The economy in the FRG

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  • The Economy in the FRG
    • Erhard
      • Mini Economic Recession
        • Causes
          • Wages rose quicker then the rate of prouduction
          • Schimdt claimed the Government spent too much on modernising railways.
          • The amount of public spending outstripped the budget
        • Was a huge shock due to the Germany people due to the economic miracle they experienced under Adenauer
        • Reaction
          • Cut spending by 10%
          • Raised interest rates
            • This made things worse and plunged the FRG further into recession.
          • Wanted everyone to work an extra hour per week
            • Trade unions were calling for a shorter working week
              • Contrast to Adenauer and co-determination
      • Wages increased by 8.55 and production increased by 8% - 850,000 unfilled jobs
    • Kiesinger and the Grand Coalition
      • Had to resolve the state of the economy.
      • Reaction
        • Raised VAT from 10-12%
        • Concerted Action - Co-operation between workers, the state and employees towards effective economic planning
        • June 1967 stabilisation law - Increased Federal Government involvement in economic matters e.: Building a reserve fund for times of economic slump.
        • Increased co-operation between the central Government and the Lander, e.g developing the economic infrastructure
      • Results
        • In 1967 the budget balanced
        • Inflatation fell to 1.5% in 1969
          • In 1966 inflation was at 4%
        • Employment was down and industrial growth had increased by 6%.
    • Brandt
      • Social developments
        • Pensions increased by 5%
        • 1972 factory management law -  Gave workers more say in the running of their factories.
        • School leaving age raised to 16 and voting age lowered to 18
        • Homosexuality laws relaxed
        • Exacerbated the inflation issues
      • Inflatation
        • The strong deustchmark lead  tempted oversea spectactors - This caused more money to be in circulation
          • This lead to workers demanding higher wages
        • Bundestag asked to approve anti-inflationary measures as  workers  wages increased by 145% and  inflation was up by 4%
    • Schimdt
      • 1973 oil crisis
        • FRG grew reliant on cheap fuel
        • FRG had to pay DM 17 Million more for it's imports
      • Actions
        • Inflatation stood at 4.7% whilst western europe as a whole had inflation of 11.9%
        • unemployment never got  above 8%
        • Wages rose and working hours decreased
      • A two-thirds society was created whereby there was over 2 million unemployed and guest workers felt neglected by the Government
    • Kohl
      • Returned to the principles of the social market economy
      • Annual budget increases at a max of 3%
      • 1987 unemployment over 2.2 million
      • Inflation fell from 6.2% in 1981 to 0.6%  in 1986
      • Continued to subsidise farming, coal and steel.


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