2.1) Germany: Economic developments


Stabilizing new currency

  • August 1923, Hyperinflation at worst.
  • Cuno's coalition replaced by Stressemann.
  • First coalition with parties from left and right.
  • Coalition made up of DVP, Centre party, DDP and Socialists.
  • 103 days for him to fix currency and hyperinflation.
  • Took 3 steps.


  • September, unpopular and risky move.
  • Led to Munich putsch.
  • Economy and inflation were out of control.
  • Stopped paying workers who were on strike. Reduced Government expenditure.
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Stabilizing new currency


  • Replace Reichmark with Rentenmark. 1RTM = 1trillion RCM.
  • Supported by mortgage on industrial and agricultural land.
  • Once launched Gov controlled money circlulation.
  • August 1924, Rentenmark replaced by Reichmark.
  • Inflation removed. 
  • Hjalmar Schacht helped


  • Cut expenditure, rose taxes for people and companies.
  • 300,000 civil servants lost jobs.
  • Government debt fell.
  • Changed economy.
  • Business who avoided debt won.
  • Small business and people who lost out during inflation lost.
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Reparations and the Dawes plan

  • November 1923, Allies' reparation committee got financial experts to fix Germany financial concerns.
  • USA wanted Germany to pay France so they could be re-paid through them.
  • Banker Charles Dawes called. Dawes Plan finalised on April 1924.
  • Made payments more manageable.
  • Amount Germany paid each year was reduced.
  • Started buy paying 1000m and raised 2500mm each year.
  • USA loaned 800mm to get them started.
  • Nazi's opposed this and Stressemann said it was Economic Armistice.
  • July 1924, All agreed.
  • Allies accepted German finanical problems were real.
  • French left the Ruhr
  • Loans allowed machinery, housing and economy to be rebuilt.
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Extent of economic recovery.


  • 1925, Germany was stable.
  • New currency, Dawes plan and Schacht work helped.
  • Kept interest rates high for foreign investment.
  • Industrial output rose.
  • But Growth rates were unsteady, 1924,25 and 27 were good but economy shrank in 1928-29.
  • Investment in new factory machinery fell in 1929.
  • Many Cartel were created, allowed profits to be reinvested.
  • Tariffs were allowed for Germany, tax on foreign goods.
  • Many industries developed, car, chemicals, etc.
  • Inflation vanished.
  • Living standard rose.
  • Loans helped finance building school, houses and public works.
  • 1926, 205,000 new homes.
  • Money spent on welfare and health improvements too.
  • 1924, new schemes of relief launched.
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Extent of economic recovery.

  • Strikes in Germany fell becuase of Compulsory arbitration.
  • Employers felt this was biased as they favoured unions and resented state intervention.
  • 8hour working day and Tradeunions were apart of work councils.
  • 1928, dispute over iron an steel industry wages in Ruhr. Small wage increase given.
  • Employees refused to pay increase and locked out workers.
  • Workers were paid by the state.
  • Normal workers benefited by Tradeunions and wage increaeses after 1924.


  • 1929, Stressemann said Germany is dancing on a volcano.
  • 1925, Unemployment continued, 1m and 1926, 3m.
  • Caused by Publics spending cuts, companies reducing workers to save money. 
  • E.g, Mining companies reduced it by 56,000 between 1925-29.
  • Middle class gained very little, bankcrupt by inflation.
  • White collar workers didn't benefit from wage  increase in industrial sector.


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Extent of economic recovery.


  • Farmers never benefited, worldwide agricultural depression kept food price low.
  • Small peasent farmers stored money but were wiped out during inflation.
  • 1923, gov made it worse by making it easier for them to borrow.
  • Famers were in debt during time of falling price.
  • More tax for welfare was unfair on farmers.
  • Late 1920's many farmers were bankrupt.
  • Banks foreclosured farms.
  • Agriculural production fell.
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Reparations and Young Plan

  • Dawes Plan was temporary
  • Allies still had Rhineland occupied, French refused to leave until final settlement of reparations issue was agreed.
  • Stressemann and international committee Owen Young met in Paris to finalise a reparations issue.
  • Young Plan wanted Germany to pay until 1988 with reparation reduced from £6.5b to £1.8b but annual payments increased. 
  • Britian and France left Rhineland in 1930, German gov now responsible for reparations..
  • Nationalist, Conservatives and Nazis not happy. 
  • Attemped a 'freedom law'. 
  • Wanted to remove war-guilt clause and arrest those that agreed with it.
  • Referendum couldn't be held as never had enought signatures to be debated in Reicstag.
  • 13% of electorate signed it, showed right wing supporters.
  • Hugenburg helped Hitler become a political figure.
  • Showed Germans were never satisfied with reparations.
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