Germany 1921-1929: Economy and Foreign Policy

• The London Payment Plan was what set reperations
• Reperations were set at 132 billion gold marks in 1921
• August 1921 was when the first cash payment was made
• Germany could pay in cash or commodities
• Germany was required to pay $500 million annually
• The Allies were unsympathetic to Germany of economic problems, as European Allies had their own war debts to the USA
  

Context

• Germany's WWI was funded entirely by loans - Weimar had huge debt before reperations were set
• There were also demands for increased government expenditure

Facts

• 1914: 1 dollar = 4.29 marks
• 1920: 1 dollar = 100 marks

Loaf of Bread

• 1918: 0.63 marks
• 1923: 201,000,000,000 marks

• Germany was required to hand over resources as well as cash payments
• 26% of coal production
• Merchant shipping
• Rail locomotives
• It was difficult for Germany to recover due to the huge loss of natural and industrial resources
• Germany experienced inflation before the war ended

• By printing money on a massive scale, the Cuno government destoryed what confidence remained in the German mark
• It was not worth the paper it was printed on: People turned to bartering 
• The hardest hit was those on fixed incomes e.g. pensioners - Though, some profitted from hyperinflation
• 1923 autumn: the economy finally broke down
• Rioting and looting occured as food became scarce
• The Cuno government resigned
• A Grand Coalition was created, headed by Gustav Stresemann

Those who lost out:

• Middle and working classes suffered the most
• Only 30% of ttrade union members worked full time
• Savings, pensions, loans and mortgages were worthless
• Many salaries became insufficient

Those who benefitted:

• Speculators made fortunes
• Those who owed money could pay off debt in devalued money
• Those who had something to barter e.g. goods or skills avoided the worst

Background

• Treaty of Versailles imposed reperation payments
• Germany was plunged into a period of economic, politicl and social stress
• An Allied committee was established under Charles Dawes to work out a way forward 
• The period is characterised as one of recovery
• Production doubled due to mass production techniques, called Fordism
• However, increased production was not matched by a rise in domestic domestic demand
• Use of short term looans to finance loing term projects left the economy out of balance
• Stresemann was able to steer Germany out of the economic crisis

• The new government started to stabilise the currency
  
• Payments of reperations were resumed
• the French agreed to set up a commission of enquiry to study the problem of the German economy
• The Rentenmark was established to replace the old mark
• Printing of the rentenmark was strictly limited
• He sacked 700,000 state employees
• Rentenbank opened, to help replace the worthless currency
• The Reichsmark replaced the Rentenmark in 1924

Successes:

• The Locarno Pact gave France reassurance
• Entry into the League of Nations helped restore Germany's status as a major power
• The Dawes Plan was very important in Germany's economic recovery
• The Young Plan diluted the original terms further

Limitations:

• No formal change to the military limitations
• Stresemann ought to have settled the eastern borders and tried to build up economic and political influence
• Stresemann's gradualism did not result in enthusiastic support from the electorate
• German's would have liked to have seen more dramatic concessions and revisions made

• These were created as a consequence of Germeny's struggles to pay the reperations
• Germany ended up receiving more in loans than they paid in reperations
• They realised it was unlikely that Germany could meet its obligations wih the plans
• The Allies agreed to Germany making a one off payment: it was never paid

• 1924
• Temporary measure in response to the Ruhr crisis
• Agreement was that reperations would be set at 1,000 million marks
• Adjustments would be made depending on Germany's economic performance
• To help Germany, it was loaned 800 million marks to stabilise the currency
• The plan helped economic recovery and reperations were paid

• 1929
• This reduced the amount Germany had to pay
• Annual payments were lowered
• Payments were to be made over 58 years
• Allied supervision was discontinued
• There was major opposition to the Young Plan, around a referendum campaign

• Stresemann's foreign policy was based on a realistic set of aims
• He hoped to end the 1923 Ruhr and Rhineland occupations
• He wanted to rid the country of reperations
• Stresemann wanted US support to provide much needed loans
• He rejected the idea of re-building Germany's army 
• His policy centered on cooperation with other powers

• 1925
• Germany accepted its western borders
• In return, some European countries renounced the use of invasion - except in self defence
• France was reassured by the fixing of borders
• Germany was happy to see prospects of invasion diminish
• Stresemann was seen globally as a pragmatic politician

• 1926
• Germany joined the League of Nations
• League of Nations later became the United Nations
• Not being in the League of Nations was humiliating for Germany
• Joining was a statement of progress
• Germany was given a great power status on the League Council with veto power
• Germany couldn't participate in action against aggression

• 1926
• Between Germany and Russia
• They both held interest in the border settlement with Poland
• This was a follow up treaty with the USSR
• They promoted economic and military exchanges
• Some of the clauses were secret e.g. German military was rebuilding in Russia's borders.

• Secretely Germany was rearming beyong the terms of the Treaty of Versailles
• In 1928 Germany signed the Kellogg-Briand Pact with 70 other countries
• The pact condemned the use of war for international controversy
• The pact had no real effect in practice, as there was no consequence