At midnight, the East German mark ceased to exist. The Deutsche Mark became the sole legal tender in the German Democratic Republic. Citizens could exchange up to 4,000 Ostmarks at a 1:1 rate; savings beyond that converted at a 2:1 rate. The move, called the Währungsunion, was a unilateral economic annexation. It was the first step of formal reunification under Article 23 of West Germany's Basic Law.
This action mattered because it made political union irreversible. The East German economy, already fragile, could not compete with Western productivity. Overnight, East German factories saw their cost base skyrocket while their goods became less competitive. The decision prioritized political speed over economic stability. It was a calculated gamble by West German Chancellor Helmut Kohl to prevent a mass exodus from East to West and to lock in reunification before Soviet opposition could solidify.
A common misunderstanding is that the two Germanies simply merged. The economic union was a West German administrative takeover. The Treuhandanstalt, a trust agency, was created to privatize or liquidate over 8,500 state-owned East German enterprises. The process resulted in massive deindustrialization and unemployment in the east, the social costs of which are still felt today.
The lasting impact is a Germany still marked by an economic and psychological divide. Billions of Deutschmarks, and later Euros, flowed east in transfer payments. The rapid integration created a template for shock therapy economics later applied in post-Soviet states, with similarly mixed results. The date marks not a celebration, but the precise moment the GDR's economy was switched off.