Urban shrinkage and resurgence in Germany

Introduction

The world is experiencing a continuous trend towards urbanisation. According to the UN (2014), 54% of the world population is presently living in cities, and this share is expected to grow to 66% by 2050. In Europe, the figure totalled 73% in 2014. Despite this trend, many cities have been suffering from economic declines and population losses and, at the same time, they have undergone economic transformation with symptoms of structural crises (Haase et al., 2014; Oswalt, 2006). According to Hollander et al. (2009), one in six cities worldwide was shrinking even before the US subprime mortgage crisis in 2007, while 40% of all European cities with more than 200,000 inhabitants experienced a population decline between 1960 and 2005 (Turok and Mykhnenko, 2007, 2008). The failure to achieve a timely and smooth post-industrial shift from traditional manufacturing to innovation-driven high-tech industries and modern business-oriented services, which was also triggered by relocation and polarisation of economic activities in a global context, has caused serious unemployment and outmigration problems in many urban areas, and also contributed to the gradual, worldwide rise in the number of shrinking cites (Friedrichs, 1994; Galster, 2012; Großmann et al., 2013).

Other determinants leading to urban shrinkage include counter-urbanisation caused by overcrowded city cores and suburbanisation, ¹ war, natural or human-made disasters, an ageing or low-fertility rate population, etc. (Beauregard, 2006; Ehrenfeucht and Nelson, 2011; Großmann et al., 2013; Haase et al., 2014; Kabisch et al., 2008; Lang, 2012; Lin, 2014; van den Berg et al., 1982). All these have weakened the economic power of cities and also created financial bottlenecks in maintaining their local infrastructure and quality of life. Consequently, the challenges related to vacant housing, uncompetitive local business firms, as well as poor infrastructure including communication and transportation system, schools and waste disposal facilities have rapidly emerged (Haase et al., 2014; Hollander et al., 2009).

Population loss is widely acknowledged as ‘the indicator of urban shrinkage, the tip of the iceberg [resulting] from underlying complex sets of causes propelling specific problems for urban development, typically listed as economic decline, demographic stagnation, decay or abandonment’ (Großmann et al., 2013: 221). More precisely Martinez-Fernandez et al. (2012) and Morrill (2014) assess the urban shrinkage as:

a multidimensional complex of demographic (e.g. aging and population loss), socio-economic (e.g. economic downturn, employment decline, and poverty [and crime] concentration), […] and physical processes and effects (e.g. infrastructure, housing or industrial deterioration and abandonment) in constant interaction and as unmistakable symptoms of a structural crisis at work. (Audirac, 2014: 28)

Furthermore, it is often argued that there is presently no single theory of urban shrinkage that encompasses a large number of heterogeneous urban decline factors (Richardson and Nam, 2014) and, for this reason, that ‘there is still a lack of conceptualisation and integration of shrinkage into the wider theoretical debates in human geography, town and country planning, urban and regional studies, and social sciences at large’ (Haase et al., 2014: 1519).

The East German urban shrinkage caused by economic and structural transformation after the 1990 unification has been the most pronounced and serious in Europe. This downturn has also been clearly manifested in ‘a vast supply of housing stock resulting from combined effects of low fertility rates, outmigration and a building and renovation boom encouraged by tax incentives in the 1990s’ (Großmann et al., 2013: 222). Yet the recent economic and demographic development has differed from one East German city to another (Bartholomae and Nam, 2014a; Franz, 2004; Gatzweiler and Milbert, 2009; Mulder, 2009; Rink et al., 2010; Steinführer and Haase, 2007). For example, Dresden and Leipzig have been better able to cope with the difficulties, and some middle-sized cities like Jena and Rostock, offering attractive jobs, historical centres and high-quality education facilities, have also been quite successful (Hospers, 2014).

