3- Economic and Social Problems in Germany, 1919-24 Flashcards
(37 cards)
What financial problems affected Germany?
Germany’s defeat plunged the finances of the state into crisis
How was gov spending financed in Britain?
- Higher taxes
2. Gov borrowing
How did wartime German gov choose to finance the war?
- Increased borrowing
- Printing more money
This meant that
- More gov debt
- Value of the currency decreased
This risky strategy was based on the assumption that Germany would win the war and would be able to balance the losses by annexing industrial areas of its defeated enemies and forcing them to pay heavy financial reparations.
What did the defeat mean for Germany financially given its previous expectations and the way they had financed war?
Defeat not only deprived the country from the repayment method, but also imposed a heavy burden of reparations and a loss of some industrial areas
What was the debt in 1919?
1.44 marks or 6.6 billion pounds
How would govs normally reduce national debt?
- Raise taxes
- Reduce spending
or both
Why did raising taxes or reducing spending pose serious risks for the Weimar Republic?
- Rise in taxation would alienate support for new republic as anti-republican parties would claim that taxes were being raised to pay for reparations to the allies.
- Reduce spending difficult bc although military was reduced, there were civil servants to be paid. Support for gov was fragile so govs avoided making civil servants redundant.
What had disappeared by 1921?
Unemployment- rapid recovery in economic activity. 1.8% compared to nearly 17% in GB- this encouraged investment from the USA
In many ways Germany coped with the transition to peace more successfully than other economies
What had happened to the prices between 1918 and 1920?
1918-19: prices had doubled
1919-20: prices had quadrupled
Why had the gov allowed for inflation to happen?
Political issues:
1920 coalition led by Konstantine Fehrenbach dominated by ZP, supported by many powerful industrialists who were benefiting from inflation by taking short-term loans to expand their businesses.
By the time loans were due to be paid their value had been reduced by inflation
What could be considered an advantage of inflation?
It reduced gov’s burden of debt and it has been suggested that German politicians had an interest in allowing it to continue unchecked
What did the inflation lead to left unchecked?
Hyperinflation in 1923
What happened after the gov agreed to the reparation payments set in 1921?
Fehrenbach resigned in protest bc he considered them extremely harsh and was replaced by another cabinet led by Chancellor Joseph Wirth
Could Germany choose whether to accept the reparations payments or not?
No- gov signed and begun the policy of fulfilment
What had happened by January 1922?
Germany was in such economic difficulties that the Reparations Commission granted a postponement of the January and February instalments
What happened in July 1922?
German gov asked for a further suspension of the payments due that year
What happened in November 1922?
Gov asked for
- A loan of 500 million gold marks to stabilise the economy and
- to be released of its obligations for 3-4 years
What happened after the petitions of Nov 1922?
French suspicious that this was an excuse and refused to agree to Germany’s requests and led to a major clash over reparations.
What are different writer’s views on the amount of reparations to pay?
- English economist Maynard Keyne argued 2 billion pounds should have been the limit for reparations. More would damage Germany’s and Europe’s economy
Historian Peukert argued the reparations were manageable as they only amounted to 2% of its gross national product. He argued the financial problems that arose in the early 1920s, were a result of post-war loans and the way Germany funded her war effort, and not the result of reparations.
What was the economic impact of reparations on Germany?
- Germany’s gold reserves inadequate for the amount of reparations payments that had to be made in gold
- It also had to make payments in coal but Germany had lost large part of its coal reserves in the TofV
How did the Allies limit the ways of payment of reparations?
- Possible method of payment in manufactured goods but manufacturers in allied countries wouldn’t agree to this as it would threaten their jobs and businesses
- Germany might have been able to increase their ability to make payments by increasing exports to other nations, but allies confiscated its entire merchant fleet and had imposed high tariffs on imports of German goods.
Allies forcing Germany to make payments but made it difficult for Germany to find the means to do so.
What was Germany’s response to the allies limiting the payment of reparations?
Printing more money, making inflation even worse and the currency falling even further
What happened in January 1923?
French and Belgians sent a military force of 60,000 men to occupy the Ruhr industrial area in order to make Germans comply with the TofV
What was the aim of the invasion of the Ruhr?
To seize the coal, steel and manufactured goods as reparations
