Germany's Recovery: 1924-1929

Recovery of Germany, 1924-1929

• This lesson discusses how Gustav Stresemann attempted to solve Germany's economic and political problems.

Key Terms

• Diplomacy is the use of negotiations and agreements to reach decisions and resolve differences between countries
• The League of Nations was an international organization set up as part of the Treaty of Versailles, intended to prevent future wars.
  • It was originally the idea of Woodrow Wilson.
  • It was unpopular in the US, so America did not join.
  • Defeated countries of WW1 were not allowed to join.

Germany 1924-1929: From Crisis to Stability and Prosperity

• The years 1919-1923 were a time of turmoil.
• The young Republic faced the impact of defeat in WW1, the Treaty of Versailles, revolts, and political assassinations.
• Throughout 1923, Germany was in crisis because of the French occupation of the Ruhr and hyperinflation.
• The Weimar Republic overcame its economic problems, social unrest, and political revolts and entered an age of stability and prosperity within the next few years.
• The years 1924-1929 are known as the 'Golden Years of the Weimar Republic' or the 'Stresemann Era' because of the improvements brought about by Stresemann.

Gustav Stresemann

• Stresemann was the leader of the DVP (The German People's Party - moderate right).
• President Ebert appointed Stresemann as Chancellor in August 1923.
• He had initially opposed the Weimar Republic, but changed his mind when he realized that the alternative was anarchy.
• He was Chancellor for only four months but remained the most influential politician in Germany until his death in 1929, serving as foreign minister.
• In 1923, Stresemann faced challenges like strained relations with other countries, French and Belgian troops occupying the Ruhr, and the German economy crippled by hyperinflation.
• By 1929, Stresemann had improved political stability, contributed to economic recovery, and improved relations with other countries.

Economic Recovery: Hyperinflation

• Due to hyperinflation, the German mark was worthless, so Stresemann needed to stabilize the economy.
• Stresemann abolished the old currency and replaced it with the Rentenmark.
  • A new temporary currency with the amount of printed money tightly controlled.
• The new notes were trusted because the government promised to exchange them for shares in German land or industry if the currency failed, which generated confidence in the German economy.
• Stresemann also called off the passive resistance in the Ruhr.
• In 1924, Stresemann replaced the Rentenmark with a new permanent currency.
  • The Reichsmark, controlled by an independent national bank, the Reichsbank.

Effects of the New Currency

• Positive:
  • Stabilized the economy.
  • People trusted it.
  • Stopped hyperinflation, and prices dropped.
  • People from abroad invested in Germany.
  • Improved German business and the employment rate.
• Negative:
  • Did not remedy all divisions, and some people were still unhappy.
  • Those affected by hyperinflation were never compensated.
  • The middle classes were angry as they lost the most.

Reparations

• Stresemann worked on reparations, which were so high that Germany could not pay.
  • Believed that Germany would never recover unless this issue was solved.
• Stresemann argued that Germany should accept the Treaty of Versailles to improve foreign relations with Britain and France.
  • VERY unpopular with many Germans.
  • Stresemann believed that with better relations, it would be possible to negotiate better terms on the reparations.
• Britain and France had a lot to gain from allowing the German economy to recover.
• The USA had lent millions of dollars to France and Britain during WW1.
• If the German economy improved, Germany would make its reparations payments, which would provide Britain and France with the money they needed to repay the USA.

The Dawes Plan

• In 1924, Germany, the USA, Britain, and France agreed to the Dawes Plan.
• Germany was loaned 800 million marks from America.
  • This gave a boost to German industry.
• Annual reparation payments were lowered.
  • The Allies agreed to review the payments rate over time, considering Germany's ability to pay.
• The French agreed to withdraw troops from the Ruhr.
  • Any missing payments in the future would be dealt with by the Allies together.
• Germany received more than 25 billion marks in loans from the USA over the next 6 years.

Effects of the Dawes Plan

• Positive:
  • Sparked the recovery of the German economy.
  • The French agreed to leave the Ruhr.
  • The industrial output doubled between 1923-28.
  • Wages rose, the cost of living went down, and the standard of living improved.
  • The government built roads, schools, and public buildings.
  • Relations with other countries improved, and other countries began to trust Germany.
• Negative:
  • Increased resentment from the extreme right-wing parties.
  • Extreme political parties found it unacceptable that Germany had agreed to pay reparations again.
  • They felt Germany accepted blame for starting the war.
  • The economy became fully dependent on American loans. If something went wrong with the American economy, then Germany would be in serious trouble.

The Young Plan, 1929

• Despite the Dawes Plan and American loans, the German government struggled to make reparation payments.
  • The Young Plan was agreed to in 1929.
• The reparations were reduced from £6.6 billion to £2 billion.
• Germany was given 59 more years to pay in small installments.

Effects of the Young Plan

• Negative:
  • Increased resentment from right-wing groups.
  • Extreme parties were angry about stretching the payments over more time.
  • Adolf Hitler (Leader of the Nazi Party) said they were 'Passing on the penalty to the unborn.'
• Positive:
  • Contributed to economic recovery.
  • Lower reparations payments meant that the government could lower taxes.
  • Lower taxes would mean that the government could spend more on the industry and economic growth.

Stresemann Abroad: Improving Relations

• Stresemann aimed to strengthen Germany's power and wealth through diplomacy.
• He improved Germany's relationship with other countries, including Britain and France, by ending passive resistance in the Ruhr in 1923

The Locarno Pact, 1925

• In 1925, Stresemann signed the Locarno Pact with Britain France, Italy, and Belgium.
• It was written ON EQUAL TERMS (Unlike the T.O.V)
• Germany accepted new 1919 western borders with France (not eastern ones).
• Germany agreed that Alsace Lorraine would be French, and in return, the French agreed not to occupy the Ruhr again.
• All countries agreed to avoid using military force except in self-defense.
• The Rhineland would be free from all allied troops by 1930.
• The five powers opened talks about German membership of the League of Nations.

Effects of the Locarno Pact, 1925

• Positive:
  • Improved Germany's relations with other countries.
  • The Pact reassured France about its borders and Germany about any French invasion/occupation.
  • War was less likely.
  • Stresemann was given the Nobel Peace Prize in 1926.
• Negative:
  • Increased resentment from right-wing groups.
  • Some parties disagreed and hated that the Versailles agreements were put in place.
  • Extreme parties hated that the Weimar was working with the enemy.

The League of Nations, 1926

• Germany joined the League of Nations in 1926.
• Germany joined the international body in which powerful countries discussed solving the world's problems to solve them without going to war.
• Germany was given a place on the League of Nation's Council, which members made the most important decisions, and Germany was once again regarded as a 'Great Power.'

Effects of Germany's Acceptance into the League

• Positive:
  • Increased confidence that people had in the Weimar Government.
  • Boosted the confidence of Germans in the Weimar.
  • Germany was once more accepted into the 'international family.'
  • Germany got equal power to 'veto (disagree)' with other countries about certain topics.
• Negative:
  • Increased resentment from right-wing groups.
  • Not all political parties liked it, some say it was a symbol of the hated T.O.V.

The Kellogg-Briand Pact, 1928

• Germany and 61 other countries signed it.
• It promised not to use war to solve problems.

The Effects of The Kellogg-Briand Pact, 1928

• Positive:
  • Increased the confidence that those people had in the Weimar Government.
  • Showed that Germany was a part of a new wave of solutions.
  • The Weimar continued to grow in support.
• Negative:
  • Increased resentment from right-wing groups.
  • This treaty did nothing to end/alter the hated Treaty of Versailles.