GERMANY: ECONOMIC PROBLEMS

War Debts

Discounting the immense cost of the reparations sanctioned by the Treaty of Versailles, Germany had to pay off its own war debts in the wake of four years of continuous fighting. Munitions, army pay, food and oil were all extremely costly factors that needed to be settled after the last shots of the Great War had been fired. As the Allied Forces had taken Germany's key industrial hub situated in the Ruhr, Germany was completely inable to pay off its own war debts, let alone the war debts of Britain, France and the US forced upon them by the Treaty.


World Economic Crisis, 1929
The World Economic Crisis affected the German Republic in the sense that their long-term weaknesses were exposed, and this would ultimately contribute to the collapse of its democracy in 1933. The financial strains and compromises that had to be made challenged the German constitution, and hence its legitimacy and functionality was questioned.

The Treaty of Versailles, 1919
The ToV insisted that 13% of Germany's European territory was to be handed over, including the Ruhr which resulted in loss of a large amount of financial gain due to the industrial benefits of the lost territory. This resulted in high unemployment and low industrial output, and many soldiers who had come back from war or who had lost their jobs due to the treaty army restrictions (limited to 100,000 men) could not find work. Furthermore, the reparations imposed on Germany, 6,600 million pounds, caused extreme hyperinflation. Historian Ruth Henig suggest that the damage imposed on Germany due to increasing the supply of paper money was far greater than the damage which would have been imposed if they had chosen to pay the reparations fairly. This then led to Germany's susceptibility to damage when the Great Depression came around.