Economic problems 1919-23

The French invasion of the Ruhr

Cause

  • As a consequence of signing the Treaty of Versailles, the Weimar Government was obliged to pay reparations to the victors of World War One.
  • In 1922, the Weimar Government stated that it would not be able to pay the next three years’ instalments as a result of economic hardship.
  • The French believed that the Weimar Government could pay and that it was testing international patience.

Invasion

  • In January 1923, the French and Belgian armies sent 60,000 soldiers into the Ruhr region of Germany.
  • The French aimed to extract the unpaid reparations and took control of key industries and natural resources.
  • The Weimar Government instructed the Ruhr workers to go on strike, instead of helping the French.

Consequences

This worsened the economic crisis in Germany. Government income from the Ruhr, one of Germany's most industrialised areas, was down. The Government started to print more money in order to pay the striking German workers in the Ruhr.

Hyper-inflation

A German woman using money as fuel and putting it into her stove
A German woman using money as fuel and putting it into her stove

  • This was caused by the sudden flood of paper money into an economy weakened by war, combined with the general strike.
  • The inflation rate rose so dramatically that the German currency lost virtually all value. Paper money was practically worthless (eg. a loaf of bread which cost 250 marks in January 1923 had risen to 200,000 million marks by November 1923).

Results of hyper-inflation

  • Any German with savings lost the most, as their money lost its value.
  • The elderly suffered greatly as their income was fixed.
  • Germans who were paid monthly were also affected, as the value of their money would decrease a great deal before they were paid again.
  • Those who were paid weekly, or who could renegotiate their pay daily, were better off.
  • Those who had taken out loans, found it much easier to pay them back. The upper class landowners did not suffer many of the effects of the hyperinflation.
  • There were food shortages as businesses did not have enough money to purchase produce from farmers.
  • There was a rise in crime as Germans became desperate.

In 1924, the crisis was brought to an end by the Dawes Plan and the introduction of a new currency, the Rentenmark. The German economy was now dependent on loans from the USA.

Hyper-inflation had serious repercussions for the Weimar Government. The German economy now relied on that of the USA. With the Wall Street Crash in 1929, the American economy went into meltdown and the German economy was pulled down with it. Industries failed and unemployment rose to 6 million. Social unrest followed, as people starved.