(FORTUNE Magazine) – THE NEWS struck Lutz Maier-Rehm with the thunk of Cupid's arrow. He was listening to the radio last February in his hometown of Eisenach, then part of East Germany, when he heard that Adam Opel, a subsidiary of General Motors, planned to build a network of East German auto dealers. Maier-Rehm, 45, already had cars in his heart. His grandfather founded the local Opel dealership back in 1925. But the Communists had no use for auto dealers, and by the time Maier-Rehm got into the business they had downgraded it to a repair shop, which was eventually expropriated. Was it possible that now, with the return of capitalism, Maier-Rehm could sell Opels again? He drove across the nearby West German border and grabbed the first pay phone he could find. Four weeks later he had the franchise. A month after that he put a couple of Opels on display in the yard of the repair shop. Some 10,000 car-starved citizens showed up to ogle, and 60 placed orders. A sporty dresser by East German standards, with lively eyes and a quick smile, Maier-Rehm has been scrambling ever since. He bought the repair shop back from the state, added a showroom, purchased a $40,000 computer system, and launched a mail campaign for customers -- activities unheard of in the East just a year ago. Also unheard of: He rarely gets home before 7 P.M. ''We're 40 years behind the West and I notice it every day,'' he says. ''Psychologically, it weighs on you. There's so much stress trying to catch up all at once.'' Events in united Germany are moving at Autobahn speeds. In the year since the Wall came down, the freshets of freedom have poured forth into this long- suppressed society. Conversations with East Germans often include the still awestruck observation: ''A year ago we could never have spoken like this.'' Shops are newly filled with Sony VCRs and Procter & Gamble detergents. Citizens have gone to the polls in three free elections, and a fourth will be held December 2, the first all-German vote in 57 years. Still, times are hard. In what used to be called the German Democratic Republic, industrial production is collapsing, unemployment is rising, and the future is filled with angst. But make no mistake, Germany's eastern third is set to imitate the economic miracle that the West began with the Marshall Plan and Ludwig Erhard's currency reform of 1948. The benefits to Europe and the world will be enormous. The significance of all this is far larger than the rebirth of one Germany, though that alone means the fusion of 16 million people with 62 million of their sisters and brothers to create Europe's most powerful economy by a mile. Coupled with the Soviet Union's decline as a hegemonic state, Germany's unification compels a rethinking of how to preserve the Continent's peace and security. The days of 19th century-style nation wars seem over; the NATO- Warsaw Pact confrontation abates. Now come more ambiguous challenges: How to deal with increasingly strident ethnic conflicts -- the Slovaks vs. the Czechs, the Turkish minority vs. the Bulgarian majority in Bulgaria, the Rumanian majority vs. the Hungarian minority in Rumania, the boiling caldron of Yugoslavian animosity that pits Serbs against Albanians, Slovenes, and Croats. How to get Europe to take a larger role in ''out of area'' disputes like Saddam Hussein's Kuwaiti incursion, which are beyond NATO's charter but have a direct effect on the Continent's well-being. Resolution of these issues will require the vigorous participation of a Germany whose partition has protected it from having to assume leadership. Haunted by their own dark past, the Germans are being dragged reluctantly out of that sheltered position to face the responsibilities of power. German unity will quicken the march toward a unified Europe. Germans want this acceleration, and so do their neighbors. In the current jargon, debate about the European Community's future focuses on whether to ''deepen'' or to ''widen.'' Deepening means speeding up the drive for a single currency, harmonizing disparate legal systems, and otherwise strengthening economic and social bonds. Widening means extending the community from the 12 present members to include such countries as Austria, Sweden, Switzerland, and the East European states. In time, both outcomes are likely, with deepening first, widening later. A free market of 325 million people is poised to become a free market of 500 million, the world's most formidable concentration of economic power. For Germans the magnitude of the challenge is daunting. They say the infrastructure of the East was ''destroyed twice,'' once in World War II, a second time by Communism. The highways are narrow, shoulderless, and ill- maintained. Only 9% of households have telephones. Apartments, owned by the state, rent at 1935 prices and show the dilapidation such rents imply. Though the pollution of air, water, and soil is infamous, nothing can adequately prepare a visitor for the sight. Travel south on the road from Leipzig to Chemnitz and you gradually find yourself under a forbidding cloud that's too high to be fog, too low to hold rain. It emanates from the stacks of an electrical plant burning sulfurous brown coal stripped from the ground surrounding it. Open pits yawn grotesquely as far as the eye can see. In the distance, other plants, other stacks, other plumes of smoke. Some of these monsters have been shut recently, putting people out of work. An easy call, says Arndt Haubold, a Lutheran pastor in Leipzig: ''Would you make 500,000 people sick just to keep 10,000 working?'' THE VERY vastness of the task ahead cries opportunity. Why did West Germany explode with growth in the Fifties, Sixties, and Seventies? Because three crucial elements coalesced: a people (educated, striving Germans), a system (a market economy), and a challenge (a nation that had been destroyed, if only once). How these same elements react with one another in the crucible of united Germany will provide one of the great unfolding stories of the 1990s.

