The history of Berlin over the past 16 years—more exactly, since the dramatic fall of the Berlin Wall in November 1989—offers an almost classic example of how wild dreams conceived in a moment of euphoria can so easily collapse into a mood of grudging resignation.

Overnight, the divided city, which had previously had two town halls—one in East Berlin, the other in the southwest-central district of Schöneberg in West Berlin—was administratively reunited in the redbrick Rotes Rathaus, located east of Unter den Linden, not far from the Nikolaikirche, the city’s oldest church (13th century), in the historic center of Berlin.

Galvanized by Chancellor Helmut Kohl’s visionary promise that, within four years, an industrially backward East Germany would be transformed into a “flourishing landscape,” a municipal coalition government composed of Christian Democrats and Socialists embarked enthusiastically on a policy of massive reconstruction.  Famous architects from all over the world were invited to descend like eagles on the still war-ravaged wastes of this new El Dorado in the hope that they could help to make the city—with its 3 opera companies, 5 symphony orchestras, 150 museums, and umpteen theaters (some guidebooks have spoken dithyrambically of no fewer than 500)—what Berlin was supposed to have been in the “crazy” 1920’s: the cultural capital of Europe.  What the city, with its three-and-a-half million inhabitants, could not provide in funds would, it was assumed, be generously provided by the government of a Federal Republic now numbering 80 million citizens.

The acme of this euphoric self-intoxication was probably reached in the years 1999-2000, when, in an effort to revive the once-bustling, bus-tram-and-automobile-crammed Potsdamer Platz—the Picadilly Circus of pre-World War II Berlin—DaimlerChrysler “unveiled” a soaring complex of 19 skyscrapers, designed by architects from half a dozen countries.  Shortly afterward, in June 2000, Sony opened a rival center of its own, a modernistic glass-and-steel structure with a 425-foot transparent “tent roof” (strung on steel rods and hawsers), calculated to awe visitors to its Film Museum.

So much for the architectural achievements, of which there were many others.  The question that had, by this time, raised its ugly head was, Who is going to pay for all these marvels?  For, in the meantime, none of the city’s soaring expectations had been realized.  It had been hoped that Germany’s major banks would make a beeline for a reunified Berlin, but this did not happen, most of them continuing to regard Frankfurt as the Federal Republic’s financial capital.  It had confidently been assumed—since its founder, the pioneering electrical engineer and telegraphic inventor Werner von Siemens, had first established his famous firm in 19th-century Berlin—that Germany’s foremost electronics corporation would return to its original home.  Instead, Siemens remained stubbornly attached to its main headquarters in Bavaria.  Nestlé even chose to close down a local chocolate-making subsidiary, while the city of Berlin lost 250,000 manufacturing jobs.

It had been expected that the gradual transfer of the federal government’s departments from tiny Bonn to huge Berlin would result in a desperate need for office space and a real-estate boom.  Exactly the opposite occurred—a 30-percent decline in real-estate values and tens of thousands of square meters of empty office space.  A spectacular example, which any stroller can now view on the Kurfürstendamm, is the 16-story skyscraper, designed like a ship’s prow by Chicago architect Helmut Jahn, to “jazz up” the Kranzler Eck (site of the once-famous “Kranzler Corner” café of pre-war Berlin), 11 of whose glass-paned floors remain conspicuously empty.

In the summer of 2001, the Bankgesell-schaft Berlin, largely owned by the city, was bankrupted in a scandal caused by bogus deals and corrupt real-estate loans.  Klaus Wowereit, a clever Social Democratic politician, took advantage of the resultant chaos to forge a radically new alliance with the PDS—the Party of Democratic Socialism (a post-1989 successor to East Germany’s once all-powerful Communist Party)—riding to a crushing victory over the conservative CDU and CSU in the municipal elections of October 2001.  Appalled by this lurch leftward, Chancellor Gerhard Schröder intervened to forge a new makeshift coalition, from which the irate neocommunists were excluded.  Klaus Wowereit, however, survived.  As a result, Berlin, like Paris, now has a homosexual mayor—who is only too happy to have the Potsdamer Platz, now the site of an important annual film festival, used for huge international demonstrations of “gay pride.”

Crippled by debts—some estimates put the figure at 46 billion euros—the city government has continued to be plagued by scandals.  A controversial Memorial for Murdered Jews, consisting of a bleak undulating surface of 2,700 unmarked slabs, had hardly been inaugurated near Unter den Linden’s administrative center in 2003 when it was revealed that the special varnish used to protect the slabs from being defaced by antisemitic graffiti had been manufactured by a Berlin firm that had once provided the Nazi regime with poison gas for its death camps.

