reparations and the ruhr

• Reparations and the Ruhr

  Under the Treaty of Versailles, Germany had to pay £6.6 billion in reparations (payments to the victors) to the Allies. This was a huge burden and Germany found it hard to pay.
• Difficulty with paying reparations

  • The period of 1919 to 1923 was particularly difficult for Weimar Germany. Most especially because they were unable to pay their reparation instalments (fixed regular payments).
  • In 1922, the Weimar Republic stopped paying their reparation instalments (fixed regular payments).
  • In 1923, France and Belgium retaliated by seizing the Ruhr (German region) to take what they believed Germany owed in the form of coal and other goods.
• The seizing of the Ruhr

  • The Ruhr was the main industrial region in Germany.
  • The French and Belgians took control of all factories, mines and railways in the area.
  • The actions of the French and Belgians were legal in the eyes of the international community because of the Treaty of Versailles.
• The seizing of the Ruhr

  • The Ruhr was the main industrial region in Germany.
  • The French and Belgians took control of all factories, mines and railways in the area.
  • The actions of the French and Belgians were legal in the eyes of the international community because of the Treaty of Versailles.
• Hyperinflation

  After the Ruhr crisis, to help pay France and Belgium quicker, the Germans printed more money. This led to hyperinflation and had disastrous effects on the economy.
• Cause of hyperinflation

  • When money was printed, governments tied currency to a fixed value of gold.
  • But Weimar Germany did not have enough gold to match the amount of money it was printing.
  • This meant that the value of the German mark fell and that the price of goods increased rapidly.
  • This caused hyperinflation (price of everything increases extremely quickly).
  • Germany's war debts and the interest payments on these meant that they had debts worth 175% of their total national output (Debt: GDP of 175%). This is the same level as Greece in the Eurozone crisis.
• Consequences of hyperinflation

  • In 1918, a loaf of bread cost 0.6 German marks. By November 1923, it cost 201 billion German marks.
  • As prices rose every hour, people bought goods as soon as they were paid. This meant that they carried money round in wheelbarrows.
  • To get around the problem of hyperinflation, people used a barter system (trading items) instead of money.
• Social problems with hyperinflation

  • People with savings (especially the middle class) lost their money.
  • People with a fixed income could not renegotiate (discuss again to change) their earnings.
  • The elderly with fixed pensions could not get any more money and so their incomes were destroyed.
  • Small business own
• Benefits of hyperinflation

  • A few people benefitted from hyperinflation.
  • People with debt benefited because it was easier to pay off.
  • Farmers benefited because people paid more for food.
  • However, it is important to remember that most people suffered because of hyperinflation. People did not get their savings back when hyperinflation ended