How did the Weimar Republic Recover? (WJEC Eduqas GCSE History): Revision Note

Summary & Timeline

The first few years of the Weimar Republic had been chaotic both politically and economically. But from 1923 onwards, things improved and became more stable. Gustav Stresemann introduced a new currency to bring the hyperinflation crisis to an end. First, the Dawes Plan of 1924 and then the Young Plan of 1929 reduced the burden of the reparations imposed by the Treaty of Versailles. Germany appeared to be well down the road to recovery but questions remain over whether this was down to American loans. 

Recovery from hyperinflation

• When Gustav Stresemann became German Chancellor in August 1923, he had three main aims:

  • To end the hyperinflation crisis

  • To rebuild relations with other European nations

  • To reduce the popularity of the German extremist parties

The Creation of the Rentenmark

• Germany’s currency, the mark, was beyond saving:

  • The largest note was 100,000,000,000,000 (100 trillion) marks

  • The government believed there were 400.3 billion trillion marks in circulation

• In November 1923, Stresemann created a new currency called the Rentenmark

  • One Rentenmark was the equivalent of a trillion marks

  • Stresemann established a new state-owned bank called the Rentenbank

  • The German public brought marks into the Rentenbank to transfer them into Rentenmark

• The Rentenmark was a gold standard currency

  • This means that the value of the Rentenmark matched the price of gold

  • European countries trusted gold standard currencies

• In August 1924, the government created the Reichsbank to control the Rentenmark

  • The Rentenmark was renamed the Reichsmark

  • This new currency had brought hyperinflation to an end and enabled German businesses to trade with foreign countries

Dawes & Young Plans

The Dawes Plan

• Germany had been unable to meet the reparations payments stated in the Treaty of Versailles

• Hyperinflation in 1923 led the Allies to consider reducing Germany’s reparations bill

• The USA’s economy was booming , which meant it was in a position to help Germany

  • Britain and France were still repaying the money they had borrowed from the USA during the First World War

  • As a result, the USA had a surplus of money in their economy

• Charles G. Dawes, an American banker, created a plan for Germany

The terms of the Dawes Plan

• A temporary reduction of reparations to £50 million a year

• A guarantee of US bank loans for German industry

The impacts of the Dawes Plan

• Reparations became more manageable and enabled Germany to invest in its businesses

  • The Allies trusted that Germany would meet their reparation payments

  • Stresemann called off the passive resistance in the Ruhr and France agreed to leave

• The USA gave $25 billion to German industry from 1924-30

  • Germany’s industrial output increased by 50% between 1923 and 1928

  • The government achieved more income from trade

The Young Plan

• By the late 1920s, the Allies believed that they could provide Germany with more help

  • In June 1929, the Allies established a committee to reduce Germany’s reparations further

  • An American banker called Owen Young led the committee

• In August 1929, the committee agreed upon the Young Plan

The terms of the Young Plan

• Reduction of the total reparations bill from £6.6 billion to £2 billion

• The Allies extended the time that Germany had to repay their reparation debts until 1988

The impacts of the Young Plan

• The German government was able to lower taxes on its citizens

  • The German people then had more money to spend, which boosted German industry and created more jobs

  • This meant German companies made higher profits, meaning they paid more in tax, which gave the government more money to spend 

• There was less pressure on Germany to pay off the reparations debt

  • This improved relations between Germany and the Allies

  • France decided to leave the Rhineland in 1930

• The Young Plan created a favourable reaction in Germany

  • In 1929, 85% of voters were in favour of the Young Plan. This was roughly 35 million German citizens

• Weimar’s insistence on fulfilling the reparations payments outraged Germany's extremist parties:

  • In his speeches, Hitler stated that Weimar's consent to the extension of the reparations deadline was ‘passing on the penalty to the unborn’

Did Weimar Germany Economically Recover by 1929?

• The strength of Weimar Germany’s economic recovery remains a topic for historians to this day

Arguments that Weimar Germany economically recovered

• Stresemann’s policies facilitated Weimar’s ‘Golden Years' from 1924 to 1929

  • Living standards improved 

  • Average working wages increased

  • Unemployment reduced

• Germany fulfilled its reparation payments until 1929

  • There was no repeat of the occupation of the Ruhr

Arguments that Weimar Germany did not economically recover

• Britain, France and Germany were gambling their economies on the USA’s prosperity

  • Stresemann was aware of the dangers involved in accepting American loans

    • In 1929, Stresemann stated that Germany was “dancing on a volcano”

  • If the USA recalled the loans or experienced a depression, the ‘volcano’ would erupt and destroy the stability of Weimar Germany

    • This occurred in 1929 due to the Wall Street Crash

• Germany still owed a large amount of reparations

  • Germany took 92 years to pay off their reparations debt

    • German Chancellor Angela Merkel made the final payment in October 2010