The Treuhand's Foreign Outreach—An Initial Assessment

What led Germany's federal government to empower the Treuhand, a new agency granted a short lease and immersed in head-spinning domestic challenges, to establish an office in New York and a “base” in Tokyo and to appoint formal representatives in major European capitals and commercial centers? A key reason was to attract capital, but an ancillary aim was to challenge narratives of German protectionism and bureaucratic overreach circulated by press outlets. Although the conversion of state-owned assets into for-profit companies grabbed most of the headlines, both the Treuhand and the finance ministry also forged close working relations with investment bankers in order to secure loans for the agency's sprawling operations. This dimension of the Treuhand's work is often overlooked. The Treuhand was a major purchaser of hundreds of millions of Deutsche Marks’ worth of advice and hundreds of billions of Deutsche Marks’ worth of credit, obtained from financial elites active in international markets. In studies penned by the many critics and fewer defenders of Germany's privatization agency, proposed or realized sales to a French oil concern, a British airline, and an Italian steel company make cameo appearances alongside prestige-heavy financial consultants—but then quickly yield center stage to domestic actors whenever conclusions are drawn about the redistributive effects of privatization. This understates the importance of foreign actors. In fact, the degree of financial consultancies’ involvement is striking: the Treuhand routinely spent more money on contractors wearing the insignia of internationality than on its own employees.Footnote ² According to Germany's supreme audit institution, the Bundesrechnungshof, the Treuhand devoted DM 460 million to consultants and DM 360 million to its own staff in 1992, with the lion's share of consultancy fees going to investment bankers. The actual sum was higher, as fees to contractors responsible for those East German firms run within the Commercial Coordination Area (Bereich Kommerzielle Koordinierung, hereafter referred to as the KoKo) were later shouldered by the ministry of finance directly and not through its intermediary, the Treuhand.Footnote ³

In their multisided efforts to attract investment, expertise, and loans from abroad, Breuel, members of her managerial board, and senior staff interacted not only with the directors of banks and consultancies but also with heads of state and foreign dignitaries. In September and October 1991 alone, the Treuhand invited ambassadors of all European community states to Hamburg, official delegates from all the former Soviet-led Council for Mutual Economic Assistance (Comecon) states to Berlin, and a dozen emissaries, mostly ambassadors, from the Organization of Economic Cooperation and Development (OECD) countries to Cecilienhof Palace in Potsdam.Footnote ⁴ Eric Martin, the Swiss embassy official charged with economic affairs, took notes on a brief question-and-answer session at the Cecilienhof meeting. His report conveys foreigners’ concerns with the Treuhand's evenhandedness, on the one hand, and captures the Treuhand's defensive responses to such doubts, on the other. Complaints from the Japanese and Austrian ambassadors about preferential treatment for West German firms yielded a tight-lipped acknowledgment from Breuel that “certain things had apparently gone wrong at the beginning.” In response to what Breuel described as “glitches,” the Treuhand was now engaging foreign investment banks to ensure parity. The problem, Breuel explained, was that redoubling efforts to welcome international investors was having the unfortunate side effect of reawakening dormant interest among western Germans. And the Austrian ambassador, Herbert Grubmayr, cited a number of cases where construction firms from his country had faced discrimination at the hands of the Treuhand, a charge Breuel and her colleagues vehemently denied.Footnote ⁵ Japan's ambassador to Germany, Keizo Kimura, remained more than skeptical, asking incredulously whether the Treuhand had not in fact long ago disposed of the “choice cuts” (Filetstücke). Breuel was unable to answer Kimura's question satisfactorily, and her troubles did not end there. As Wolfgang Vehse, the Treuhand's international relations director, confided to Martin, the Treuhand's intention to appoint “senior experts” abroad had sown mistrust among officials of the influential Federation of German Chambers of Industry and Commerce (Deutscher Industrie- und Handelskammertag [DIHK]).Footnote ⁶

Given foreign skepticism and the Treuhand's unwillingness or, perhaps, inability to address such doubts, it comes as little surprise that the agency's engagement of foreign investors via the intermediation of bankers and consultants ultimately fell far short of its stated objectives. “Our goal,” Breuel claimed in mid-December 1991, “is to build an open economy, fifteen percent of which would reflect foreign capital, similar to the way western Germany has grown in the past forty years. That's the best way to integrate eastern Germany into global commerce.”Footnote ⁷ In fact, the percentage of foreign purchases of all Treuhand companies in December 1994 was less than 6 percent; in April 1991, before the appointment of representatives abroad and the establishment of the Investor Services directorate, foreign engagements stood at 4 percent. The Tokyo “base” in particular was a flop, producing not even a single investor. In this narrow sense, capitalists from other countries did not contribute significantly to East Germany's deindustrialization. The terms of postsocialist reconstruction were set primarily in western Germany, not abroad.

Nonetheless, foreigners did invest in 858 Treuhand enterprises, often purchasing them outright. Studies conducted in the 1990s sought to gauge the motivations of eastern Germany's foreign investors, using questionnaires distributed to individual decision-makers, face-to-face interviews with mediators, and statistics compiled by federal authorities, notably the Treuhand itself, the German Central Bank, and the Cartel Office.Footnote ⁸ Although useful starting points, these accounts overlook just how deeply sources produced by federal policymakers were tainted by national interest. For example, as Swiss consular records reveal, a French trade representative in Bonn padded the Treuhand's monthly statistics in favor of his country before a state visit by French president François Mitterrand in September 1991.Footnote ⁹ A “modified” list supplied by French officials enabled the French to sail past their Alpine competitors, if only through sleight of hand.Footnote ¹⁰ Neither was the director of the Swiss embassy's consular office in Berlin above putting his own finger on the scale, supplying the Treuhand's international relations director Vehse with his list of Swiss investors in the eastern federal states that he insisted be treated confidentially. Other countries, too, attempted to massage their numbers. In October 1991, the British embassy's Berlin office was drawing up its own statistics on foreign investments for Vehse and requesting a meeting with him to ensure that its measure of UK engagements was included in the agency's future tallies.Footnote ¹¹

Swiss Engagements in Eastern Germany—A Detailed Examination of Investment Intermediaries

Although statistics generated by Germany's federal ministry of economics reveal significant investment activity among Germany's smaller neighbors—the Netherlands, Denmark, and especially Austria and Switzerland—no research has yet paired an exploration of the Treuhand's international marketing efforts with the engagement of those nations most active in eastern Germany's retracting economy.Footnote ¹² According to the Treuhand's statistics, Switzerland led the nations investing in eastern Germany, with 139 privatizations, followed by Britain (124), Austria (100), and the Netherlands (96). Tallies produced by the Treuhand and the federal ministry of economics confirm that Switzerland, a nation of fewer than 7 million, topped the list of foreign investors in eastern Germany during the first half of the 1990s, surpassing the efforts of much bigger and more influential competitors, including enlarged Germany's most important European Community partners, Britain and France. Whereas French concerns, often majority state-owned, purchased large enterprises in eastern Germany in 1990 and 1991 with the political support of the French president and German federal chancellor (the best-known example is the scandal-ridden acquisition of the Leuna refinery works and Minol filling station network by a consortium led by oil giant Elf Aquitaine), Austrian and Swiss investments were more often realized by smaller firms with less visible ties to political and administrative elites at home and in unifying Germany. For this reason, rankings of investors based on investment volume or job guarantees—factors that lend themselves to subsequent revision—overinflate the role of French concerns in eastern Germany's post-Wall economy. Notably, Swiss investments were spread more evenly across the Treuhand's nearly five-year history, with Switzerland almost always occupying first or second place in monthly lists of foreign investors produced by the German privatization authority. Austrian and especially British investments assumed greater relative importance from mid-1991 onward, for reasons explored briefly toward the end of this article. In eastern Germany, Swiss investors accounted for 16 percent of all firms purchased by foreigners; by 1995, Swiss entities had committed themselves to more than three hundred investments, Treuhand-related and otherwise.Footnote ¹³

The origins of Swiss engagement lay in developments not in Berlin or Bonn but rather in Bern, Basel, and especially Zurich. Swiss investment successes flowed from many cultural similarities and a few key differences. The Alpine federation and West Germany shared much, notably a language (for two-thirds of Swiss citizens), a border, legal norms, and extensive economic and social contacts, including with the former East Germany.Footnote ¹⁴ Even imbalances in the relationship, such as the fact that West Germany was Switzerland's most important trading partner or that Switzerland's banks were far more successful in securing the wealth of private individuals from around the world, point more to shared than to divergent interests.Footnote ¹⁵ The importance of German economic ties for Swiss authorities can, then as now, hardly be overstated. For all the similarities with West Germany's economy, notably its own niche manufacturing enterprises like those typifying Germany's Mittelstand, Switzerland differed from its powerful northern neighbor in important ways. Prominent among these were its banking secrecy laws and its numerous “asset managers,” affiliates, brokerages, investment houses, consulting concerns, and private banks. Having played special roles in facilitating commerce between the postwar German states during the eras of détente, these actors’ engagement informed Swiss approaches after the Wall fell.