In fact, comparable post-industrial transformations had started in Germany in the 1970s, leading to the shrinkage of several urban cores in the old industrial regions of its western part. Ruhr cities with traditional coal mining and steel industry had to carry out massive and painful structural reforms to enhance their competitiveness (Gatzweiler et al., 2003), while Bremen’s decline was primarily led by the collapse of the shipbuilding sector (Bartholomae and Nam, 2014a). Even by the end of the 1980s, most large West German shrinking cities were found in the northern part of Germany, whereas Munich, Frankfurt and Stuttgart in the South were growing fast (Dormhardt and Troeger-Weiß, 2009). But, although their population size is diminishing, the Ruhr cities have recently demonstrated that urban economic revival and smart growth is possible if there is a gradual shift in the sectoral structure from old manufacturing to more sophisticated high-tech industries and modern services, since the latter are generally acknowledged to have a stronger urban orientation (Kermer, 2007). This has undoubtedly been a long, uneasy development process, and it should continue in the future. Furthermore, the number of single adult households and DINKs (‘double income, no kids’: couples in work without children) has also been increasing. Such demographic trends and new lifestyles favouring city locations, coupled with demand for attractive urban amenities, have further reduced suburbanisation (Cox, 2014).

This article aims to contribute to the scientific discussion surrounding the crucial question of whether urban shrinkage can be straightforwardly assessed as a consequence of demographic changes without a greater regard to the role of the economy (Haase et al., 2014). It primarily concentrates on examining the interplay of structural transformation and deindustrialisation, economic decline and demographic change (Großmann et al., 2013), and deals with the parallelism of demographic and economic development in characterising urban shrinkage in Germany. In this context, we argue that using population change as the only indicator of urban growth and decline could also lead to less effective policy recommendations to combat urban shrinkage (Florida, 2013; Gottlieb, 2002).

As seen in several Ruhr and East German large cities, urban economic growth can also be achieved despite population declines (so-called ‘smart’/‘lean’ growth), in cases where the large-scale presence of modern industries and business services guarantees a recovery. Urban shrinkage in East Germany is frequently caused by a post-industrial transformation failure and, therefore, today’s marked policy orientation towards slowing the downsizing process of population (primarily via urban regeneration measures aimed at hindering suburbanisation and low core urban density) addresses the symptoms without adequately tackling the root of the problem. In a close combination with these already existing policy schemes, more ‘proactive’ industrial (structural) policy measures are urgently required in East Germany’s shrinking cities to achieve a rapid and better-targeted economic restructuring, i.e. to create a competitive manufacturing sector (endowed with new high-tech firms) and to foster growth interdependence with modern local services.

Identification of urban shrinkage in Germany: Economic vs. demographic perspective

Among regional scientists, population change has conventionally been the most widely used indicator to identify urban growth and decline (Hospers, 2014; Rink et al., 2012), since:

[firstly,] population change is an important consequence of urban conditions. Migration [can also be seen as] a response to differences in employment or the quality of life between [cities, which, in turn, leads to fierce competition among them]. Secondly, population change also exerts an important influence over urban economic conditions [because] sheer population size and deep labour pools increase agglomeration economies and productivity in terms of better realising both economies of scale and scope. Population downturns have certainly caused wider economic, financial and environmental problems for cities and their authorities, while shifts in population size affect local jobs through demand for consumer goods and [public] services, housing, schools, etc. (Turok and Mykhnenko, 2007: 167)

However, population change alone does not fully capture urban economic development (Florida, 2013). Focusing on the East German case, Franz (2004) highlights the existence of a loose relationship between demographic and economic development: with high unemployment rates a reduction in the ‘natural’ labour supply caused by the extra population decline will hardly limit the city’s growth, as the idle working population continuously remains huge in this area. Furthermore, ‘jobless’ urban growth, which is rather independent of the labour supply development in the same area, can be achieved if the city sharply increases its productivity (Bartholomae and Nam, 2014a; Berlemann and Jahn, 2013).

