Until the European Central Bank purchased a call option on the future assets of the Greek government (which remains out-of-the-money), the largest leveraged buyout of a sovereign state had taken place in 1990, when the West German government acquired the German Democratic Republic (GDR), thought at the time to consist largely of liabilities. By most accounts the Bonn government paid over the odds for East Germany, estimated to have cost the West more than $1 trillion.
The resulting peaceful unification of Germany has been one of the great achievements of postwar European integration. In recent months, Germany has faced the opportunity for another buy-out of a European neighbor, this time of Greece, but it has showed little appetite for the purchase. Does East Germany provide a model for the Greek bailout? ,
To take stock of what the West Germans got for their investment, my son Charles, aged 16, and I recently biked around the principle cities of the East—Dresden, Leipzig, Weimar, Potsdam, and East Berlin—that for a long time fell on the dark side of the Iron Curtain.
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