Eastern Germany weathering crisis better than West

BERLIN, June 10 (Reuters) - Germany's eastern states are withstanding the financial crisis better than western areas, helping the former communist region to close the gap with the wealthier West 20 years after the fall of the Berlin Wall.

Despite soaking up billions of euros in subsidies, Germany's eastern states still suffer from higher unemployment and lower productivity and per capita wealth. Migration is also a big problem.

However, in his annual "unity" report, minister Wolfgang Tiefensee, who represents the eastern states in Chancellor Angela Merkel's cabinet, said Germany's deepest recesssion since World War Two was having an unexpected side effect. "So far, the East has not been hit as hard," said Tiefensee, unveiling the report. "The East is on the road to convergence with the West."

The Berlin Wall fell in November 1989 but formal reunification between the one-time Soviet ally East Germany and the western-backed West Germaay took place a year later in October 1990.

A positive recent factor was the bigger proportion of smaller firms in eastern states which are more flexible than big companies and less dependent on exports, which have slumped in the last few months, Tiefensee said.

He pointed in particular to the technology sector, where growth was higher in eastern states, especially in the solar energy branch which is strong there.

Tiefensee said that while unemployment had stayed roughly stable in eastern states in the last year, it had risen to 6.9 percent in May in western states from 6.4 percent.

Gross domestic product per capita has risen to 71 percent of the level in the West from 67 percent in the last eight years.

Government stimulus measures to help the economy withstand recession have also helped.

However, the divisions are still wide. Jobless figures are twice as high as in western states and long-term unemployment is a major problem.

Young people, especially women, tend to abandon their hometowns, leaving some areas as a wasteland.

"We have come a long way, but there is still a lot of work to do," Tiefensee said.

The goal was for eastern German states to catch up with the poorest western states by the end of 2019 when the "Solidarity Pact", a package of special aid, will end.

In 2006-08 alone, eastern states have received about 45 billion euros in subsidies for investment in the economy and infrastructure, Tiefensee said.

Although celebrations to mark the 20th anniversary of the fall of the Berlin Wall culminate in November and polls show most Germans support reunification, social differences between "Ossis", or Easterners, and "Wessies", or Westerners, persist.