Though the most important early investor in the new federal states, Switzerland was among the last foreign representatives to join the Treuhand's ranks abroad. The Swiss representative Fritz Leutwiler was appointed in June 1992 but only assumed his duties at the end of the summer. A financial heavyweight who had also previously served as president of the Swiss National Bank and the Bank of International Settlements, Leutwiler rarely engaged in cultivating individual investors during his eighteen-month tenure as Treuhand representative. Instead, Leutwiler and the Treuhand entrusted this task to a Swiss-German trade association, the Handelskammer Deutschland-Schweiz (hereafter referred to as the Handelskammer). When Leutwiler resigned his position as Treuhand representative at the end of 1993, the Handelskammer formally assumed his ambassadorship, as well as expanded its purview to neighboring Austria.

How did the Swiss-German Handelskammer cultivate business ties in eastern Germany? In his memoirs, the former director of the Handelskammer, Hans-Joachim Meyer-Marsilius, traced the origins of its interest in the changing economy of eastern Germany to January 1990. This was not even half true. In fact, Meyer-Marsilius's interest in East German foreign commerce dated back to at least the late 1960s, when Swiss security officials had asked him to assess whether the East German regime should be allowed to place representatives of its Chamber for Foreign Trade (Kammer für Aussenhandel) in Bern or Zurich.Footnote ¹⁶ It was Meyer-Marsilius's long-standing interest, not merely the dramatic events that followed the Wall's breach in November 1989, that explains why the Handelskammer's honorary president, Hans Vontobel, dispatched him to still-socialist East Berlin for a one-week semiofficial visit in January 1990. Housed in the private archives of the Handelskammer, Meyer-Marsilius's notes on that visit reveal his—and Vontobel's—objective: to prepare a new business consultancy featuring the Vontobel Holding, a banking trust presided over by Meyer-Marsilius's old and new superior, Hans Vontobel.

Born in Giessen, Meyer-Marsilius worked as an attorney in Frankfurt am Main in the early 1950s before becoming director of the Handelskammer from 1957 to 1984. From 1967 to 1985, Hans Vontobel was the Handelskammer's president. In December 1989, the Handelskammer boasted 3,200 members, two-thirds of whom were Swiss and the other third West German. In his January 1990 visit to Berlin, the now retired director Meyer-Marsilius unofficially represented the Handelskammer and Vontobel Holding. For someone no longer engaged in the day-to-day affairs of a business association, his itinerary reads like a Who's Who guide to East German foreign trade affairs. Meyer-Marsilius spoke first to Herbert W. Goulnik, deputy director of the GDR-FRG Trade Association (Handelsverein DDR-BRD). Goulnik had headed the commercial affairs section of East Germany's embassy in Switzerland from 1982 to 1986. At the time of Meyer-Marsilius's visit in January 1990, some 40 percent of the trade between the German Democratic Republic (GDR) and the Federal Republic of Germany (FRG) flowed through Goulnik's offices. Goulnik approved of Meyer-Marsilius's plans for what the latter described as “the consultancy” (a reference to Vontobel's European Community consultancy), noting that this initiative should begin soon in order to prevent East Germany's foreign trade relations from being tilted too heavily toward the Federal Republic (bundesdeutsch-kopflastig). Goulnik also recommended passing a note about the consultancy to Hans Modrow, the East German minister president, during the upcoming World Economic Forum meeting in Davos.Footnote ¹⁷ Over the course of an evening meal and lengthy interaction with Jürgen Nitz, a longtime adviser to Gerhard Beil, East German minister for foreign and intra-German trade, further details of the Handelskammer's plan emerged. During their conversation at the five-star Palast Hotel, Nitz requested from Meyer-Marsilius a summary of plans featuring the Vontobel banking house in advance of Nitz's next scheduled trip to Switzerland in early February.

Both Swiss and East German partners were among Meyer-Marsilius's contacts during his Berlin trip. A meeting with the last Swiss ambassador to East Berlin, Franz Birrer, revealed enthusiasm for the “EC [European Community] Consulting” initiative, which Meyer-Marsilius argued should feature a Berlin meeting of the World Economic Forum scheduled for spring 1990 and apprenticeship training programs in Switzerland for aspiring East German business leaders. Meyer-Marsilius met with the deputy director of West Berlin's Chamber of Industry and Commerce (Industrie- und Handelskammer), Wolfgang Wetzke, an expert in East German commerce and thus “a man in high demand.” Wetzke, too, voiced approval for the consultancy, cautioning that many West German companies were moving quickly to establish profitable relationships in East Germany. Wolfgang Richter, director of the GDR's Chamber for Foreign Trade (Kammer für Aussenhandel), echoed Wetzke's appraisal, pairing his approval for the “plans of the consulting group” with the pointed observation that “a genuine invasion is in the works,” one of many indications East German officials saw Swiss involvement as a defense against West German hegemony.Footnote ¹⁸

This invasion metaphor also figured in remarks by Heinrich Gramer. Gramer was deputy director of the Deutsche Handelsbank, one of three institutions granted permission under East German law to take out loans in western markets during the 1980s, and had expertise in trade ties to West Germany, specifically in commerce benefitting both unnamed Swiss financial and commercial entities and KoKo companies. Gramer encouraged Meyer-Marsilius to bring the “matter concerning the Vontobel Bank to the attention of Christian Meyer,” deputy minister for external economic relations of the GDR, “during his upcoming visit to Bern and Zurich.” (Meyer was Gerhard Beil's deputy; his visit to Zurich is discussed following.) In conversation with Meyer-Marsilius, Gramer also indicated his assessment that the training program should target the future leaders of small- and medium-sized enterprises in the GDR, a plan Meyer-Marsilius affirmed as “absolutely in keeping with the Vontobel Bank's expertise.” Gramer and Richter proposed the immediate establishment of a Vontobel office in eastern Germany; at minimum, Vontobel should host events in Berlin, Dresden, and Leipzig on different days, with sessions catering to those directors of state companies likely to be empowered as private-sector managers.

Meyer-Marsilius also broke bread with Wolfgang Andrä, vice director-general in East Germany's foreign trade ministry. Andrä expressed enthusiasm for the Vontobel plan but warned that the Swiss initiative faced the prospects of thin revenues and stiff competition from West German banks. Competitors from other nations, Andrä noted, were also on the horizon—the head of McKinsey's West German office had already paid him a long visit. Only if Vontobel and the Handelskammer acted quickly could the Swiss succeed in winning over those managers who would soon head the small- to medium-sized enterprises to be carved out of massive industrial combines.Footnote ¹⁹ Near the end of his weeklong visit, Meyer-Marsilius sought advice from the director of the East German Bank of Foreign Trade (Deutsche Aussenhandelsbank), Siegfried Hrzan, and his London-based deputy. Hrzan's bank was the official recipient of a DM 1 billion credit secretly negotiated between the minister-president of the state of Bavaria, Franz-Josef Strauss, and Alexander Schalck-Golodkowski, head of the KoKo commercial networks and a Stasi agent during the early 1980s (Schalck-Golodkowski, unlike Stasi chief Erich Mielke, was essentially unknown in East Germany until November 1989). The loan brought with it an easing of travel restrictions to and from East Germany and was approved by West German chancellor Helmut Kohl.Footnote ²⁰

