East German government slashes consumer prices


EAST BERLIN -- The East German government Wednesday announced further cuts in consumer prices largely aimed at an alignment with international markets and reducing a stockpile of unsold goods.

A government spokesman told a news conference that among the prices slashed were those for eggs, meat, poultry, canned fruit and vegetables.


Prices for textiles, shoes, leather items, books, sporting goods, and industrial goods were ordered cut Monday.

Apart from basic goods, such as bread or baby clothes, which were subsidised at 1950's prices, East German consumer goods were sold at highly inflated prices so as to stanch demand which the old Stalinist command economy was incapable of meeting.

The radical price reductions have been prompted by a glut of East German manufactured goods. Because of their price, quality or styling, East Germans largely refused to buy domestically made products.

A saleswoman in East Berlin's Schoenhauser Allee said sales in her shop reflected reports of a national 80 percent drop in sales of locally made clothes in the weeks leading up to this week's price cuts.

The trickle of Western exports to the former communist country has already turned into a flood and many East Germans are putting off important purchases until the West German mark is introduced July 1 as part of the historic currency, economic, and social union between the German states.


With overflowing warehouses, industries in the textile, shoe and electrical goods sectors are already on the verge of total collapse.

In the East Berlin warehouse of the textile wholesale concern Grotex mountains of newly-manufactured clothes valued at 180 million East German marks (about $55 million) cannot be sold even when offered at half the original price.

'We have inherited mostly ruined industrial concerns,' East German state secretary Guenter Krause told parliament. Only 32 percent of East Germany's plants make a profit, he noted.

The East German council of ministers ordered firms to submit Western-style balance sheets calculated in West German marks. A computer analysis of the balance sheets provides depressing reading.

The survey shows that 279 of the 2,200 companies that submitted information were in clear danger of going bankrupt, a figure which West German experts regard as optimistic.

Calculated on the basis of a Western market economy accounting system, the coal and energy sectors were the only ones to show a profit.

Billions of marks invested during the 1980s now will have to be written off as large parts of huge diversified concerns such as Robotron computers or Carl Zeiss Jena Optics are threatened with bankruptcy.


The opening of the East German markets to cheaper and better goods from market economy countries has forced the slashing of prices for domestic goods.

For most East German industry this will mean an increase in losses.

With the planned currency and economic union of July 1, East Germany's companies showing losss are expected either to go bankrupt or be taken over and restructured by Western industrial concerns.

Many Germans have expressed fears this could lead to massive unemployment.

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