Urban productivity can be enhanced in various ways: through massive investment in human capital and R&D infrastructure; a proactive location policy (also via establishing technology parks) to attract high-tech industries and modern services combined with a ‘brain gain’; or through support for the creation of local innovation networks with modern industrial and service clusters that are linked with their national and international counterparts. All of these factors contribute to a better realisation of agglomeration advantages (Florida, 2013; Glaeser et al., 1992). In particular, the discussion of a productivity gap among East German cities has recently gained prominence in the vivid concept of a ‘lean city’, and ‘smart urban economic growth’ debates (Fuhrich, 2003; Lang and Tenz, 2003), since Germany expects a continuous decline in population size in the long-run – which could worsen demographic problems in shrinking cities (Bartholomae and Nam, 2014a). ²

Table 1 depicts the differences in real gross value added (GVA) development and population change of selected large German cities in the period of 1995–2012. Without neglecting the idea of the parallelism of demographic development and economic change (‘growth-with-growth’), but also with adequate consideration given to its methodological disputes mentioned above (‘growth-without-growth’ according to Gottlieb, 2002), four varied categories of urban development can be identified via simple comparisons of these two indicators, ³ as shown in Table 2:

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Table 1.

Real GVA and population changes in large German cities (1995–2012).

City		Real GVA (1995 = 100)									Population (1995 = 100)
		1996	1998	2000	2002	2004	2006	2008	2010	2012	1996	1998	2000	2002	2004	2006	2008	2010	2012
West	Bremen	98.3	100.6	102.7	106.2	106.2	108.2	108.3	102.4	104.0	99.9	98.9	98.2	98.8	99.4	99.7	99.6	99.6	99.5
	Cologne	100.0	101.8	100.5	103.2	101.5	102.0	102.4	102.9	104.5	99.9	99.7	99.7	100.3	100.4	102.5	103.1	104.3	106.1
	Dusseldorf	97.7	100.5	101.0	103.7	104.7	103.4	111.1	105.6	105.2	100.1	99.6	99.7	100.2	100.3	101.1	102.3	103.1	104.0
	Frankfurt/Main	102.3	99.1	105.1	107.6	107.6	108.0	107.2	103.6	103.2	99.6	99.1	99.5	99.0	99.5	100.4	102.3	104.6	105.8
	Hamburg	100.9	103.7	104.0	108.4	108.2	108.2	108.9	105.8	105.9	100.0	99.5	100.4	101.2	101.6	102.7	103.8	104.6	101.5
	Munich	99.6	101.9	105.2	107.0	106.1	107.4	105.1	107.5	113.5	99.2	96.2	97.9	99.9	101.0	104.7	107.3	109.5	112.3
	Stuttgart	100.4	99.8	101.6	110.1	109.1	109.9	102.2	101.9	105.6	100.0	99.4	99.7	100.5	100.9	101.4	102.5	103.6	102.1
Ruhr	Bochum	96.4	102.1	97.7	90.7	90.4	92.2	87.9	93.2	95.0	99.5	98.2	97.7	97.1	97.0	95.8	94.6	93.6	90.5
	Dortmund	96.7	99.2	96.8	100.9	107.5	103.2	105.0	105.9	111.2	99.7	98.8	98.4	98.7	98.3	98.1	97.6	96.9	95.5
	Essen	99.3	99.5	93.9	95.7	96.4	94.0	105.3	106.0	106.0	99.5	98.1	96.8	95.2	95.7	94.9	94.3	93.5	92.2
	Gelsenkirchen	104.2	105.3	109.0	99.8	103.0	108.3	108.5	111.2	110.6	99.3	97.6	95.7	94.4	92.8	91.6	90.0	88.6	88.5
East	Berlin	97.6	93.3	91.5	89.4	86.0	88.8	92.5	94.7	96.8	99.6	97.9	97.4	97.7	97.6	98.1	98.9	99.7	97.2
	Cottbus	101.9	101.2	101.5	97.9	102.4	96.7	96.0	93.0	89.4	98.5	94.7	89.9	86.4	84.2	82.2	80.6	80.8	79.1
	Dresden	103.7	101.7	105.4	117.6	128.4	125.3	119.9	117.5	113.7	98.8	96.6	96.4	96.9	98.4	101.9	103.4	105.6	106.0
	Erfurt	99.1	98.0	98.4	96.9	95.8	97.0	94.7	95.6	95.8	98.6	96.1	95.0	94.7	95.9	96.0	96.3	97.1	96.4
	Halle (Saale)	102.7	97.0	91.1	94.2	95.5	91.3	83.0	85.4	85.6	97.8	92.2	87.6	84.6	84.3	83.4	82.4	82.4	81.8
	Jena	109.1	114.2	126.0	126.6	127.6	137.5	136.3	144.6	159.9	99.2	98.1	98.8	99.5	101.4	101.4	102.3	104.0	105.8
	Leipzig	101.8	95.2	95.9	98.8	98.8	104.8	103.3	105.9	114.5	98.1	95.3	94.9	95.2	95.9	97.5	99.2	100.6	100.2
	Magdeburg	101.1	103.7	98.6	100.2	99.0	99.9	101.0	103.8	101.5	97.4	92.9	90.3	88.6	88.0	89.2	89.3	89.9	89.2
	Rostock	102.5	94.3	98.5	92.1	93.6	91.9	99.4	101.9	104.5	97.1	91.2	88.1	87.1	87.5	87.8	88.4	89.1	89.2
	Schwerin	102.9	97.5	90.5	91.6	92.2	91.7	91.2	90.3	91.4	96.8	91.7	88.3	86.1	84.7	84.0	83.3	83.0	79.6
	Weimar	94.1	89.8	91.6	89.9	90.2	90.1	91.6	96.4	99.4	99.8	100.3	100.5	103.1	103.8	103.8	104.5	105.4	101.8

