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German Monetary Unification: Domestic and External Issues

In: Inside the Bundesbank

Author

Listed:
  • Reiner König
  • Caroline Willeke

Abstract

Monetary, economic and social union between the Federal Republic of Germany and the former German Democratic Republic came into force on 1 July 1990. The Deutsche Mark became the sole legal tender in both German states and responsibility for domestic and external monetary policy in the extended Deutsche Mark area devolved on the Deutsche Bundesbank. The State Treaty on which probably the largest currency transaction in history was based had been negotiated in just less than two months. A slower process would certainly have been preferable from a purely economic point of view. In the light of the differing importance of the GDR Mark and the Deutsche Mark, and the widely diverging economic and structural conditions in the two German states, a phased process seemed, in principle, to be appropriate: one in which basic macroeconomic conditions could gradually be brought into line with those in the former Federal Republic and which could ultimately lead to monetary union.1

Suggested Citation

  • Reiner König & Caroline Willeke, 1998. "German Monetary Unification: Domestic and External Issues," Palgrave Macmillan Books, in: Stephen F. Frowen & Robert Pringle (ed.), Inside the Bundesbank, chapter 3, pages 20-31, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-26476-6_3
    DOI: 10.1007/978-1-349-26476-6_3
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