The latest “scandal” concerns a scheme to restore the 17th-century Stadtschloss, built at the eastern end of Unter den Linden by Berlin’s Hohenzollern rulers, which Walter Ulbricht’s communist regime decided to demolish in 1950 in order to create a large proletarian parade-ground honoring the memory of Marx and Engels.  For lack of funds, the original plan for a total reconstruction of the castle has been shelved.  Instead, a new, basically bogus “palace” is to be built behind a baroque trompe-l’œil façade.  But even for this task of “national [in fact, Prussian] recognition,” the needed funds have not yet been found.

The leftward lurch in Berlin’s 2001 municipal elections foreshadowed by some four years what was to happen in the federal elections of September 2005.  In those elections—which cost Gerhard Schröder’s Social Democrats 29 Bundestag seats; the Christian Democrats, 34; and their (essentially Bavarian) Christian Socialist allies, 13—the spectacular victor, with a dramatic advance of 51 parliamentary seats, was a newly founded Linkspartei (“Party of the Left”).  It was this hastily concocted coalition—of, on the one hand, disgruntled “Ossies” (East Germans), led by a clever Berlin lawyer, Gregor Gysi, who kept denouncing the scandalously high rate of unemployment in the Federal Republic’s five eastern provinces (21 percent, compared with 11 percent in the West), and, on the other hand, Socialist “defectors” fed up with Chancellor Schröder’s “moderation” and demanding radically anticapitalist “soak the rich” policies, led by a veteran Saarland troublemaker named Oskar Lafontaine—that made it impossible for either of Germany’s two main parties to obtain an absolute majority (more than 300) in a Bundestag of 614 deputies.

The paradoxical result of this stalemate was that the two principal nonvictors—Gerhard Schröder’s repudiated SPD (222 Bundestag seats) and the unsuccessful CDU-CSU alliance (226 seats)—were forced to accept a new “Grand Coalition,” which both parties basically detested.  It was small wonder that the ensuing negotiations—just who was to get this or that ministerial portfolio, including the top job of chancellor—lasted two full months before Angela Merkel, the chairman of the CDU, was finally approved on November 22 by a Bundestag majority of 397 deputies as Germany’s first woman chancellor.

That day was also an historic moment for postwar Germany, because, for the first time, the chancellor came from one of her eastern provinces.  The daughter of a Protestant clergyman from Hamburg who, in 1947, was asked by his superiors in the Lutheran church to move to the East German Land of Brandenburg in a missionary effort to maintain the status of the imperiled Evangelical Church in the adverse, atheistic environment of a communist state, Angela Kasner (her maiden name) Merkel has never been a charismatic orator—unlike her opponent Schröder.  Her initial interest in science (physics and quantum chemistry) was typical of a sober, hard-working and pragmatic disposition.  But it is precisely these undramatic, plain-speaking virtues that have now made her so popular in a country saturated by opportunistic rhetoric and glib promises.

Even her critics—they included Edmund Stoiber, the once powerful but now crestfallen minister president of Bavaria—have had to admit that the 51-year-old Merkel is a skilled and stubborn negotiator.  Although forced to grant her Social Democratic “partners” a majority of ministerial posts in the new “Grand Coalition” government, including the key post of foreign minister, she lost no time staking out her claim to be the future architect of German foreign policy by undertaking a whirlwind tour of major European capitals—visiting Paris and Brussels the day after being chosen chancellor, London the next day, and Warsaw the following week.  By the time the heads of state met for a summit meeting of E.U. leaders in mid-December, Angela Merkel had transformed herself into the “rising star” among European politicians.

After restoring friendly relations with Washington (badly impaired by Schröder’s anti-American rhetoric during the Federal Republic’s 2002 elections) and displaying a new German firmness—notably at variance with her predecessor’s obsequious friendship with Vladimir Putin—during a visit to Moscow in mid-January, Merkel was able to establish herself in German public-opinion polls as the most popular chancellor the Federal Republic has known since the 1989-90 heyday of Helmut Kohl.

Whether this popularity will endure, along with the laboriously concocted “Grand Coalition,” remains to be seen.  One thing is certain: with the 51-year-old Merkel, and the 51-year-old Matthias Platzeck, the new leader of the Social Democrats, who also comes from East German Brandenburg, a new generation is coming to power that is markedly different from that of the 76-year-old Helmut Kohl, a Catholic Rhinelander, and of the 62-year-old Gerhard Schröder, from Westphalia.

What has not changed are the Federal Republic’s most intractable and urgent problems: a steadily increasing national debt; a perilously declining birthrate (1.37 per woman); a dependence on Russian gas; and, above all, a level of unemployment presently exceeding 11 percent in all 16, and about 21 percent in the five eastern, Länder (including Berlin) that must be reduced if a new generation of immigrant malcontents, mostly of Turkish or Kurdish origin, are to be dissuaded from embracing Islam as a desperate solution to their persistent economic woes.