Germany’s Reunification - The Political Geography of Inequality - page 159

massive transfer of resources spanning multiple policy instruments was no free
lunch. Rather, it demanded a massive fiscal effort by the federal government
and western citizens and l ander, thus exacerbating conflicts over interregional
redistribution. This is the issue I turn to next.
Cost Allocation and Interregional Redistribution
In terms of interregional redistribution the federal government tried to use
Reunification to rebalance its position vis-`a-vis the l ander. The ultimate goal
was to increase the federal government's share of tax revenues and to shift
a good portion of the cost of unification to previous net receivers, that is,
financially weak l ander mostly controlled by the SPD. Given the involvement
of the federal government in the social and economic incorporation of the
East, it was only natural to seek a stronger role in the revenue system. To
achieve this goal, however, Theo Weigel, minister of finance, needed to break
the party ranks in the Bundesrat, controlled by the SPD. Indeed, the issue of
interregional transfers had caused breaches in intraparty discipline before, as
shown by Brandenburg's on the VAT allocation (see footnote 14).
Accordingly, his basic strategy consisted of trying to exploit the differences
between the three groups of l ander in Table 6.5 and forge a coalition comprising
the Bund, the financially strong western l ander and eastern l ander against
the financially weak western l ander (Renzsch 1994 : 123-137). To this end,
Weigel proposed the following (Lehmbruch 1996 : 187): “in return for a higher
federal share (plus 5%) of the turnover tax yields, the Eastern Lander were
promised extra federal grants in aid mounting to an annual 32 DM Bill, while
financially strong Western Lander were attracted by a long-term reduction in
the horizontal transfers to their less wealthy neighbors”.
However attractive in terms of cash flow in the short term, Weigel's proposal
was perceived by the financially strong western l ander (including Bavaria) and
his own party, the CSU, as an attempt to rebalance the distribution of power
in favor of the federation, a process which in turn could potentially lead to an
increase in their share of the Reunification's fiscal cost (Gunlicks 1994 : 81-99;
Katzenstein 1987 ; Sally and Webber 1994 ).
This generated a unified response by the l ander. Bavaria (CSU) and North
Rhine Westphalia (SPD) provided the initial documents for a common alter-
native position, seeking to protect the position of the l ander relative to the
federal government within existing fiscal arrangements. Saarland (SPD) and
Saxony (CDU) represented the interests of lower income l ander, while Bran-
denburg played a key role as a bridge between the SPD-ruled western l ander
and the five CDU-ruled eastern ones (Renzsch 1994 : 116-138). Their common
proposal succeeded over Weigel's, and, eventually, became the Solidarity Pact.
Ultimately, under conditions of uncertainty about the future of the system
of interregional redistribution, all l ander found it more rational to preserve
their relative institutional position within the fiscal system rather than accept
exchanging political capacity for short-term income transfers.