economic challeneges

• treaty of versailles reparations damaged Germany's economy
• expenditure - gov spending
• gov spending rising as Weimar Republic had brought in welfare benefits and had to pay pensions for widows and veterans , compensate war victims
• gov had to paid compensation to people who lost land under versailles , gave cheap loans and subsidies to help industry
• marks lost value quickly due to inflation :

  jan 1918 - 8.9 marks to $1

  jan 1923 - 17,792 marks to $1
• german gov fell behind with reparation payments
• sum of reparations = £6.6 billion in 1921
• gov had to buy good or raw materials to meet reparation payments and had to print more money for gov spending
• impact of french occupation of the Ruhr:

  • as germany fell behind on their reparation payments , France invaded Ruhr
  • streseman ordered workers to stop working (passive resistance)
  • hyperinflation got worse - no income from ruhr
• rentenmark - introduced november 1923
• people had confidence in the new currency - Rentenmark
• cons of hyperinflation:

  • money lost all value
  • savings and incomes = worthless
  • monthly salaries = no value
  • affected mainly middle class
  • people sold heirlooms for money
• pros of hyperinflation:

  • foreign currency purchasing power soared
  • value of loans decreased
  • german gov benefitted - 150,000 million marks in debt = 15 pfennings in reichmark
• invasion of ruhr = 1923
• french and belgians shot 132 germans dead during ruhr occupation - removed 150,000 people from their region for refusing to obey orders
• motive behind invasion of ruhr :

  • germany couldn't pay france and belgium reparations
  • france and belgium dissatisfied and wanted to seize what was theirs from the germany economy
• streseman = ended inflation
• dawes plan:

  • reparations would be 1,000 million marks , then 2,500 million after 5 years and then vary according to germany's economic performance
  • allies got control of railways , reichsbank and customs duties
  • germany given 800 million loan from US to stabilise currency
• international economic agreements that helped Germany economy:

  • franco-german agreements on potash and aluminium
  • european cooperation on raw materials production
• right wing view of dawes plan:

  • right wing against war guilt and reparations
  • believed dawes plan achieved nothing
• young plan - introduced 1930
• the young plan reduced reparations by 20%
• young plan failed due to wall street crash in 1930 , money that supported the plan recalled
• locarno pact (1925) - pact with Britain , France , Germany , Italy and Belguim.

  • Germany recgonised borders with France and the demilitarisation of the Rhineland
• 1926 - League of Nations set up
• Kellogg-Briand Pact (1928) Germany and 62 other countries signed it

  • countries agreed to disarm or reduce armed forces and not use war to resolve disagreements
• support for extremist parties such as Nazis and KPD decreased due to growing support for Weimar Republic after the implementation of Streseman's policies
• 1925-29 , 100,000 homes built for workers
• 1927 - insurance system set up to help workers if they were unemployed or ill
• positives of golden year : economy

  • 1928 - production equalled that of pre WW1
  • 1928 - national income was 13% higher than in 1913
  • Chemical company IG Farben = largest manufactuer in Europe
  • 1.3 million unemployed - decreased every year
  • wages rose every year , 1927 - 9% , 1928 - 12%
• negatives of golden year : economy

  • unemployment never fell below 1.3 million
  • agricultural was in recession from 1927 , 1929 - outputs 75% less than 1913 levels