.
He said East German farmers must be willing to find new ways to market, distribute and sell their products if they want to survive.
Retailers learned quickly, however, and their grasp of the laws of supply and demand drew some sour comment from German media.
''With bravura the former staunchly socialist Konsum and HO have sprung into the market economy - as capitalistic as the greediest capitalist,'' East Germany's ADN news agency said.