From an earlier answer of mine
In short, reunification led to a near wholesale cashiering of the GDR's Nationale Volksarmee (NVA) establishment. Although the new Bundeswehr accepted some 20000 NVA personnel for the Armee der Einheit (Army of Unity), most of them were specialists or other individuals that could maintain the little Soviet equipment that Bundeswehr elected to keep. NVA officers above Oberstleutnant were particularly not welcome in the new German army as the Bundeswehr felt that these individuals had been ideologically compromised by the regime. Evidence of Stasi collaboration also became grounds for dismissal and the end of their careers. The NVA was very top-heavy in terms of officers, with an officer to enlisted ratio of 1:8, whereas the Bundeswehr maintained a ratio of 1:40. As such, the few NVA officers that remained in the Bundeswehr were dropped to the enlisted ranks as the Bundeswehr establishment saw NVA officers as performing the same functions as a Bundeswehr NCO. By about 2002, only about 5 percent of the Bundeswehr consisted of former NVA personnel.
This rather unceremonious dismissal of the GDR's armed forces had a good deal of support within Europe as Germany rushed to reunification. One of the preconditions for Soviet acceptance of German unification and Germany's continued NATO membership was that the new German state's armed forces would not exceed 375000 men under arms. In theory, combining the NVA and Bundeswehr created one of the largest armies on the European continent, and this was unpalatable Germany's neighbors as the memory of the Second World War still remained a sharp political issue in countries like France and the UK. The resulting 2+ 4 Treaty included provisions to limit German armed forces.
There was also considerable pressure within the FRG establishment to drastically draw back Germany's military strength. Maintaining a large heterogeneous military of Western and Soviet equipment would have been an expensive prospect when Germany was facing the serious issue of economic reunification. Aside from some advanced equipment like the MiG-29, the Kohl government saw little advantage in keeping this hardware and most of it was scrapped or sold to other states. Within the Bundeswehr there was a perception that the NVA operated on principles completely different than their Western counterpart. One of the ideological lodestones of the postwar Bundeswehr was Innere Führung (inner leadership),a philosophical-military concept developed by one of the architects of West German rearmament, Wolf Graf von Baudissin, in which a subordinate was supposed to keep his head and disobey orders if the situation warranted it. The Bundeswehr officer was to be a citizen-soldier who would not mechanistically obey the orders of a superior and instead defend the Federal constitution. In the estimation of the Bundeswehr leadership, the NVA's close relationship with the Soviets and the SED regime meant NVA soldiers lacked any concept of Innere Führung. The idea that the typical NVA soldier lacked a democratic ethos also reinforced the general condescension the Bundeswehr establishment held for their Eastern counterparts. The Bundeswehr was one of the strongholds of anticommunism within the FRG and its leadership did not really consider the NVA to be true German soldiers. The NVA's tutelage under the Soviets and its generally poor standards of hygiene and soldierly bearing among its conscripts made the NVA seem decidedly un-German soldiers in the eyes of the Bundeswehr who inspected their bases after reunification.
Although it is more than a bit churlish, especially after twenty-five years of reunification, it is a bit understandable given the Cold War background of the FRG bureaucrats when setting these policies. It was pretty much taken as a given among a number of Bundeswehr officers that the NVA was an auxiliary force of both the SED and Soviet Union instead of an institution fighting for German interests, and there is more than little truth to this aspersion. The NVA officers were among the state elite and there was a close integration between the SED and the NVA. The Bundeswehr leadership felt that if ordered to do so, the NVA would turn on the GDR's own civilian population and this was one of the great fears during the street protests of the late 1980s. The NVA's predecessor, the Volkspolizei actually did do use force against protesters in the 1953 uprisings and there was little indication that the NVA had fundamentally changed from being an instrument for SED rule in the intervening thirty-five years. Although there was some unrest in the ranks during the events of 1989, the NVA leadership remained committed to following the line towed by the SED. Strikes from the lower ranks of the NVA for better conditions and other grievances in 1990 strengthened the suspicions of the Bundeswehr that the NVA's officer corps' loyalty was to the departed regime and not Germany.
A number of NVA officer veterans have not exactly helped their case. In interviews, both NVA and MfS veterans often complain that they are scapegoats for the failures of the GDR and that they are the Jews of the reunified Germany. This exculpatory depiction of their place in the GDR glosses over the fact that the NVA officers were a state elite in a country characterized by perennial shortages of goods and services. Furthermore, the NVA was one of the buttresses for an unpopular regime and the threat of military armed force to quell mass dissent, even if never used in a major fashion after 1953, was one of the realities of life in the GDR. Comparing themselves to Jews is especially unsettling given the NVA officers' former elite status was real and verifiable and very much unlike the interwar antisemitic claims of Jewish wealth and influence.
In the end, the soldiers of the NVA were among the losers of reunification. Up to 2005, retired NVA officers were considered Gedient in fremden Streitkräften (a veteran of foreign armed forces), by the Ministry of Defense. This was a source of much grumbling for NVA veterans as it was a status that explicitly claimed they were not German soldiers. The Ministry of Defense later reclassified them as "soldiers serving not in the Bundeswehr", a status that still implies they were serving a foreign power. Nor can NVA officers officially use their retired rank as a title, außer Dienst (retired) in official correspondence, which is a prerogative of all retired Bundeswehr officers. Beyond the sting of official non-recognition, NVA pensions in the Berlin Republic are usually less than their counterparts and many NVA officers were forced to retire several ranks lower. Nor did the NVA have many vocal advocates in the reunified Germany. The NVA's unsavory association with the Grenztruppen and the Soviets in the public eye meant that it was much more difficult to apply Ostalgia to the East German military experience as it was for other aspects of East German life in two decades after unification like Vita Cola. Especially for the NVA officers, reunification has been a bitter pill to swallow.
Sources
Clarke, David, and Ute Wölfel. Remembering the German Democratic Republic: Divided Memory in a United Germany. New York: Palgrave Macmillan, 2011.
Herspring, Dale Roy. Requiem for an Army: The Demise of the East German Military. Lanham [u.a.]: Rowman & Littlefield Publishers, 1998.
Follow up question:
[1].What actually happened to the elite of the country? I am referring to Directors and Managers of Nationalized Enterprises. Did they retain any role post privatization in the Enterprises?
[2].In the Soviet Union, many of the Red Directors who were initially supportive of free market reforms turned bitter multiple failures. Did the same happen in East Germany?