Meyer-Marsilius's notes from his whirlwind tour end with an admission: nearly all his meetings in East Berlin had been set up by a West German born, Zurich-based banker, Holger Bahl. Born in Wuppertal, Bahl had moved from West Berlin to Zurich in 1970 to work at the Kontor Handelsbank, renamed the Bank für Kredit und Aussenhandel a year later. The Bank für Kredit und Aussenhandel was a Swiss subsidiary of the state-owned Landesbank of Rheinland-Pfalz, the chairman of whose board of directors was the state's minister-president (and later German chancellor) Helmut Kohl. In 1973, Bahl assumed the directorship of the Bank für Kredit und Aussenhandel under Kohl's formal supervision. Between 1975 and 1989, under Bahl's leadership the bank exploited the growth of a new loan sector known as the Euromarket to secure consortia loans for the East German regime in London, Luxembourg, and Zurich.Footnote ²¹

Bahl presented himself as an expert in export finance and currency hedging. This caught the attention of Meyer-Marsilius, who enlisted him for Handelskammer publications and speaking events organized by his Handelskammer from 1979 until the early 1990s.Footnote ²² Bahl's major clients in his capacity as head of the Bank für Kredit und Aussenhandel during the 1980s were East Germany's largest banks, the Deutsche Aussenhandelsbank and the Deutsche Handelsbank, as well as KoKo companies, specifically a firm established in 1964 named Intrac.Footnote ²³ In the mid-1980s more of East Germany's trade flowed through KoKo channels than through planned measures by ministries such as Beil's. This was made possible by “untethered” import loans arranged by the Bank für Kredit und Aussenhandel (and quietly approved by governments in Bonn eager to keep alive détente in the face of hostility to Soviet cooperation in London and Washington, DC).Footnote ²⁴ Generous finder's fees were a feature of such exchanges, with a portion of commissions transferred to accounts of East German Socialist Unity Party (SED) functionaries. The volume of this trade—much of it in unexceptional goods, notably raw materials, especially metals and oil, chemicals, and agricultural products—enabled Bahl not only to raise capital and hedge against risks but also to channel proceeds to unnumbered Swiss accounts and exotic banking arrangements outside Europe. East German records reveal that the bank activated Stasi transfers to the Caribbean, where government controls and taxes on capital gains were (then as now) essentially nonexistent. To offer only one example, in June 1980, Schalck-Golodkowski reported to Economic Secretary Günter Mittag, the key figure in East Germany's party leadership for the socialist planned economy, that, acting on advice from Bahl, the KoKo concern Intrac would soon become a silent shareholder in a foreign subsidiary of the Swiss Bank für Kredit und Aussenhandel, the Bank for Credit and Foreign Commerce (Overseas) Ltd. in Nassau. The Bahamian bank's principal shareholders were two West German state-owned banks, Landesbank Rheinland-Pfalz (74.66 percent) and the Würtembergische [sic] Kommunale Landesbank in Stuttgart. This engagement would, Schalck-Golodkowski cryptically noted, facilitate “additional operational options” using funds from West Germany and the United States.Footnote ²⁵ As it happened, a decade later the decision would ensure that a unified German government owned a piece of the Bank für Kredit und Aussenhandel's business.

Holger Bahl served as president of the supervisory board (Verwaltungsrat) of a second financial entity, Eurasco Zürich AG, for ten years after leaving the Bank für Kredit und Aussenhandel, from 1988 to 1998. Eurasco (Europe Asia Comecon) was established with a share capital of 2 million Swiss francs on May 26, 1988, to act in banking, trade, and insurance with capital from the USSR, the GDR, and the Federal Republic of Germany. Stockholder entities hailed from East and West Germany, Switzerland, and the Soviet Union. Among Eurasco's initial shareholders were Donau Bank AG in Vienna, a subsidiary of the Bank for Foreign Trade of the USSR (Vneshtorgbank), and IK Industriekredit, with 1 million Swiss francs each. On October 7, 1988, the Bank for Foreign Economic Affairs of the USSR and the Landesbank Rheinland-Pfalz joined as shareholders, increasing Eurasco's capital to 5 million Swiss francs. Eurasco's aim, one reads in its 1989 annual report, was “to contribute to the revival of the East-West trade, which has stagnated over the past few years, by means of innovative measures in the fields of finance and trade, and to promote cooperation in third markets.”Footnote ²⁶ To this end, the share capital was boosted again, to 6 million Swiss francs, in connection with the June 1989 addition of a metals-trading industrial conglomerate based in Frankfurt am Main, Metallgesellschaft AG. Together with its main stockholder, the Landesbank Rheinland-Pfalz, Eurasco opened a representation in Moscow in June 1989. Bahl sought and obtained payments to boost Eurasco's capital stock. By August 31, 1990, Eurasco's original capital had expanded to 70 million Swiss francs; at that time, the Bank for Foreign Economic Affairs of the USSR emerged from the cloak of the Donau Bank AG to join the list of Eurasco's equity holders.Footnote ²⁷

Bahl's role in securing initial contacts for the Handelskammer under Meyer-Marsilius is presented in this paper for the first time. We know more about Bahl's involvement in the brokering of multi-billion-Deutsche-Mark loans to the East German regime by West Germany's federal government in 1983 and 1984 (including arrangements ultimately reached between Bavarian state premier Franz-Josef Strauss and the chief of the KoKo, Schalck-Golodkowski).Footnote ²⁸ Among Bahl's West German contacts were Karl Wienand, then general secretary of the Social Democratic (SPD) parliamentary grouping (and subsequently an East-West investment consultant, then a convicted Stasi agent); the minister of state at the German chancellery, Hans-Jürgen Wischnewski; and Wischnewski's successor, Philip Jenninger.Footnote ²⁹ Remarkably for a Helvetic banker, Bahl has published an account of his efforts to secure loan agreements on behalf of the East German regime; it features many of the personalities mentioned in Meyer-Marsilius's notes.Footnote ³⁰ Bahl claims to have been motivated by a desire to promote a superior form of economic union to the actual terms of East Germany's absorption into the Federal Republic in 1990.Footnote ³¹ Whatever the true mixture of his political and pecuniary motives, by 1989 Bahl had already cemented impressive governmental contacts in both West and East Germany and in the Soviet Union. Bahl's Bank für Kredit und Aussenhandel organized the Soviet Union's first bond issuance in a capitalist country in 1988, yielding a sum of 100 million Swiss francs.

In his account, Bahl shares little about his professional activities after November 1989. He mentions only a meeting he was asked to arrange immediately after the Wall's collapse between the leadership of the Handelskammer in Zurich and the commercial affairs officer of the GDR's embassy in Bern, Karl-Heinz Baron.Footnote ³² Files from the archives of the German foreign ministry confirm that on January 25, 1990, during Meyer-Marsilius's week in East Berlin, Bahl had convened an informal meeting in Zurich with East Germany's ambassador to Bern, the East German commercial representative in Zurich, and Handelskammer director Manfred W. Herr.Footnote ³³ Published sources, mostly newspaper reports but also parliamentary inquiries initiated by members of the German federal parliament and state parliamentarians in Munich, add further details about Bahl. Their focus is twofold: how East Germany had obtained generous loans from the West German government and how the East German state had evaded high-technology import controls to squirrel away the proceeds of illegal commerce.Footnote ³⁴ Bahl's East-West contacts from 1990 onward, by contrast, have not received scholarly attention.

In Switzerland, rivalry within the small world of business associations greatly accelerated the search for investment interlocutors. The country was unique among Germany's major European trading partners in having not one but two private chambers of commerce engaged in promoting business ties with the Federal Republic, the Handelskammer in Zurich and the Vereinigung Schweizerischer Unternehmer in Deutschland (Association of Swiss Companies in Germany hereafter Vereinigung) based in Basel. The Vereinigung gained an initial edge on its Zurich competitor through a decision to transform a “local antenna” in East Berlin into a formal representation, a move approved by the board of directors in February 1990.Footnote ³⁵ The Vereinigung's contacts enabled it to ramp up its own East German network, at the heart of which was the East German counterpart of the Christian Democratic Union (CDU) party. The Vereinigung's board also sought to enhance ties with Swiss banks with decades of experience in east-central Europe. Industrialists too—among them Hoffmann-La-Roche, Nestlé, and Asea Brown Boveri (ABB)—were quick to join the Vereinigung's “GDR Working Group.”Footnote ³⁶