Source: Own calculations based on data from Statistisches Bundesamt.

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Table 2.

Classification of selected large German cities according to changes in GVA and population size (1995–2012).

	Demographic decline/stagnation	Demographic growth
Economic decline/stagnation	Shrinking Cities Bochum** Berlin, Cottbus, Erfurt, Halle and Schwerin***	Population Magnets Weimar***
Economic growth	Smartly Growing Cities Bremen* Dortmund, Essen and Gelsenkirchen** Magdeburg, Rostock and Leipzig***	Growing Cities Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart* Dresden and Jena***

Note: * Traditional large cities in West Germany; ** Selected Ruhr cities; *** Large cities in East Germany.

Sources: Bartholomae and Nam (2014a); Statistisches Bundesamt; Table 1.

To verify whether cities are still suffering from the post-industrial transformation process that started in the 1970s, three groups of large cities were selected for the investigation: (1) the traditional, large West German cities such as Hamburg, Bremen, Düsseldorf, Cologne, Frankfurt, Stuttgart and Munich; (2) some Ruhr cities like Bochum, Dortmund, Essen and Gelsenkirchen; and (3) the East German cities that were strongly struck by the post-socialist shock after Germany’s reunification in 1990, namely Berlin, Cottbus, Dresden, Erfurt, Halle, Jena, Leipzig, Magdeburg, Rostock, Schwerin and Weimar.

During the period of 1995–2012, all the large West German cities investigated (except Bremen) experienced demographic expansion and economic growth at the same time, while Dresden and Jena are also considered growing cities. In spite of the temporal downturn caused by the 2009 crisis, the real GVA growth was most remarkable in Jena (∼60%), followed by in Dresden (∼15%; see Table 1). Dresden and Jena achieved also a significant population expansion (∼6%). Among the West German growing cities, Munich’s performance was most remarkable in the same period – the city achieved around 14% of real GVA growth and 13% of population growth (Table 1).

Bremen and most of the Ruhr cities investigated show a homogeneous development pattern: between 1995 and 2012 these ‘old’ post-industrial transformation cities experienced a demographic decline combined with economic growth. Dortmund and Gelsenkirchen in particular demonstrated a rapid real GVA increase of ∼11%, although the number of inhabitants declined by ∼12% in Gelsenkirchen and by ∼5% in Dortmund. Magdeburg and Rostock in East Germany also belong to this ‘smartly growing’ group that experienced a clear decrease in population of ∼11%, but achieved moderate real GVA growth of 2% to 5%, respectively (see Table 1).

