Economic Challenges (1966-89) and Integration into the European Economy (1945-89)

Question 1

What 3 phases can the economy of the FRG be split into?

Answer 1

• Social market economy 1949-66
• More state intervention 1966-82
• Free market economy 1982-89

Question 2

What major economic challenges did the government face in the 1960s and 70s?

Answer 2

• Recession in 1966-67
• Oil crises of 1973 and 1978

Question 3

What other, minor, economic challenges did governments of the FRG face?

Answer 3

• Rising levels of government spending, particularly on social welfare

Question 4

Give figures to show the increase in social welfare. What fact made this situation even worse?

Answer 4

• 1965: DM46.7 million
• 1970: DM115.9 million
• This had happened despite various cuts to benefits

Question 5

What immediate impact did the recession have in the FRG?

Answer 5

• Shock, as West Germans had become used to continued growth and prosperity

Question 6

What were 6 impacts of the recession?

Answer 6

• There was a risk of inflation; prices were 4% higher by 1966
• Trade decreased
• Unemployment increased
• Public spending was spiralling out of control
• There were fewer guest workers (some didn’t have their contract renewed)
• Productivity began to fall

Question 7

Give figures showing the decrease in the number of guest workers.

Answer 7

• Start of 1966: 1.3 million
• September 1967: 991,000

Question 8

Why did Erhard resign due to the recession?

Answer 8

• His policies were ineffective, and Germany remained in a recession

Question 9

When did Erhard resign?

Answer 9

• November 1966

Question 10

Who led the response to the recession? What was unique about him?

Answer 10

• Karl Schiller, the economics minister
• He was the first economics minister to use economic planning

Question 11

What were 4 steps taken by Schiller to deal with the recession?

Answer 11

• He increased government involvement in the economy through planning, intervention and control
• He reintroduced cartels to stop prices from rising
• The 1967 Stabilisation Law
• In 1968 article 109 of the Basic Law was amended

Question 12

What was the 1967 Stabilisation Law? Give 2 details.

Answer 12

• It allowed government intervention in times of economic crisis
• It introduced five-year financial plans for the different levels of government

Question 13

What did the amendment of article 109 of the Basic Law mean for the economy?

Answer 13

• It allowed for money to be shifted from wealthy Länder to provide social welfare for poorer ones

Question 14

Using 3 statistics, show how successful Schiller was.

Answer 14

• By 1968:
• unemployment was falling
• industrial growth was at 6% (annually)
• In 1969, inflation was at 1.5%

Question 15

What did Brandt do as chancellor?

Answer 15

• He introduced a range of social measures

Question 16

How did Brandt’s introduction of social measures affect the economy?

Answer 16

• He increased social welfare
• Social welfare rose from one quarter of GDP to one third

Question 17

What caused the oil crises?

Answer 17

• The OPEC (Organisation of Petroleum Exporting Countries) put up oil prices sharply in 1973 and 1978

Question 18

Give 3 reasons why the FRG was hit hard by the oil crises.

Answer 18

• During the 1960s and 70s, the FRG had started to rely on oil as fuel rather than coal
• Car ownership increased petrol consumption
• The FRG got 40% of its fuel needs from OPEC

Question 19

Compare how much the FRG would normally pay for oil, and how much they paid during the oil crises.

Answer 19

• 1972: DM10.8 billion
• 1973: DM32.8 billion
• 1978: DM49 billion

Question 20

Give 3 impacts of the first oil crisis.

Answer 20

• Unemployment rose from 1.2% in early 1973 to 4.7% by 1975
• Guest workers did not have their contracts renewed
• The balance of payments went from a surplus to a $692 million deficit within a year

Question 21

What were 3 actions the government took in the first oil crisis?

Answer 21

• The government encouraged people to use less oil
• They began to invest in nuclear power to reduce their dependence on oil
• In 1975 they brought in public spending cuts and higher income tax

Question 22

How did the government encourage people to use less oil? Give 4 examples.

Answer 22

• ‘Car free Sundays’
• Speed limits on the autobahns to save fuel
• Propaganda pushed energy-saving tactics
• The government didn’t subsidise oil prices like other countries did, so it was expensive to buy

Question 23

Why was the FRG not hit as hard by the oil crises when compared to other countries? Give an example.

Answer 23

• It had income from its high level of exports
• In 1978, the FRG even exported more to OPEC countries than it imported

Question 24

What 2 economic issues wes there in the 1980s? What social issue did they cause?

Answer 24

• The gap between the rich and the poor widened
• Inflation increased
• This caused hostility towards guest workers

Question 25

What 3 other problems did the rise in inflation cause?

Answer 25

• The economy’s growth shrank
• Unemployment rose and hit 1.7 million in 1981
• This then increased unemployment benefits

Question 26

How did the government cope with the increase in public spending? How did the public feel about their response to the issues?

Answer 26

• In 1981, they cut spending, including benefits
• This was unpopular, as the public felt that they should return to a social market economy

Question 27

What 5 things did Kohl’s government do to deal with economic issues when he became chancellor?

Answer 27

• They cut spending even more, as he believed welfare support created dependency
• They reduced the retirement age to 58 and encouraged people to take early retirement
• They reduced tax
• They kept budget increases to a maximum of 3%
• They sold shares from state-owned companies, such as the Lufthansa and Volkswagen

Question 28

Using 3 facts, were the measures taken by Kohl’s government effective?

Answer 28

• By 1989:
• unemployment was at its lowest
• the economic growth rate had risen
• the balance of payments surplus was DM134 billion (in 1983, it had been DM73 billion)

Question 29

What global goal did Adenauer have for Germany’s economy?

Answer 29

• He knew (like Stresemann) that political and economic integration with the rest of Europe would lead to the FRG’s political and economic success

Question 30

Which country in particular did Adenauer want to build better relations with? Why?

Answer 30

• France
• It had been invaded by Germany 3 times since 1870

Question 31

Name 2 organisations that the FRG joined to have closer economic links with European countries, and when it joined.

Answer 31

• The ECSC (European Coal and Steel Community) in 1951
• The EEC (European Economic Community) in 1957

Question 32

What was the purpose of the ECSC?

Answer 32

• To help Europe recover economically from the war

Question 33

How did the ECSC work?

Answer 33

• Essential industries were merged across the countries
• They then planned and developed together, and traded freely

Question 34

How successful was the ECSC? Give 3 exmaples.

Answer 34

• It led to closer co-operation through the EEC
• Trade in coal increased 10 times among its members
• It provided more than 112,500 apartments for workers

Question 35

What was the purpose of the EEC?

Answer 35

• To create a free trade zone with common economic policies

Question 36

How important was the FRG in the EEC?

Answer 36

• It was the wealthiest and paid as much as 25% of the budget
• It also had 25% of the GDP of the EEC