In February 1990, therefore, the Handelskammer confronted the daunting prospect of a new domestic rival focused exclusively on establishing relationships between Swiss and East German authorities; a Swiss attorney's office had also submitted a written application to the commercial affairs section of East Germany's embassy in Bern in a failed bid to establish a new “Swiss-GDR Trade Association.”Footnote ³⁷ Complicating matters for the Handelskammer was the fact that the East German deputy director of foreign trade, Christian Meyer, appeared to be inching toward a cooperative engagement with British authorities similar to the Vontobel proposal of training seminars for mid-level managers. Swiss ambassador Birrer, who had advocated for professional exchanges between Swiss and aspiring East German business leaders in his January 1990 meeting with Meyer-Marsilius, sounded alarm bells, warning diplomats in Bern and foreign trade officials in Zurich that Meyer had recently held productive meetings with Lord David Trefgarne, an influential Conservative politician and former undersecretary of state at the Department of Trade and Industry, and Sir George Trevor Holdsworth, chairman of the Confederation of British Industry.Footnote ³⁸ These meetings threatened the progress achieved in talks between René Felber, head of the Swiss Department of Foreign Affairs and member of the Swiss Federal Council (Bundesrat), and Hans Modrow, during the Davos World Economic Forum in February 1990. There, the two had agreed to exchange mid-level managers, a form of Swiss–East German cooperation that Felber believed best suited both to serve Swiss business interests and to avoid ruffling feathers in West Germany.Footnote ³⁹

The multiplicity of suitors gave East German trade authorities such as the Chamber of Foreign Trade (Kammer für Aussenhandel) a brief window of opportunity to acquire influence with the Swiss Handelskammer. Worried by this and intent on steering the Chamber of Foreign Trade away from greater cooperation with trade experts based in West Berlin,Footnote ⁴⁰ Meyer-Marsilius added substance to consulting plans he had sketched during his visit to East Berlin in January 1990. The former Handelskammer director offered the Chamber of Foreign Trade three- to four-month-long management training seminars targeted at three hundred to five hundred mid-level executives, with costs to be shouldered by “Swiss representatives” (in fact, Vontobel). The Handelskammer also offered to send retired Swiss senior executives to GDR state enterprises to serve as management consultants and aimed to establish, with Vontobel's assistance, an electronic database to facilitate further exchanges in support of East German companies. Pairing these carrots with sticks, the Handelskammer impressed upon the chamber's delegates the Swiss government's wish to resolve some 1,400 property claims that had burdened relations between the two countries for decades. Sensing weakness after the March 18, 1990, elections to East Germany's parliament, Meyer-Marsilius added to his negotiating team the head attorney of a law firm pursuing such claims, Werner Stauffacher.Footnote ⁴¹ Whereas Meyer-Marsilius's allies at the Handelskammer sought to distance themselves from the Chamber of Foreign Trade, labeling it in internal correspondence as an organization still dominated by socialists, Meyer-Marsilius and Stauffacher took a more positive view, seeing a chance to get East German agreement on solutions favorable to Swiss citizens and companies.Footnote ⁴² At a follow-up meeting with East German public figures in mid-May 1990, the two men pushed still harder for restitution settlements on purely “commercial grounds” (for example, in swift payments, reached outside formal governmental agreements that would likely soon be overridden by federal legislation).Footnote ⁴³ Also in mid-May 1990, Vontobel's longtime former director Hans Vontobel assumed central stage at the event planned during Meyer-Marsilius's first post-Wall visit to Berlin. Together with Ambassador Birrer, Vontobel opened an event titled “A Presentation of Switzerland's Economy” in East Berlin's International Trade Center.Footnote ⁴⁴

Meyer-Marsilius and Stauffacher had driven hard bargains to secure restitution from East German authorities, but in late May 1990, Meyer-Marsilius's successor as head of the Handelskammer, Haro Eden, invited Holger Bahl to head a recently established “GDR advisory council.”Footnote ⁴⁵ Set up to counter the Vereinigung's GDR Working Group, the Handelskammer's advisory council soon took up a suggestion that the former director of the GDR chamber, Wolfgang Richter, had made to Meyer-Marsilius five months earlier, and in late June 1990, the Handelskammer presented the first seminar run by a foreign business association in the eastern federal states. Provocatively billed “Switzerland as Economic Partner: The Obvious Alternative for Saxony's Foreign Trade,” the two-day event held in Chemnitz (known until May 1990 as Karl-Marx-Stadt) and Radebeul near Dresden sought to help Swiss investors get a foot in the door of East Germany's economy before their western German counterparts (and before those Swiss firms favoring the Vereinigung). As treaties were signed in Bonn and East Berlin stipulating the terms of East Germany's absorption by the Federal Republic of Germany on June 20 and 21, the Handelskammer chartered a private jet to collect Swiss financiers and cantonal investment authorities. In Saxony, the Chemnitz and Dresden representatives of brand-new chambers of industry and commerce (Industrie- und Handelskammer), together with a small number of would-be business leaders, joined them. The seminar's official moderator was the Handelskammer's Manfred Herr, but its star attraction was banker Holger Bahl.

As the Handelskammer's monthly newsletter reported, even for this “doyen of the Handelskammer's investor seminars,” the president of Eurasco Zurich AG's supervisory board, “the opportunity to stand at the lectern in Chemnitz and present his experiences of joint ventures was truly exceptional.” A Handelskammer speaker for more than a decade, Bahl had consistently sought to underscore the value of “East-West trade via Swiss platforms.”Footnote ⁴⁶ Informal conversations about Bahl's experiences in the “Comecon area” reportedly led one participant to wonder how the Handelskammer's seminar would have been regarded in the old days of the GDR. What Bahl shared of his past experiences in the GDR during the flight to and from Dresden and the car trip from Radebeul to Chemnitz remains a mystery. We do know Bahl invited attendees to record their impressions of the Handelskammer premiere by completing the sentence: “I was there, my next step will be . . .” Among those to respond was Urs Künzle, a representative of the EC Consulting Group AG, Zürich, the consultancy that Vontobel Bank had set up in 1988.Footnote ⁴⁷ In Künzle's estimation, “factories in the GDR do not necessarily work worse than elsewhere”—they had merely been hamstrung by “ideological and industrial barriers.” He argued that the restructuring of the GDR's economy had exacerbated management difficulties. Limited financial and currency reserves were hitting East German companies at the same time as investment requirements and competitive pressures were peaking. Exceptional historical circumstances demanded “problem-oriented analyses” that the EC Consulting Group, consisting of one hundred experienced employees based in Zurich, Düsseldorf, London, and Milan, was willing and able to offer “GDR managers” of businesses or “business units.” What Künzle and the Vontobel consultancy were offering remained vague. In his survey answer, he promises to identify “problem areas” that could be rectified with “relatively limited engagement,” thus producing improvements that might be of interest to a “potential partner.”Footnote ⁴⁸ Weak on analysis, the solution was somewhat clearer: in hard times outsiders with deep pockets could make all the difference.

The Relevance of Inter-German Trade to Post-Socialist Investments

How did such “potential partners” from Switzerland acquire assets, Treuhand or otherwise? In December 1991, Swiss diplomats noted that two important reasons for their country's early successes in the newly capitalist East lay in the recently socialist past and the activities of the Handelskammer. With reference to the former, in “most cases” Swiss investors had cultivated “a loose connection” or “some form of cooperation” in socialist times with newly purchased firms. The Zug-based apparel manufacturer Schiesser, they reported, had set up a licensing contract with the Saxon state enterprise Trikotex, and the LUWA AG had established a cooperation agreement with a state-run enterprise in Dresden specializing in air engineering instruments.Footnote ⁴⁹ Such examples were the tip of the iceberg. Modest when compared to those of West Germany, Swiss contacts with the GDR were nonetheless extensive. The year 1989 was the forty-second that Swiss firms had participated in East Germany's most important industrial event, the Leipzig trade fairs: 128 firms were represented there that March.Footnote ⁵⁰ Among the firms marking their twenty-fifth anniversary at Leipzig in 1989 was Ciba Geigy AG. Then the largest chemical concern in Switzerland, Ciba-Geigy had ties to East Germany extending back to the late 1950s. After the Swiss government granted East Germany formal recognition in 1972, Alexander Schalck-Golodkowski, head of the KoKo foreign trade networks, paid a visit to Ciba-Geigy's Basel headquarters.Footnote ⁵¹ East Germany's minister for foreign trade, Gerhard Beil, followed five years later. During his 1977 visit to Basel, Beil met the president of Ciba-Geigy's supervisory board, Louis von Planta, along with his counterparts from Sandoz, today a division of Novartis, as well as Winterthur-based pump manufacturer Sulzer, prompting observation by the Swiss intelligence authorities.Footnote ⁵²

