Economic problems 1919-1923

The French Invasion of the Ruhr

Cause

  • The Treaty of Versailles stated that Germany had to pay fines to the victorious countries of World War One.
  • In 1922, the Weimar Government said that it would not be able to pay the next three years’ instalments.
  • The French Government believed that the Weimar Government could pay but just didn't want to.

Invasion

  • In January 1923, the French invaded the Ruhr region of Germany.
  • The French took control of factories and mines to collect what was owed to them.
  • The Weimar Government told the Ruhr workers to go on strike.

Consequences

This created hyper-inflation in Germany:

  • The German currency lost virtually all value.
  • Paper money became worthless.
  • For example, a loaf of bread which cost 250 marks in January 1923 had risen to 200,000 million marks by November 1923.
A German woman using money as fuel and putting it into her stove
People burned money to warm their stoves

Results of hyper-inflation

  • People with savings lost the most.
  • The elderly suffered greatly.
  • Germans who were paid monthly were also affected, as their money would lose value before they were paid again.
  • Those who were paid weekly were better off.
  • Those who had taken out loans found it much easier to pay them back.
  • There were food shortages as businesses did not have enough money to purchase goods from farmers.
  • There was a rise in crime as Germans became desperate.

In 1924 the crisis was brought to an end when the USA agreed to give loans to Germany through the Dawes Plan. This meant that Germany now relied on the USA staying strong.

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.