East Germany has distinct advantages over the other countries of the old East bloc. The biggest is that as a country it no longer exists, which means it doesn't have to manage the wrenching transition from a command economy to a democratically ruled free-market society on its own. As part of Germany, it is now a member of the EC, with full access to that market and a convertible currency. It also has a partner willing to invest billions. The first part of the job will be to surmount the traumas of transition. The cold bath treatment that thrust East Germany into a market economy on July 1 -- monetary union, the loss of protection for its industry -- instantaneously rendered its enterprises impotent. Labor productivity stands at about 40% of the Western level. A pitiful but all-too-typical example of the East's backwardness: If you have never seen a 1950s auto plant in operation, visit Automobilwerk Eisenach, which makes the 1.3-liter Wartburg sedan. The Wartburg is the better of the cars manufactured in East Germany; the ludicrous Trabants, many of which run on an oil-gasoline mix like an outboard motor, are even worse. Wartburg chassis are pushed around on dollies and mated to the autos' bodies in a way modern producers haven't used for decades. When East Germany was isolated from competition and was a titan of East bloc industry, Wartburgs were in such demand that you might have had to wait on a list for 16 years before being able to buy one (you needn't have bothered specifying color). Today, sales in Germany have fallen to zero. East Germans want ''real cars,'' as they call used Volkswagens, Opels, and Fords. What market is left for the Wartburg? Poland, Hungary, and the U.S.S.R., and these only because Germany agreed to subsidize sales until the end of the year. With this story being repeated in plentiful variation across the land, the economy's deep troubles raise dangerous specters. Production in the East has fallen 51% in the year ended last August. Unemployment has risen from the official socialist nil to an estimated 14%. Of the 8,000 companies that used to be part of the Kombinats (state conglomerates), perhaps one-third will go bankrupt, while the rest need radical surgery. Pastor Haubold's church, in Leipzig's old city, provided sanctuary to dissidents who defied police last year by lighting candles and marching through the streets for freedom. Now half the workers Haubold talks with fear freedom will cost them their jobs. Philipp Von Wilcke, deputy editor of the Leipziger Tageblatt, a local paper, argues that these anxieties cannot be calmed by promises of a better life in two or three years. ''There is a huge ripple running through society,'' he says. ''It could lead to aggression and radicalization. We have to be careful. Germans are always ready to swing left or right.'' Tino Schwierzina, former mayor of East Berlin, has nightmares of mobs of unemployed petitioning for help he is powerless to give. The most urgent matter now? ''The economy,'' says Schwierzina. ''The economy. The economy.'' EXPERTS IN THE WEST take a brighter view: They see the economy bottoming out by the middle of next year, followed by a long steady expansion. Ulrich Schroder, an authority on the East who is senior economist at Deutsche Bank, thinks that as services and construction pick up next year, unemployment will top out at perhaps 25% to 30%. Meanwhile, the government will lavish resources on tiding people over. Unemployed workers will receive 63% to 90% of their old wages. In all, transfer payments to the region will equal an astounding 25% of its total output. By contrast, Marshall Plan aid to West Germany came to less than 4% of GNP. The phenomenal philanthropy of their countrymen may render East Germans the first consumers in history to experience rising income while their economy collapses. Harbingers of growth abound. Compared even with other Communist countries, East Germany's employment has been concentrated in gargantuan enterprises. In the first eight months of this year, however, a new entrepreneurial spirit has shown itself in the birth of 167,000 small and medium-size businesses like Maier-Rehm's dealership. Schroder projects that small and midsize companies should grow fast enough in the next few years to create jobs for 25% of the current work force. As its economic engine revs up, Germany will spur growth in Europe and provide oomph for economic expansion elsewhere. With the U.S. and British economies feeling woozy, what better time for a blast of oxygen? Deutsche Bank officials believe that once the East has turned the corner in mid-1991, its economy can expand 7% to 10% annually for years while the West grows 3%, giving united Germany a robust rate of around 4%. With Germany's central bank as independent and inflation hating as any on earth, many economists believe that this rapid expansion can be managed without unleashing an upward price spiral. Competition from Western goods pushed East German consumer prices down 5% so far this year. Coffee and color TVs dropped 80%. That trend can't continue, but economists look for