Perhaps the taint of KoKo connections led Beil to leave his numerous trips to Switzerland unmentioned in his official memoir.Footnote ⁵³ Beil's influential deputy minister and by now state secretary for trade in Hans Modrow's government, Christian Meyer, logged more time in Switzerland, making at least one of his visits prior to the assumption of formal diplomatic relations.Footnote ⁵⁴ Meyer's most important trip was probably the one he made in February 1990.Footnote ⁵⁵ On this occasion his meetings with industrial contacts took place in the Zurich offices of the Schweizerische Bankgesellschaft, today the headquarters of UBS, much as they had in the 1970s and 1980s. What was new was the sheer scale of the gathering in Meyer's honor. Meyer met directors of ABB, AGIE, André & Cie, Balzers, Bühler, Cargonautic, Ciba-Geigy, Elektrowatt AG, Emont, Feintool, General Transport, Georg Fischer, Gyseler Cotton Company, F. Hoffmann-La Roche, Intermerkur, Intershop, Intrac, Lonza, Meili, Nestlé, Sandoz, Sacomintag, Schindler, Schubiger, Schweizerischer Versicherungsverband, Simec, Sprecher Energy, Sulzer, Swissair, Berno Thues, Achim Türklitz, UTC International, and Zurich Insurance. The general director of the Schweizerische Bankgesellschaft, his deputy, a vice director, and a general manager swelled the throng, and the bank's competitors dispatched representatives to meet him, among them Schweizerischer Bankverein, Schweizerische Volksbank, Holderbank, and prestigious private banking houses Leu and Vontobel. Also joining the discussion was the former director of the Handelskammer, Meyer-Marsilius; the Vereinigung's director, Rudolf Kögler, was not in attendance.Footnote ⁵⁶ In preparation for this meeting, the official trade agreements delegate (his formal title was “ambassador”) of the Swiss Federal Council, Silvio Arioli, suggested that staff of East Germany's embassy in Bern compile “a Swiss wish list for improved cooperation.” Keen to suggest possibilities, Arioli did not miss the opportunity to state what Meyer and his SED colleagues had grasped immediately: “without assistance from third countries (Swiss or European Community),” East Germany would be compelled “to surrender in the face of the West German offensive.” “If the GDR sought to avoid the monopolization of its foreign trade,” concluded Arioli, “it could only do so by opening its economy rapidly and fully to all potential investors.”Footnote ⁵⁷

Long-standing Swiss ties to East Germany and Handelskammer activism did not always yield new business, though they often appear to have paved the way. Not infrequently, these connections led back to the KoKo. At the end of 1989, the eighth floor of the International Trade Center in Berlin hosted Nestlé World, a firm that, less than six months later, was producing at four locations in East Germany via “cooperation agreements.” Whether these contacts had anything to do with earlier ties remains unknown, though one might be tempted to suspect as much given the visits during the early 1980s of two high-ranking KoKo functionaries, Günter Asbeck and Horst Steinert, to Nestlé headquarters in Vevey.Footnote ⁵⁸ Still other firms, notably the Siemens competitor ABB, an attendee at Meyer's February 1990 conference, had been trading with East German firms for thirty years; headed by the president of its supervisory board, Fritz Leutwiler, ABB, too, was a Swiss investment leader after 1990, with ties developed by the company's West German subsidiary in Mannheim. Like many West German concerns, ABB's predecessors had done extensive business with Intrac, the largest and most important KoKo trade intermediary—and again an attendee of the February 1990 meeting in Zurich—as well as with several other KoKo concerns.

Hoping to expand footholds in eastern Germany's economy after November 1989, those closest to the events perceived the immediate need for insights into the inner workings of East Germany's evolving economy. That prompted Meyer-Marsilius's visit to East Berlin, and also accounts for why the Vereinigung, the Handelskammer's competitor, sought in October 1990 to expand the board of its GDR Working Group, under the leadership of F. Hoffmann-La Roche's Donald de Courten, to include two or three representatives “with actual frontline experience” in East Germany.Footnote ⁵⁹

Unfortunately for the Vereinigung, the Handelskammer and Vontobel were several steps ahead, having already engaged “two to three representatives” with precisely these ties. The ace up the Handelskammer and Vontobel's sleeve in opening eastern Germany's economy to Swiss interests was the tradition of connections arising from Switzerland's roles in trade between East and West Germany. Eurasco chief and Handelskammer associate Holger Bahl was not the only relevant figure in such networks. A second was investment strategist Michael Grossauer, a Vienna-born financier based not in the main Swiss banking capital of Zurich but in nearby Zug. Like Bahl's Eurasco, Grossauer's company Asada did not possess a Swiss banking license; instead, Grossauer presented Asada as an “engineering and finance group.” Asada's specialization was electronics imports. Unlike the Handelskammer and the Vereinigung, both Bahl and Grossauer had long been fixtures of the Leipzig trade fairs, visiting and hosting receptions attended by Swiss ambassadors to East Berlin and other notables of East German foreign trade (including KoKo companies).Footnote ⁶⁰

Incorporated in 1985, Asada opened an office in East Berlin's International Trade Center the following June. In 1989, Asada marked its fifteenth anniversary at the Leipzig spring trade fair, and by March that year, Grossauer had opened offices in Warsaw, Moscow, and East Berlin.Footnote ⁶¹ Grossauer's East German clients included foreign trade enterprises permitted to specialize in electronics and electrical engineering; his business was embargoed goods. Both Grossauer's Asada and Bahl's Eurasco moved quickly to deepen contacts they had fostered during thaws in the continent's two-generation Cold War. Both asset managers have recently drawn criticism from sleuthing investigators, with Grossauer's role in intra-German commerce treated to a scathing portrayal by a Berlin-based Swiss historian-cum-journalist.Footnote ⁶²

Nevertheless, the precise motives behind Bahl's and Grossauer's efforts remain unclear. Beyond dispute are their respective organizations’ attempts to leverage the positions the pair had acquired as German-German go-betweens. Bahl's and Grossauer's commercial enterprises bound together economic interests in West Germany, Switzerland, East Germany, the Soviet Union, and other east-central European countries. As a neutral power and thus only a de facto, not de jure, member of the American-led Coordinating Committee for Multilateral Export Controls (CoCom), Switzerland served as a conduit of Western technology to Soviet bloc nations. Coupled with its attractions as a haven for “private asset management,” Switzerland's role in intra-German trade was exploited by figures like the West German Bahl and the Austrian Grossauer to their commercial advantage, paving the way for the Handelskammer's and Vontobel's later cooperation with the Treuhand.

In late January 1990, the US Department of Commerce denied Grossauer and his firms US export privileges for ten years.Footnote ⁶³ This decision appears to have encouraged Grossauer to deepen ties between Switzerland and East Germany. A month later, the Swiss ambassador to East Berlin, Franz Birrer, reported on a conference organized by Asada chief Grossauer with economic experts from the East German counterpart of the Christian Democratic Union.Footnote ⁶⁴ Grossauer's Asada had cohosted this event, held in East Berlin and featuring thirty prospective East German entrepreneurs, with East CDU politician Eberhard Engel, a central figure on the “Economic Committee” of the last SED-led East German government under Hans Modrow.Footnote ⁶⁵ Acting on a suggestion from Birrer, at the end of February 1990 Haro Eden, head of the Handelskammer, asked Asada AG to join the organization. Eden and his colleagues hoped this would enable the Handelskammer to counter the Vereinigung's CDU ties in East Berlin. Eden noted with satisfaction that Grossauer immediately lent his support to the GDR advisory council within the Handelskammer.Footnote ⁶⁶ Among the first tangible results of Grossauer's inclusion was the recruitment of another Swiss firm with East German ties, Losone-based fiber-optic cable manufacturer Diamond SA, along with the first two honorary East German members of the Handelskammer.Footnote ⁶⁷ Profiled in the June 1990 issue of the Handelskammer's monthly newsletter, brand-new Handelskammer member Werner S. from Glienecke (near Potsdam) explained to readers that his new export-import firm, Beveco, was entirely different from “Schalck.”Footnote ⁶⁸ The candid reference to KoKo chief Schalck-Golodkowski appears to have been lost on the newsletter's writer: we know only that Grossauer's Asada, a firm long favored by high-tech enterprises within Schalck's KoKo and subsequently targeted by US export control authorities, was making similar pitches to readers in the very same issue.Footnote ⁶⁹

