GERMANY: FINANCIAL PROBLEMS


Article 231:
Article 231 of the Treaty of Versailles, the War Guilt Clause, forced Germany to take full responsibility for the war and justified the allies’ demands for compensation. Therefore, they were required to pay 6.6 billion pounds in reparations, reimburse all civilian damage and pay for the rebuilding of all devastated areas.
The Dawes Plan:
In 1924 Stresemann negotiated with Great Britain and the US to create the Dawes Plan. This indicated that although Germany were still required to pay reparations, after the first payment of 1000 million marks in 1925, and then the increase over the next 5 years to 2500 million marks in 1930,the reparations would be adjusted to Germany's economic ability.
The depression which was blooming in the United states in 1929 provided many financial issues for Germany. It meant that US banks were left with no other option than to withdraw their loans to German companies, and this caused severe unemployment, hyperinflation, and a significant decrease in living standards. Hence Germany was forced to more independently support themselves, and eventually the funds for the Unemployment Insurance Act of 1927 were exhausted and the national system failed. Many civilians and Germans of the general public lost faith in the Weimar Republic and it was these financial issues which lead to decline in support and hence the rise of the Nazi Party.