The Recovery of Germany, 1924-29 Flashcards
Gustav Stresemann
He became chancellor in 1923 and led the ‘Great coalition’ government. This government helped solve the urgent problem of hyperinflation and brought about important improvements such as: a fall in unemployment, more house building and investment in transport systems.
What was the Rentenmark
As a result of hyperinflation the German mark was worthless. As a temporary solution in order to stabilise the value of the currency in November 1923 Stresemann introduced a new currency. It was known as the Rentenmark and the amount of money printed was tightly controlled.
What was the value of the Rentenmark based on
It was based on Germany’s industrial and agricultural worth. Furthermore, Stresemann promised to exchange the notes for shares in German land or industry if the currency failed which gave German people confidence in the new currency.
Whatwas the Reichsbank
Set up in 1924, the Reichsbank was the new independent German national bank; set up to help build confidence in Germany’s financial system.
What was the Reichsmark
The Reichsmark was a new permanent currency issued to replace the temporary Rentenmark in 1924. This restored faith in Germany’s financial system and was vital in allowing Germany’s economy to grow stronger.
What did Stresemann believe that was unpopular among Germans
He argued that Germany’s economy could not recover until the issue of reparations had been solved and that Germany should accept the treaty to improve relations with Britain and France. Stresemann believed it would be possible to negotiate better terms for
Germany as the USA, France and Britain had a lot to gain from allowing the German economy to recover.
What would be benefits if Germany’s economy imrpoved
- If the German economy
improved, Germany would be able to make its reparations payments
-Would provide Britain and France with the money they needed to repay the USA
-The Allies would also benefit if Germany was able to become a strong trading partner again
What was the Dawes Plan
An agreement in 1924 between Germany and the Allies under advise of an American representative, Charles Dawes, which renegotiated the reparation payments
Key points of the Dawes Plan
- USA loaned Germany 800 million gold marks which gave a massive boost to German industry
- Reparations payments were lowered to 1,000 million marks for the first 5 years, to make them more affordable. After this time, the payments would be increased to 2,500 million marks
- The Allies agreed to review the payment rate over time, to take account of Germany’s economic situation and ability to pay
- French agreed to withdraw troops from the Ruhr. They also agreed that any missed payments in the future would be dealt with by the Allies together
- The Allies were given some control of the Reichsbank and the railways in Germany
Why did some Germans criticise the Dawes Plan
because by agreeing to the terms of the Dawes Plan they felt that Germany was accepting the blame for starting the war by continuing with reparation payments
Effects of the Dawes Plan on Germany and its economy
-The stability in
Germany’s currency meant that there was more investment in Germany from
other countries, especially the USA, which helped boost industrial output which doubled in the years 1923-29
-Wages rose, the cost of living went down and the standard of living improved
-Confidence in the economy
was restored and the government was able to build new roads, schools and public buildings
-The improvements in the economy meant that by 1927 new laws could be introduced to allow people to claim unemployment benefit and ‘labour exchanges’ were set up to help people still unemployed to find work
Risks of foreign investment on German economy
Foreign investment made the German economy vulnerable if there were problems in the world economy. The recovery was based largely on
American loans which were invested in projects that would create
wealth and allow the loans and interest to be paid off. By 1927 there were signs
that the German economy was slowing down and the farming industry was
beginning to struggle. When the Wall Street Crash came in 1929, the Germans
found out how weak their economy still was.
What was the Young Plan of 1929
- Reduced total reparations to around $8 billion
- Payments were to be made over 59 years, at a rate of $473 million per year
- Germany was only obliged to pay a third of the annual sum each year. It should pay the rest if it could afford to do so
- French agreed to leave Rhineland by June 1930, 5 years ahead of the previously agreed date of 1935
What did Germans think of the plan
Some nationalist groups
were angry that Germany would continue to pay reparations. They felt that
the timescale for the payments was far too long and would limit Germany’s
progress as a nation.
What happened to the Young Plan
In the end, the Young Plan came to nothing. In 1929, the Wall Street Crash
occurred in the USA; after this, the Americans could not afford to loan any
money to Germany. In 1931, the German economy also crashed and the Allies
agreed to suspend reparations payments.