Ten days prior to Bahl's June 1990 seminar in Chemnitz and Radebeul, Grossauer was offering opening and closing remarks in Zurich's Zunfthaus at a “GDR seminar” devoted to “questions of finance.”Footnote ⁷⁰ The Handelskammer's activism was not lost on Swiss commerce officials in Bern. A report submitted by a lead official of the Swiss Federal Office for Foreign Trade (Bundesamt für Aussenwirtschaft) noted with approval that the purpose of Grossauer's seminar was to establish a much-needed counterweight to West German financiers.Footnote ⁷¹ Presented on Asada stationery, Grossauer's list of speakers included East German minister-president Lothar de Maizière's right-hand man for economic matters, state secretary Martin Dube; Eberhard Engel, co-organizer of the Asada-sponsored February gathering in East Berlin; and several individuals whom Meyer-Marsilius had met in East Berlin in January 1990 through Holger Bahl, including Heinrich Gramer, director general of the GDR's Handelsbank (known to insiders as Schalck's “house bank”); Karl-Heinz Baron, commercial attaché in East Germany's embassy in Bern; and Dieter Prietzel, state secretary in the Ministry of Economics engaged in East German foreign trade matters from the mid-1950s to 1990. Participants at Grossauer's Zunfthaus seminar learned of his plans to expand Asada's operations in East Berlin; that month, Grossauer and his colleagues launched the Asada Business Consulting Group there. Grossauer's team of financial auditors and accountants focused on incorporating East German enterprises, a task to which the Treuhand (and Vontobel's EC Consulting Group) had begun to devote significant attention. The Asada Business Consulting Group also sought to insert itself into the business of winning restitution for the Swiss owners of properties in East Germany before the country's absorption into the Federal Republic.Footnote ⁷²

Sensing commercial possibilities in the “faltering East-West commerce” to which Germany's federal government had signaled its commitment, in January 1991 Grossauer set up a “clearinghouse” for goods and services produced in eastern Germany and bound, with financial assistance from the federal government, for East European markets. Asada's exchange was a private-sector attempt to take up activities recently carried out by East German foreign trade officials including Meyer, Beil, Gramer, and Prietzel.Footnote ⁷³ It was not successful. Still, it is worth noting that, in promoting the clearinghouse, Grossauer joined forces with a Swiss public relations firm, Klaus J. Stöhlker & Partner. Stöhlker, who had been the public relations mastermind behind the rise of Switzerland's Schweizerische Volkspartei (Swiss People's Party, SVP) during the 1980s, chose former East German state secretary Dieter Prietzel as his (and Grossauer's) lead consultant in Berlin.

The Handelskammer's monthly newsletter devoted coverage to Grossauer's moves after joining the Handelskammer—his establishment of a consultancy within Asada, attention to restitution claims, the clearinghouse for eastward-bound goods and services, and a partnership with a Swiss public relations firm showcasing Prietzel.Footnote ⁷⁴ At the same time, the Handelskammer moved forward on more conventional initiatives to expand its radius in eastern Germany. These measures, most notably an investor guide and seminar in Zurich, are important in grasping how the Handelskammer sought to leverage its ties among the Swiss, GDR, and FRG economies in the service of the German Treuhand. In June 1990, Handelskammer vice director Manfred H. Gutermuth published a guide tailored to the interests of potential Swiss investors.Footnote ⁷⁵ Titled “Cooperation Exchange Switzerland/GDR,” Gutermuth's publication included short entries profiling businesses in both countries. Updated monthly, this catalog was available from the Handelskammer in Zurich and the Treuhand in Berlin; it served as the basis for a Handelskammer database.Footnote ⁷⁶ As for the Handelskammer's ties to Vontobel, these received a boost in December 1990, when the moderator of Bahl's Saxony seminar, Manfred Herr, left the Handelskammer after twenty-one years to accept a new position as a deputy director with Vontobel Holding. His first act there was to orchestrate a gathering of more than four hundred participants in January 1991, featuring two speakers from the Treuhand, including a member of the Treuhand's supervisory board.Footnote ⁷⁷ Citing their engagement with the Treuhand's leadership, Herr and the Vontobel managing board member responsible for the new consultancy, Hans F. Vögeli, contacted the Treuhand's Wolfgang Klinz and informed him that Vontobel's plans to engage directly in the privatization of Treuhand companies required his attention. Vontobel's move bore fruit almost immediately: in late June 1991, it was enlisted by the Treuhand to promote mergers and acquisitions, joint ventures, and direct investments.Footnote ⁷⁸ Herr and Vögeli were able to reach out to Treuhand managing board member Klinz because the Handelskammer had recently invited him to serve as the keynote speaker at yet another Zurich investor seminar.Footnote ⁷⁹ As it happened, Herr and Gutermuth had arranged this event prior to Herr's departure to Vontobel EC Consulting Group. Klinz, as Herr and Vögeli knew, was favorably disposed to grant their request for a meeting in Berlin because, during the late 1980s, he had served on the management board of Swiss energy management concern Landis & Gyr. At least equally importantly, from 1991 to 1994 Klinz was simultaneously on the board of both the Treuhand and the Handelskammer.Footnote ⁸⁰

In early autumn 1991, Herr and Vögeli arranged a “Treuhand workshop” in Zurich allowing potential investors and financiers to liaise with those leading Germany's privatization drive in the East.Footnote ⁸¹ In October 1991, the Treuhand's Breuel selected the Handelskammer, and not the Vereinigung, as its official Swiss representation, ignoring the recommendation submitted by a further, and very influential, Swiss foreign trade association, the Schweizerischer Handels- und Industrie-Verein (today economiesuisse).Footnote ⁸²

The Vontobel EC Consulting Group, a tiny offshoot of the prestigious Zurich private banking house, had in the meantime set up offices in Düsseldorf, from where Vontobel ran projects on behalf of the Treuhand. The Vontobel consultants felt that a powerful arrow in their quiver was their “Initial Audit for the New German States.” Capitalizing on the bank's ties to the German privatization authority, Herr and his colleagues proposed to clarify for potential investors the circumstances under which arrangements with East German entities—a purchase, a joint venture, or another form of cooperation—made business sense.Footnote ⁸³ To share knowledge about objects of interest to buyers and sellers, Vontobel's Düsseldorf-based consultants offered training seminars to mid-level public utility managers, an approach that the Swiss consultancy had developed with the Handelskammer at Ambassador Birrer's suggestion. Vontobel's focus was water treatment, a business characterized by steady demand, little or no competition, and generous infrastructure subsidies.Footnote ⁸⁴ The joint Vontobel and Handelskammer training seminars were not aimed just at East Germans. Czech, Latvian, and Slovak water specialists also received instruction, with funding provided by a Swiss foreign development authority, the Schweizer Osthilfe.

Vontobel's relationships with public-sector authorities in Germany drew upon the Handelskammer's legwork, which in turn arose from sources that Bahl, Grossauer, and other East German investment strategists had cultivated in intra-German commerce. Extensive cooperation with the GDR during the 1970s and 1980s laid much of the groundwork for Swiss engagement in eastern Germany's privatization from 1990 onward. Knowledge of the old regime was initially very valuable, but it came with a limited shelf life, a fact East Germans were among the first to grasp. Even for those with impeccable East German trade credentials, starting over presented considerable challenges. An example is Herbert W. Goulnik, well known to Swiss diplomats owing to his directorship of the commercial affairs section of East Germany's embassy in Bern until 1986 and deputy directorship of the GDR-FRG Trade Association (Handelsverein); he was now director of the newly minted Treuhand Consult GmbH. Goulnik's efforts to recast himself as a private-sector consultant were weighed up directly against his socialist past, and he was regarded by Swiss diplomats with both curiosity and suspicion—as the Swiss consulate in Berlin noted in September 1991 with a touch of distaste, perhaps Goulnik's “old-boy networks” (alte Seilschaften) might cancel socialism's stigma for future Swiss investors.Footnote ⁸⁵