Six of the large German cities analysed can be defined as the ‘shrinking cities’: namely Bochum in Ruhr area together with the post-socialist transformation cities of Berlin, ⁴ Cottbus, Erfurt, Halle and Schwerin. Unlike other aforementioned Ruhr cities, Bochum failed to create endogenous, real GVA growth (∼−5%), whereas the city’s population also decreased by around 10%. Berlin’s demographic change of −3% was accompanied by a real GVA loss of higher than 3% in the period 1995–2012. With its rate of −14%, Halle suffered most seriously from the economic loss that emerged in line with the population decrease of 18%. Schwerin’s marked economic decline of approximately 9% was combined with a large scale population reduction of around 20%, while Cottbus suffered not only from a severe population decline of around 21% but also from a serious economic decline of 11%. Weimar is the only city among the 22 large German cities considered in which the real GVA declined marginally, but the population growth rate amounted to around 2% in the years 1995–2012 (Table 1). ⁵

Comparison of Halle’s structural problems with those of other German cities

Comparison of Halle’s economic structure with that of other German cities

As mentioned, Halle’s economic and demographic shrinkage is a structural problem. In this regard the development and specialisation of various manufacturing sectors combined with the different degrees of dominance of individual services deliver crucial information on the key reasons why urban shrinkage continues in many East German cities. The cobweb diagrams in Figure 1 compare Halle’s employment structure (in terms of the share of employees subject to social insurance contribution) to that of other selected German cities in 2013. Beside the restructuring and transformation achievement of these cities in the last 20 years, they also reveal the cities’ current economic specialisation and competitiveness.

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Figure 1.

Comparison of employment structures in Halle and selected cities (2013).

Compared to the growing cities Dresden and Jena, Halle’s employment share for the ‘manufacturing’ sector (∼5%) was significantly low: the corresponding share reached c. 12% for Dresden and over 18% for Jena in 2013. ¹⁰ Moreover, Halle’s extremely high employment share for ‘education, health, social and other public and personal services’ of over 37% (compared to 29% in Dresden) seriously calls into question whether the city has recently been smoothly transitioning to a modern service society. Together with Halle, shrinking cities in East Germany include Cottbus and Schwerin: Cottbus and Schwerin boast higher employment shares for ‘public administration and defense, social insurance’, but their general employment structures were very similar to that of Halle in 2013, with a substantial share of employment lacking in manufacturing and modern market services.

An analogous comparison of Halle’s employment structure with that of the selected ‘smartly growing’ Ruhr cities reveals a clear difference: Essen, Gelsenkirchen and Dortmund demonstrate an employment structure similar to that of Dresden and Jena. In 2013 all these growing Ruhr cities and Dresden were equipped with a stronger manufacturing sector combined with a larger share of business and market services than Halle. ¹¹ This implies that urban recovery is quite strongly affected by the performance of an individual city’s manufacturing sector, whereas an ideal combination of modern industries and services is a prerequisite for urban growth.

Some political responses to urban shrinkage in East Germany

Growth-oriented vs shrinkage-oriented policy

In recent years, cities have increasingly gained significance as major drivers of innovation, creativity and productivity growth in advanced industry and modern service-oriented economies (European Commission, 2006; Florida, 2013). In this context Turok and Mykhnenko (2008) argue that, firstly, the improved generation of agglomeration advantages (especially for firms) is required for the stoppage of urban shrinkage and to strengthen the economic role of cities. Such advantages are generated from the concentration of high-tech industries and modern business services and the establishment of more intact clusters and connectivity among them within the city area, which reduce production costs and make access to and exchange of business information and qualified labour easy. Secondly, the innovation activities carried out by local firms provide the basis for urban recovery and also guarantee the structural reform and long-term economic growth in cities (see also Wamser et al., 2013). ¹² A third policy option for the resurgence of urban economies is a strengthening and better exploitation of the role of the ‘consumer city’, since:

the concentration of major entertainment venues, convention centres, museums, opera, art galleries or specialised centres of [higher] education, [sport] and health [in large cities traditionally] offer unique benefits to consumers [e.g. by providing varieties of shopping opportunities, restaurants, hotels, etc.), with spin-offs for growth through business and domestic tourism and talent attraction. (Turok and Mykhnenko, 2008: 56)