Germany- wide prices to rise no more than 3.5% next year, vs. 2.6% for the first eight months of 1990. Whether it gets the money from tax increases or borrowing, Germany can afford to spend on its poorer part. The West starts out in tiptop shape: Its budget deficit has been low (less than 1% of GNP last year), savings have been fat (13% of disposable income), and its trade surplus almost embarrassingly high ($72 billion in the last 12 months). Now the government could save money as it reduces the combined German armies from 600,000 to 370,000. It will phase out such expenses of division as ''tremble money,'' subsidies to people living in what used to be stressful conditions along the Wall in West Berlin. Germany's foreign investment and trade surplus will shrink as it directs resources inward. That will create chances for other countries to serve markets that Germany can no longer satisfy. AMERICAN corporations doing business in Europe will benefit hugely from Germany's growth. They have invested practically as much in the country ($20 billion) as all Germany's EC partners combined. European operations are the saving grace of many U.S. companies. General Motors earns 43% of its profits in Europe; IBM, 68%. With competitors rushing in, managers need to decide yesterday how to play the transformation of the East. The opportunities fall into three categories: -- Consumer goods. Long-deprived Ossies (for Ost, the German word meaning East) lag leagues behind the Wessies in the goods they own. But bankers report an unexpected surge of black-market money flowing out from under Eastern mattresses. Little wonder that West German retail sales shot up 15% in July and August, largely due to demand from the East. Sales of new and used cars are expected to rise from about 170,000 in 1989 to as much as one million this year. To the big brand names will go the spoils. While their bodies were in the East, Ossies had their minds in the West. Years of TV ads produced 90%-plus awareness for Procter & Gamble's German brands Ariel (detergent), Meister Proper (cleanser), and others. Says Bernd Beetz, P&G's general manager in Germany: ''For a consumer company this market is ideal. We're pretty bullish.'' -- Infrastructure and the environment. Over the coming decade, economists figure that bringing roads, bridges, sewers, airports, railroads, and other public works up to Western standards will cost some $160 billion. Germany plans to spend $35 billion on a worldclass phone system for the East. Repairing environmental damage and installing pollution controls will come to around $140 billion. A ton of business beckons for Caterpillar, Komatsu, Siemens, and others. Years of abuse left Ossies hypersensitive about damage to the environment. Factories dumped toxic wastes willy-nilly; ditto Soviet army camps. In a perverse consequence of the pell-mell rush to markets, East Germany's recycling system has been overwhelmed. Families used to earn half a month's rent by saving paper, textiles, glass, and cans that they would sell to recycling centers. But when virgin paper flowed in from the West, recycled paper could no longer compete. The same for bottles, which used to be uniformly sized and reused under the old regime. Now the varieties are too bewildering to recycle. The challenge for the future, in Germany and elsewhere, is to fashion market mechanisms that will work for the environment. -- Services. Like other Communist states, East Germany emphasized industry, leaving services undernourished. Few of the region's lawyers or accountants have any experience in Western business practice. Among foreign firms rushing in to fill the void: accountants Price Waterhouse and KPMG Peat Marwick, investment bankers Salomon and CS First Boston, management consultants McKinsey & Co. and Boston Consulting Group. PLEADING for investment, East Germans especially covet attention from non- Germans, hoping they will bid up the price of assets and labor. Economically and politically, the Easterners feel smothered by their rich know-it-all brothers from the West who have swooped in with stoop-to-conquer attitudes. West German publishers have acquired interests in newspapers accounting for most of the East's circulation. Wessies captured many offices in October's state elections, including the top post in Saxony -- a bit like Mario Cuomo winning the California governorship. Incentives are attractive: Government subsidies may pay up to one-third of a capital investment, not counting German soft-loan programs (one of them a lineal descendant of the Marshall Plan). But the welcome mat doesn't mean you should stroll right in, check in hand. Smart managers are investing in ways that make sense for serving all Europe -- indeed, the entire global market. Procter & Gamble is furiously training a sales force to blanket East German stores and has bought a small company that makes apple juice that it will market in the West. But P&G plans to erect no detergent or disposable diaper plants in the East. It will serve the region from a world-scale detergent factory and two diaper plants in West Germany.