Contacts from the old regime worked best when complemented by both outstanding ties to the Federal Republic, such as those enjoyed by the Handelskammer, and fresh contacts within the governments of the new, eastern federal states. Western Europeans enjoyed obvious advantages, especially German speakers. In eastern Germany, Vontobel made the most of these strong suits by taking yet another page out of the Vereinigung's playbook. The Vereinigung's director, Kögler, had gone out of his way to cultivate ties to the economics minister of the federal state of Brandenburg, Walter Hirche.Footnote ⁸⁶ Accordingly, in November 1991, Vontobel and the Handelskammer hosted high-level meetings in Zurich for a delegation visiting from Thüringen and headed by the state's minister-president Josef Duchač. His economics minister, Jürgen Bohn, accompanied by business leaders from the state, extended this initial contact by continuing their journey to Basel, St. Gallen, and Thurgau. Sponsorship from Vontobel and Lufthansa permitted the Handelskammer to waive fees for two hundred participants.Footnote ⁸⁷ A follow-up meeting in Thüringen in 1992 engaged Duchač's successor as minister-president, Bernhard Vogel, along with the two directors of Thüringen's state development agency. The Treuhand's formal representative in Switzerland, Fritz Leutwiler, also joined the event, with the Schweizerischer Bankverein (a predecessor of today's UBS) serving as its sponsor. Breuel, for her part, supported business development with a visit in February 1992 to the World Economic Forum meeting in Davos and a talk to financiers in Zurich.Footnote ⁸⁸

Swiss Criticism (and Praise) for the Treuhand

The Vereinigung was thus denied the opportunity to serve as the Treuhand's first port of call in Switzerland and thwarted by the Handelskammer and its powerful banking allies. It increasingly found itself adding a voice of protest to the privatization authority's chorus of critics. During the summer of 1992, the board of the Basel-based association was seeking to publicize its knowledge of a failed sale to the country's largest furniture manufacturer involving the Treuhand's Suhl branch office.Footnote ⁸⁹ A written reply from Breuel in September 1992 threatening to pursue legal action did little to resolve matters; even the intervention of the German ambassador in Switzerland and Liechtenstein, Werner Graf von der Schulenburg, appears to have been only partially successful in calming the waters. On the contrary, members of the Vereinigung's board acerbically drew the German ambassador's attention to their “statutory duty” to defend Swiss members.Footnote ⁹⁰

The Handelskammer did not share this negative evaluation of the Treuhand's sales efforts. Peter Stüber, Meyer-Marsilius's successor as Handelskammer president, conceded in May 1993 that the privatization agency was facing more than its share of difficulties but nonetheless insisted that its accomplishments deserved lasting respect. Under Breuel's leadership, Stüber noted, the much-maligned Treuhand had privatized more firms every day than Margaret Thatcher's government had in twelve years.Footnote ⁹¹ The featured speaker at the subsequent annual meeting of the Handelskammer, former German minister of the interior Wolfgang Schäuble, echoed Stüber's praise, highlighting the work of Treuhand representative Leutwiler and the professionalism of the Handelskammer.Footnote ⁹²

The business case for collaborating with the Treuhand was less clear. In a public statement in the Treuhand's monthly newsletter, Vontobel's deputy director, Manfred Herr, insisted in late 1991: “The Treuhand is better than its reputation. And most of its employees are more qualified than its critics. If it didn't exist, someone would have to invent it.”Footnote ⁹³ On the other hand, in later years, Hans Vontobel, Meyer-Marsilius's old boss at the Handelskammer, regarded his bank's consulting engagements on behalf of the Treuhand as unsuccessful. A recent short history commissioned by Vontobel concedes that attempts to marry consulting with investment banking fell flat.Footnote ⁹⁴ Sold at the end of 1993, Vontobel's EC Consulting Group in Düsseldorf produced little more than red ink for the deep-pocketed private bankers, as even an in-house publication of the late 1990s admitted.Footnote ⁹⁵ Annual reports reveal that the consultancy's major client in 1992 and 1993 was the Treuhand. Despite some sales executed on behalf of the German privatization agency, EC Consulting was struggling by the end of 1993 owing to the “growing absence of West German subsidies” and “waning enthusiasm on the part of western investors.”Footnote ⁹⁶

For the companies headed by Grossauer and Bahl, association with the Handelskammer also contributed little to bottom lines. The early 1990s presented fresh opportunities for both entities, not so much in East Germany as in eastern Europe. In 1994, Grossauer dissolved Asada, folding it into another Grossauer firm, Aurico Finanz AG. Grossauer's activities thereafter are currently difficult to trace, but Bahl's next steps at Eurasco are better documented. The largest stockholder in Eurasco at the end of 1990 was the Bank for Foreign Trade of the USSR with 14.5 million Swiss francs. The stockholders also included smaller Soviet entities, along with the West German Landesbank Rheinland-Pfalz, the Metallgesellschaft, and a notable newcomer, the insurer Allianz (all three with 10 million Swiss francs each).Footnote ⁹⁷ Three of Eurasco's five managing directors were Russian; the only German national was Kurt-Dieter Neubert, who had served as Intrac's finance director prior to joining Eurasco for two decades. In January 1991, Eurasco was touting plans to launch an insurance enterprise. Bringing together capital from the Soviet Union, the Federal Republic, and Switzerland, the new Eurasco venture targeted customers across eastern Europe from its Vienna office. The idea was to unite the capital and expertise of Zurich insurance and Germany's Allianz with contacts supplied by an entity well known to Bahl and Neubert: East Germany's foreign trade reinsurer, DARAG (Deutsche Versicherung- und Rückversicherungs AG).Footnote ⁹⁸

The best sources of information currently available on Eurasco are housed in the German Federal Archives. Most of these flow from due diligence carried out by a Swiss law firm tasked by the German Ministry of Finance with untangling Eurasco's businesses. Among its discoveries was that the German government held a 2 percent stake in Eurasco through its ownership of Intrac. Throughout the 1990s, the Treuhand and then its successor, the Federal Agency for Special Matters Relating to Unification (Bundesanstalt für vereinigungsbedingte Sonderaufgaben), claimed to be trying to remove this asset from its books. But selling 4,000 shares of Eurasco proved a challenge: although the state of Rheinland-Pfalz managed to dump its shares in 1994, federal authorities still held their stake in Eurasco in the early 2000s. Even a February 1997 decision by the Swiss Federal Banking Commission to approve Eurasco's banking application,Footnote ⁹⁹ an auspicious moment to sell, failed to prompt the Treuhand's successor to call its brokers. By the end of the decade, Intrac's liquidators were holding a Swiss banking asset of dwindling value as one Russian bank after another collapsed. Bahl, for his part, appears to have anticipated a historic market downturn: in early 1998, he stepped down as Eurasco's director.Footnote ¹⁰⁰

Persisting Pasts—Comparing Austrian to Swiss Engagements in Germany's East

Often trade with foreigners during the early 1990s was grounded in socialist-era commercial activities that united select politicians, civil servants, and business interests across former Cold War divides. Switzerland was in this respect by no means unique. The clearest parallels are with neighboring Austria. In both countries, the Treuhand chose as its emissary a banker. Unlike the central banker Leutwiler, however, who immediately delegated day-to-day responsibilities to the enterprising Handelskammer in Zurich, the Treuhand's “roving ambassador” in Vienna, commercial banker Gerd Graenz, actively cultivated investors. Graenz's contacts flowed from ties to socialist leaders like those maintained by Bahl and Grossauer. In November 1989, Graenz's office was in East Berlin, where he was the formal representative of the Creditanstalt, then the most important Austrian bank.Footnote ¹⁰¹ Forty-eight hours after the Berlin Wall fell, Graenz was drafting suggestions to expand the Creditanstalt's commercial engagement in reforming eastern Germany. Graenz addressed these plans to the chief executive of the Creditanstalt, Guido Schmidt-Chiari, sharing a copy with KoKo chief Schalck-Golodkowski.Footnote ¹⁰² Graenz remained in Berlin until early 1991; thereafter, he moved to Vienna, where in November of that year Breuel introduced him as her agency's first special representative at an event held in the Creditanstalt's headquarters and presided over by Schmidt-Chiari. Remarkably, Breuel stressed that Graenz was especially qualified to serve as her Austrian mediator owing to contacts he had acquired while setting up the Creditanstalt's presence in East Berlin during the late 1980s.Footnote ¹⁰³

