Reparations

Reparations were the payments which required Germany to pay

to repair all the damage of the war. Germany had lost her
richest farmland and the coalfields after WW1. Its economy
had been damaged by the war. It couldn’t stand large payments
of gold leaving Germany every six months. In July 1922, there
was an economic crisis, and Germany was granted a six-month
delay in payments. But the German government failed to make
its January 1923 payment.

Charles Dawes was the US budget director. In 1923, he was

sent to Europe to sort out Germany's economy. Dawes
arranged the Dawes Plan with Stresemann, which gave
Germany longer to pay reparations. Most importantly, Dawes
agreed to America lending Germany 800 million gold marks,
which kick-started the German economy.
Most Germans were reassured and this strengthen the Weimar
Republic politically. However, the were drawbacks. The German
extreme political parties were furious Germany had again
agreed to pay reparations. Furthermore, the fragile economic
recovery depended on American loans.
 International Relations
Germany was treated as an international outcast. In the countries that
had fought against it in WWI it was held responsible for starting the
Great War.

If Germany could not restore good relations with her European

neighbours, Stresemann believed German would collapse. He needed to
convince foreign governments that Germany no longer posed any
military threat – or indeed had any appetite for war.

Stresemann improved relations with France and Belgium. His

agreement with them was known as the Treaty of Locarno and it said
that Germany, France and Belgium would respect each other’s borders,
and that Germany would not send troops into the area bordering
France known as the Rhineland. The treaty was signed in October 1925
and Germany was then allowed into the League of Nations. These steps
increased Germany’s international trade.

Nationalists attacked Stresemann for signing Locarno, seeing it as an

acceptance of the Treaty Communists also attacked Locarno seeing it
as a plot against the Communist government in the USSR.

Germany’s international relations further improved in 1928, when

Stresemann signed the Kellog-Briand Pact with over sixty other
countries. It agreed that these countries would never go to war
against each other. This was good for Germany because it was now
more secure and no longer vulnerable to invasion (due to the Treaty of
Versailles which had stripped Germany of the majority of its armed
forces).

Not all Germans agreed. The Pact did nothing to remove the hatred of
the Treaty of Versailles. Germany still had to pay reparations, lost
land and hand military restrictions.
 Industry
Germany needed a strong industry to be able to make
reparation payments. Stresemann used money from the Dawes
Plan to build new factories and businesses. This meant more
goods and jobs were produced. As well as this, other countries
around the world now wanted to trade with Germany. As a
result, more money was spent so Germany became richer.

Five years later, Stresemann made further progress with

reparations, when he agreed the Young Plan 1929. The plan
reduced reparations from £6 billion to £2 billion and giving
Germany a further 59 years to pay. Extremists were angered
again! As Stresemann had increased the length of payments to
“unborn Germans” and they still had to pay £50 million per
year. There were some successes though, as it enabled the
government to lower ordinary Germans. Lowered taxes also
released public spending power. This boosted German industry
and created more jobs; these jobs boosted spending power and
this boosted industry and employment again.
 Extremist Uprisings
In May 1924 elections 40% of Germans voted for extremist
parties. This showed that many German were still unhappy with
the Weimar Government.

This was because a lot of people believed in a traditional,

patriotic Germany. Germany’s economic stability saw culture in
Germany flourish. Artists and writers were free to express
themselves in their art and literature as there was little
censorship. Elderly people were especially opposed to it. They
believed that it went against all of Germany’s principles. This
was dangerous as these people were also more likely to support
right-wing extremist groups who wanted to set up a strict,
disciplined dictatorship with one strong, authoritative leader.
With the support of these people, some of whom might also be
well-educated, right-wing extremists could become a threat to
the Weimar Republic. However, elections in May 1928 saw
votes for extremist parties decrease to 28%. Stresemann’s
policies were working for most Germans.
 Hyperinflation
Hyperinflation happened because the Weimar government
printed banknotes to pay reparations and - after the 1923
French invasion - the Ruhr strikers. Because these banknotes
were not matched by Germany's production, their value fell.

Charles Dawes was the US budget director. In 1923, he was

sent to Europe to sort out Germany's economy. Under his
advice, the German Reichsbank was reformed and created a
new currency called Reichsmark which valued was tied to the
price of gold. The old money was called in and burned. This
ended the hyperinflation.
This was a much stronger basis for the recovery of German
businesses and improvements to employment. Unfortunately, it
could not bring back the losses of those people ruined by
hyperinflation.