Economy 1966-89

Question 1

What success did the Grand Coalition have with the economy?

Answer 1

Successful in reversing the recession. Economic growth resumed and a positive balance was achieved
From 1967, the budget balanced
By 1968, unemployment was down and industrial growth had increased again to 6%
Agricultural productivity had increased.

Question 2

What was inflation in 1969?

Answer 2

1.5%

Question 3

What was the only negative of the Grand Coalition’s economy?

Answer 3

Growth was not as fast or consistent in the 1950s as in the 60s. This was because rapid growth could not be sustained i.e. an inevitable slow down. Bundesbank intervened to slow growth by limiting money supply.

Question 4

What government policy aided the recovery under the Grand Coalition?

Answer 4

Modified laissez fair social market policy - Schiller argued for greater government powers which led to 1967 Stabilisation Law. Increase in direct and indirect taxes and public spending cuts of nearly 2000M DM

Question 5

What was the Stabilisation Law?

Answer 5

Allowed for greater co-ordination of federal, land and local budget planning

Question 6

What had happened by July 1968?

Answer 6

All internal EEC tariffs had been removed and trade between member nations four times what it had been in the previous decade.

Question 7

What happened to social budget costs in the 1970s?

Answer 7

Grew by over 10% a year

Question 8

When was the recession in the 1970s?

Answer 8

1974 - worsened inflation

Question 9

What happened by 1975?

Answer 9

Unemployment reached 1 million

Question 10

What was the impact of the oil crisis?

Answer 10

Oil prices increased from $3 a barrel (1973) to $12 (1974) - led to a temporary ban on Sunday driving.

Question 11

What happened to GDP in 1975?

Answer 11

Fell by 1.4% - the sharpest fall since 1949.

Question 12

When was the worst of the recession over by?

Answer 12

1976 e.g. inflation declined but economy slowed again in 1977

Question 13

How did the budget deficit change under the SPD governments? How impactful was this?

Answer 13

31.2B DM in 1977 to 75.7B DM by 1981 but economy continued to expand 1979-80

Question 14

What was the economic situation in early 1981?

Answer 14

Schmidt again faced decreasing growth and rising unemployment and inflation. Recession until 1982.

Question 15

What were the positives of the SPD economy when compared to other countries?

Answer 15

Better than other European nations e.g. 1973-79, average FRG inflation was 4.7% and European average was 11.7%
Unemployment never above 8% and growth rates still higher than 1913-50

Question 16

What caused the increase in the cost of the social budget?

Answer 16

SPD/FDP coalition expanded the social security system

Question 17

What was the impact of a strong DM in the 1970s?

Answer 17

Overseas currency speculators converted weaker US $ into DM. Increase in money supply led to increased lending by German banks which led to increased prices and wage demands

Question 18

How did the SPD limit Schiller?

Answer 18

Prevented him from making public spending cuts to balance the budget.

Question 19

How did Schmidt deal with the recession?

Answer 19

combine the posts of economics and Finance and made moderate spending cuts. VAT rate also increased.

Question 20

What did Schmidt do post recession?

Answer 20

Increased spending and reduced taxes to create jobs.
1977 - further public sector investment to prompt recovery - 160,000 jobs created 1977-79.

Question 21

What did Schmidt do in 1979?

Answer 21

Established a meeting between G8 countries and helped establish the European Exchange Rate Mechanism to promote stability.

Question 22

What also happened in 1979?

Answer 22

Shah of Iran overthrown 1979 led to further oil price rises - 150% from Dec 1979 to May 1980

Question 23

What was unemployment in 1983?

Answer 23

Still over 2 million

Question 24

What happened to inflation in the 1980s?

Answer 24

6.2% in 1981 to 0.6% in 1986.

Question 25

What else happened to the economy under Kohl?

Answer 25

Progress uneven over the period
Social budget remained high
Figures for growth and inflation improved but only slowly
German share of total world production 7.9% in 1975 to 7.4% in 1987
Growth rate rose to 3.7% in 1988; 3.6% in 1989 - highest levels in decade.

Question 26

What happened to the public sector under Kohl?

Answer 26

Growing more slowly than before, though deficit over 1 trillion DM

Question 27

How did Kohl try to reduce the government role in the economy?

Answer 27

Abandoned high spending
Annual budget increases held at 3% and tax cuts phased in over 7 years
Restrictions and regulations removed
State role in economy fell from 52% in 1982 to 46% by 1990
Sold almost 10M DM of shares in state owned businesses like VW and Lufthansa

Question 28

What else aided Kohl’s economy?

Answer 28

Rapid growth of Japanese and other Asian economies
Technological modernisation
Good industrail relations boosted productivity
Kohl continued to subsidise farming, coal, steel and aerospace industries
Oil prices fall in 1985

Question 29

What did Kohl do to help unemployment?

Answer 29

Introduced early retirement schemes and retraining programmes introduced