Recently declassified files from the Austrian Ministries of Economic and Foreign Affairs reveal the balancing act that Austria, like Switzerland, adroitly managed between West and East German interests in 1990. Whereas the Swiss Handelskammer and Vereinigung scrambled to establish contacts in East Germany based on Bahl's and Grossauer's recommendations, Austria (like France) had a number of state-owned businesses, including still-majority-state-owned banks like the Creditanstalt, actively engaged in trade with East Germany's socialist government during the 1980s.Footnote ¹⁰⁴ Austria's trade ties, like Switzerland's, to the Federal Republic were far more important than those to the GDR. However, Austria's formal links to the East German regime extended back to the 1950s. Its embassy in East Berlin setting up a commercial attaché in 1970, a post Austria's largest business association took up as its own two decades later. In late January 1990, the head of this office, Stephen Kuzmich, reported to East Germany's minister for science and technology his government's ardent wish to bolster East German sovereignty for as long as possible.Footnote ¹⁰⁵ Kuzmich and others sought to extend East Germany's life span in order to maximize commercial arrangements formalized by Austrian chancellor Franz Vranitzsky during his last visit to East Berlin two weeks after the fall of the Berlin Wall in late November 1989. Among the most important of these arrangements involved the expansion of electricity delivery from the majority-state-owned Austrian Electricity Works (Österreichische Elektrizitätswirtschafts-AG) to the KoKo concern Intrac.Footnote ¹⁰⁶ Ironically, only a few months after Kuzmich's letter, such Cold War–era ties appeared to yield more headaches than commercial advantages for Austrian state-owned companies owing to the rapid deterioration of market conditions in eastern Germany. Nonetheless, Austrian connections to the socialist GDR remained significant. Austrian firms, particularly state-run enterprises, stood to take losses as many East German industrial conglomerates were thrust into hard currency markets, a state of affairs for which Austria's economics ministry sought assurances from Bonn that it would obtain some form of compensation.Footnote ¹⁰⁷ Negotiating with representatives of unified Germany's Ministries of Finance, Economics, and Foreign Affairs, Austrian trade officials sought indirect compensation for losses incurred by East German ties: citing a clause in the unification treaty between West and East Germany designed to mitigate the effects of East German industry's collapse on the state-run enterprises of the socialist nation's trading partners (a measure taken above all to lighten blows to the economy of the Soviet Union), Austrian Ministry of Economics officials secured advanced notice of tenders planned by the Treuhand. This enabled a new commercial attaché in Berlin and Treuhand representative Graenz to parlay agreements reached by Austrian chancellor Vranitsky and Modrow in late November 1989 into knowledge about the Treuhand's privatization plans.Footnote ¹⁰⁸ Profiles of firms slated for immediate privatization by the Treuhand in Berlin and the Ministry of Finance in Bonn were forwarded to Austria's ambassador to Germany, Herbert Grubmayr. These insights were then dispatched to the Ministry of Foreign Affairs in Vienna and decision-makers in the Ministry of Economic Affairs.Footnote ¹⁰⁹ As late as mid-1994, Austrian companies were seeking to profit from their government's special “consultation rights.” They did so not only to obtain advance notice of Treuhand sales but also to secure public contracts on behalf of newly privatized eastern German firms sold to Austrians. One such transaction involved the Austrian defense contractor Steyr Mannlicher and a Treuhand firm that it had purchased in Suhl; the aim was to sell assault rifles to the German Federal Ministry of Defense. Steyr Mannlicher's unsuccessful bid mobilized Austrian economics minister (later chancellor) Wolfgang Schüssel and German economics minister (and former Treuhand board member) Günther Rexrodt.Footnote ¹¹⁰

The Treuhand's Embrace of Anglophone Finance—Contrasting British and Swiss Investments

Pressure applied by business advocates in East Berlin, consultation rights secured from the federal chancellor's office in April 1991, and Treuhand representative Graenz's ties to finance, East and West, helped Austria to soar past almost all competitors, save the Swiss and British. Austrian and especially British investments attained greater relative importance from mid-1991 onward. Britain had far fewer commercial ties to the East German regime, so the bulk of its engagements came later than Alpine (and also Dutch and French) competitors. Although the particulars of each investment case matter, what is striking in many instances—as in British Petroleum's failed bid to take over the Leuna refinery works and Minol filling stations—is the existence of ties to Schalck's KoKo network, especially the Intrac trading company. The success of Britain's first major investment in East Germany, to offer a lesser-known example, Readymix's acquisition of a cement works in Rüdersdorf, thirty kilometers from Berlin, can be traced to the personal intervention of Prime Minister Margaret Thatcher. As Readymix's president John Camden acknowledged in his thank-you letter to Thatcher, the successful bid drew on groundwork laid by officials of the United Kingdom's Department of Trade and Industry. The story does not, however, end there. Equally important in this acquisition were the ties that Readymix's West German subsidiary had cultivated with the East German cement works since the late 1960s.Footnote ¹¹¹ Encouraged by his first-hand knowledge of market possibilities, acquired through the subsidiary's socialist-era transactions, Camden set aside concerns regarding the absence of balance sheets, future pension responsibilities, restitution claims, and environment costs.Footnote ¹¹²

Britain's engagements ultimately point to contrasts with those of central European nations with deeper ties to both East and West Germany. Britain expanded its role in the post-GDR economic landscape in conjunction with the Treuhand's embrace of the financial services industry under Breuel's leadership. The turn to financial solutions ultimately enabled the United Kingdom—after unsuccessful attempts to acquire the East German airline and secure a significant piece of eastern Germany's gas distribution—to catapult ahead of most European competitors, apart from Switzerland.Footnote ¹¹³ The appointment of the Treuhand's ambassador in the United Kingdom, former energy secretary and later British Gas consultant Peter Walker, coincided with the Treuhand's decision to subsidize financial corporations’ minority shareholdings in Treuhand companies. Investment banks touting their experience of 1980s privatizations in Britain ran the gambit from high-profile entities such as Goldman Sachs and Deutsche Bank subsidiary Morgan Grenfell to largely forgotten purveyors of capital. Notable among the latter was an “East German Investment Trust” run by the Anglo-German entity Ermgassen & Co. This trust's Berlin representative was Wolfgang Rauchfuss, who had previously served as GDR minister for materials management, deputy chair of the Council of Ministers, and member of the SED's politburo. Rauchfuss's involvement as an investment mediator points to the fact that, like the Swiss, UK-based investors were not without their own ties to GDR authorities, albeit fewer than Alpine competitors.

Financial architects, for their part, demanded that the Treuhand guarantee a minimum return to draw in institutional investors such as pension funds and insurance companies. Such “liquidity aids” required the German federal government to retain a stake in funds until assets were purchased and the funds in question disposed of. Package deals with venture capital and investment funds frequently ensured generous returns for investors, while the federal government was responsible for absorbing the impact of shutdowns on eastern Germans, providing generous unemployment benefits, and dealing with the media flak attracted by its embrace of expensive outsiders to manage tasks largely unforeseen only months earlier. Meanwhile, through “private placements” with institutional investors of its bonds, the Treuhand and its banking allies sought to appeal to large-scale investors, especially pension and mutual funds but also central banks. Less than a year after they had opened, Treuhand representations in New York, London, Tokyo, and Zurich, as well as “road shows” featuring key board members (often Breuel) in Amsterdam, Brussels, Hong Kong, Luxembourg, Taipei, Singapore, and Vienna, were seeking access to capital markets. Greater attention to credit needs within the Treuhand may have encouraged its leadership to look at the social costs of Germany's rapid political merger and sudden deindustrialization through the eyes of lenders increasingly based abroad. Breuel emphasized that foreign investment was flowing into eastern Germany in December 1992 “in spite of acts of violence directed at foreigners,” a reference to antimigrant riots that had roiled the Baltic port city of Rostock in late August 1992. The Treuhand's Swiss representative voiced a similar appraisal, elevating the opinion of American bond-ratings agencies subject to little public oversight and unseen investors above physical violence and anti-Semitic actions. “The danger in acts of anti-immigrant violence and anti-Semitism” (a reference to acts of vandalism directed against Holocaust memorial sites, notably an arson attack at Sachsenhausen in the city of Oranienburg north of Berlin) lay not so much in frightening off individual investors, Fritz Leutwiler in Zurich asserted: the reason violence against foreigners had to be taken “very, very seriously” was the agency's dependence on “highly sensitive financial markets,” a reference to the placement of Treuhand securities.Footnote ¹¹⁴