WHEN GERMANY celebrates the 20th anniversary of the fall of the Berlin Wall on Monday, even the economists will be cheering.

After two decades of restructuring, two new studies show that Germany's eastern regions are performing far better than anyone could have predicted in 1989.

The six federal states east of the Elbe river have been through the wringer since unification in 1990. First came the economic collapse as one creaking East German factory after another was mothballed by the Treuhand, the agency appointed to privatise state holdings.

That had a knock-on effect, with the "blossoming landscapes" painted by the then chancellor Helmut Kohl blighted by jobless rates of 20 per cent-plus. Only now can economists see light at the end of the tunnel. "Today one can no longer look at raw economic data and say, 'Here is clearly the east and here is the west', says Karl Brenke, economist at the DIW economic institute and author of an economic study of eastern Germany.

"If anything, we now have a bigger economic gap between areas in western Germany than between areas in the east."

Things looked very different in 1989: East Germans took to the streets calling for free elections and open borders. But for members of the Politburo meeting behind closed doors, the final nail in the socialist state's coffin was a devastating report in early November saying that the country was as good as bankrupt.

Productivity was a third that of West Germany and economics minister Gunter Mittag said the economy needed urgent modernisation at a cost of "at least DM500 billion ([euro]250 billion)".

The only way to bring East Germany's finances back into order after years of living beyond its means was to cut the standard of living by 25-30 per cent. "That would make the state ungovernable," he said.

The news was a shock to members of the ruling SED party's central committee. Minutes of one of their last meetings record a contribution from an unnamed, furious official: "I was in favour of abolishing the death penalty but I would support its return for the people who got us into this mess."

According to Brenke of the DIW, the bankrupt East Germany story is only part of the truth, one that dismisses the ruling SED party's significant asset holdings at home and abroad.

"The internal planning committee showed the politburo figures suggesting the GDR was insolvent," said Brenke. "Like all governments, East Berlin had a tendency to overspend money whenever they thought they had it.