Furthermore, in response to the challenge of urban shrinkage, policymakers have options to adopt ‘active’ growth-oriented or ‘rather passive’ shrinkage-oriented approaches (Wiechmann and Pallagst, 2012). Most American cities have focussed on the former strategies, including smart economic growth (Lin, 2014), whereas more European cities have embraced the latter policy option. Hospers (2014) argues that the best strategy for shrinking cities in the EU is to accept the shrinkage and to improve the quality of life for the remaining residents. A large number of shrinking East German cities appear to be no exception: instead of reforming the urban economic structure more rapidly and stimulating productivity and economic growth, they search continuously for appropriate ways to stop the negative demographic trends and to maintain their population size. Hence, most public promotion schemes in the former GDR have focused on the creation of quality-of-life cities in terms of regeneration, redevelopment and revitalisation of city cores aimed at solving vacant housing problems, making historical centres more attractive and urban neighbourhoods greener, more compact and sustainable (Glock and Häußermann, 2004; Herfert, 2002; Lötscher, 2005).

Table 3 shows the aims and financial resources of typical federal projects that have recently been implemented to support Germany’s shrinking cities. Taking the case of Cottbus as an example, Table 4 shows how the urban rehabilitation programmes applied to the shrinking cities in East Germany are coordinated and financially promoted by the various tiers of government.

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Table 3.

Federal subsidies for urban reconstruction and improvement of city centres in Germany.

Project title	Major aims	Amount of subsidy (million euros)
		2009	2010	2011	2012
Social City (Soziale Stadt)	To stop the downward spiral in disadvantaged neighbourhoods and to enhance living conditions in cities under the consideration of unemployment rate, education facilities and other infrastructure deficits, etc.	105	94	29	40
Urban Reconstruction as an Adaption to Demographic and Structural Change (Stadtumbau für die Anpassung an den demographischen und strukturellen Wandel – Stadtumbau Ost / Stadtumbau West)	To improve the quality of life and work in cities and municipalities of which measures consist of revitalisation of inner-city areas and preservation of old buildings, as well as removal of vacant houses for other purposes, etc. in shrinking cities	East: 121 West: 96	East: 95 West: 86	East: 83 West: 75	East: 82 West: 71
Preservation of Centrally Located Monuments in Eastern Germany (Städtebaulicher Denkmalschutz für den Erhalt historischer Stadtkerne und Stadtquartiere in Ostdeutschland)	To preserve the historical city centres and to improve the general conditions of monuments	East: 85 West: 30	East: 70 West: 30	East: 62 West: 30	East: 63 West: 29
Active Inner-City Development (Aktive Stadt- und Ortsteilzentren für die Innenentwicklung)	To enhance economic and cultural functions of cities and city centres which guarantees better quality of life and work	43	86	90	93
Urban Regeneration and Development Measures (Städtebauliche Sanierungs- und Entwicklungsmaß-nahmen)	To repair old buildings and their surroundings, as well as to regenerate urban areas and neighbourhood centres	East: 45 West: 45	East: 27 West: 27	East: 25 West: 25	East: 16 West: 16

Sources: Bartholomae and Nam (2014b); German Federal Ministry of Transportation, Construction and Urban Development: http://www.staedtebaufoerderung.info/cln_033/StBauF/DE/Home/home__node.html?__nnn=true; Mulder (2009).

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Table 4.

Classification of urban reconstruction programmes for shrinking cities in Brandenburg (East Germany) according to different tiers of government: An example.

