The economy in the FRG
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- Created on: 03-06-16 12:38
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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
- Trade unions were calling for a shorter working week
- Causes
- Wages increased by 8.55 and production increased by 8% - 850,000 unfilled jobs
- Mini Economic Recession
- 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%
- The strong deustchmark lead tempted oversea spectactors - This caused more money to be in circulation
- Social developments
- 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
- 1973 oil crisis
- 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.
- Erhard
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