GM and Ford have set out on strikingly different courses. Both are building East German dealer networks, but Ford will not invest in auto assembly there, while GM will. Though Ford knew Automobilwerk Eisenach was looking for a partner, Duncan Rooke, its director for East Germany, never visited what he calls its ''inefficient collection of antique plants.'' Berlin is about six hours by truck from Ford's factory in Cologne and the company figures it can serve the market from there. Says Rooke: ''You have to think about world markets as a whole, as the Japanese have taught us all too successfully.'' General Motors, by contrast, is already assembling Opel Vectras at Eisenach -- not at the decrepit old plant but in a much newer building outside town -- where it hopes to produce 10,000 a year. The company is short of supply in Europe and plans to increase capacity there by 150,000 annually, with Eisenach a possible site. For Opel such a deal could be a three-way winner: Commercial self-interest would blend with ideological objectives, yielding public relations benefits to boot. For starters, Chairman Louis Hughes says, companies that produce in a market tend to benefit from local loyalty and sell more than those that don't. Hughes adds: ''This is a chance that comes once a century. East Europeans know that Communism doesn't work. We've got to prove that capitalism does, that it brings high levels of prosperity. We can only do that if we invest and start creating jobs.'' How good will the people who take those jobs be? Their habits, after all, have been shaped by 45 years of a command economy in which individual initiative was minimized, political acceptability maximized, and incentive for performance nonexistent. Tino Schwierzina, the former East Berlin mayor, says Ossies will miss ''the charm'' of work East German style. With no pressure for productivity, suppliers often missed deliveries, shutting down production lines and giving employees time to shop or shoot the breeze. People formed tight networks of trusted friends (free of informers, they hoped) who would stand on grocery lines for one another, scrounge on the black market for one another, cover on the job for one another, and perform all those tedious tasks that needed to be done to make life under Communism bearable. Now that the market is at work, the argument goes, life will be more efficient but, oddly, less intimate. Well, yes, and prison camps spawn fast friendships too. For years socialists used to talk of finding a Third Way -- a path between Communism and ! capitalism, sometimes called capitalism with a human face. You don't hear that in East Germany much nowadays. They have seen the future -- it's capitalism, West German style -- and it works. Hermann Hanf, 69, director of Automobilwerk Eisenach's car museum, has endured a lot since his first days on the job 45 years ago. He acknowledges that Communism has worn down the work ethic but adds, ''The craftsmen are still here. Their approach to work will change. Everyone wants to earn good money. If you don't work, you don't earn. Everyone, even the smallest child, knows that.'' The adults may be the problem. Maier-Rehm, Eisenach's hustling new Opel dealer, shows the sort of drive and organizational ability we have come to think of as classically German. But he says he looks around at friends and fellow citizens and sees people living in fear, lacking the courage to start a business, to try something new. ''We can thank Herr Honecker for that,'' he says sadly, a scowl touching his brow as he recalls the repressive Communist Party chief. Maier-Rehm admits he is afraid, too. His mother and father died some years ago, and he wishes he could talk with them about all the unfamiliar decisions he confronts. But he is also excited: ''My parents are up there somewhere saying, 'It's good what my son is doing.' '' For those coming out from under the stifling blanket of Communism, simply doing business, in freedom, brings joy. The joy of picking once-forbidden fruit.

CHART: NOT AVAILABLE CREDIT: SOURCE: DEUTSCHE BANK CAPTION: HOW GNP WILL GROW

CHART: NOT AVAILABLE CREDIT: SOURCE: INSTITUT DER DEUTSCHEN WIRTSCHAFT CAPTION: COMPARING THE GERMANYS THE EAST LIKED ITS COMPANIES BIG . . .

CHART: NOT AVAILABLE CREDIT: SOURCE: DRESDNER BANK CAPTION: COMPARING THE GERMANYS FAVORING INDUSTRY OVER SERVICES . . .

CHART: NOT AVAILABLE CREDIT: SOURCE: DEUTSCHE BANK CAPTION: COMPARING THE GERMANYS AND THE CONSUMER CAME UP SHORT