	EU	German federal government		State Brandenburg	Municipalities in Brandenburg (e.g. Cottbus-Sachsendorf-Madlow)
Programme title or name	Cohesion Funds ‘Cohesion Regions’ (2007–2013)	Social City (Soziale Stadt)	Urban Reconstruction as an Adaption to Demographic and Structural Change (Stadtumbau für die Anpassung an den demographischen und strukturellen Wandel – Stadtumbau Ost)	Future in Urban Districts (Zukunft im Stadtteil – ZIS), 2000–2006	Network for Each Other and Together (Netzwerk Füreinander-Miteinander)
Objectives	Economic and social cohesion: rectifying structural imbalances in less-developed EU regions	To stop the downward spiral in disadvantaged neighbourhoods and to improve the living conditions in cities in consideration of unemployment rate, education facilities and other infrastructure deficits, etc.	To improve the quality of life and work in East and West German cities and municipalities of which measures consist of revitalisation of inner-city areas and preservation of old buildings, as well as removal of vacant houses for other purposes, etc. in shrinking cities	Preventing further decline and degradation of ‘problem districts’ in cities in Brandenburg	Improved networking among actors in the city district
Eligible regions and areas	Inter alia: all of East Germany	331 urban districts in Germany (74 in East German cities)	East Germany	16 urban district in Brandenburg	Sachsendorf-Madlow district in Cottbus
Strategic approach	Structural and regional development	City district management, encouraging participation of local population and interest groups	Integrated urban development	City district management, encouraging participation of local population and interest groups	Networking, facilitating communication and cooperation among different actors

Sources: Bartholomae and Nam (2014b); http://www.nipp.brandenburg.de/nipp_programme/programme_zis.html; Lötscher (2005).

Conclusion

Shrinking cities are generally defined as cities facing population losses and additionally undergoing economic transformation with symptoms of a structural crisis. This study investigates the interplay of structural transformation and deindustrialisation, economic decline and demographic change. We question the widely applied parallelism of demographic and economic development to characterise urban shrinkage and suggest that the usage of population change as a single indicator tends not only to hinder the correct classification of shrinking cities but also to lead to less-adequate consideration of structural and industrial weakness when designing policy measures against urban shrinkage. This aspect is particularly important when characterising urban shrinkage in the East European transformation countries including East Germany. For the classification of German shrinking cities, the population data and the real GVA data on the city level for the period 1995–2012 are adopted, whereas their recent employment structures are compared to identify their industrial specialisation.

The experiences in some Ruhr cities and East German cities like Erfurt, Rostock and Magdeburg demonstrate that urban economic growth can be achieved via the substantial presence of modern industries and business services, although population size declines – see Florida (2013) for similar results from the US city classification. More precisely, the resurgence of these German cities is largely attributed to their success in structural transformation and achievement of ‘smart’ economic growth triggered by productivity growth. Shrinking cities like Berlin, Halle, Cottbus and Schwerin are now obviously suffering from a structural problem caused by the failure of post-industrial transformation. Beside the case of Weimar, which has become the ‘magnet’ of retirees exploiting its reputation as a historical and cultural centre, the current policy-based efforts to slow the population downsizing and suburbanisation via urban regeneration (including city-core revitalisation) measures (aimed at creating quality-of-life cities) are not sufficient for the resurgence of these shrinking cities in the long run.

To stop the shrinkage and achieve smart growth, a more proactive, growth-oriented industrial policy can be considered, which is designed based on the individual needs and initiatives of German shrinking cities and which also considers their specific economic structure and location quality, including infrastructure endowment. Turok and Mykhnenko (2008) suggest three ways to achieve urban recovery: (1) an improved generation of agglomeration advantages through concentration of modern industries and creating intact clusters; (2) rapid structural reform guaranteeing long-term growth via enhanced local firms’ innovation performances; and (3) the better exploitation of the role of consumer city (via concentration of e.g. entertainment and sport facilities). Also following this idea, Germany’s urban resurgence policy should be more strongly concentrated on the creation of endogenous growth potentials in the shrinking cities, which enables urgent developments of healthy local economic structure equipped with high-tech SMEs and modern business services, and stimulates firms’ R&D and innovation efforts within a better-established local innovation system.

In Germany, urban regeneration in less-favoured areas has been promoted by the Joint Task for Improving Regional Economic Structure in cooperation with the EU cohesion policy. Our recommendations for an ‘additional’, better-targeted industrial policy against urban shrinkage are also in accordance with the EU’s cohesion-policy objectives, emphasising the knowledge-based initiatives and the goals of the Lisbon agenda of 2000–2010, and the current Europe 2020 strategy, by promoting growth and employment in less-favoured EU regions.