Stresemann, Recovery & the Golden Years

In August 1923, a new government was formed, led by Gustav Stresemann.

Gustav Stresemann

Gustav Stresemann was chancellor in 1923 and foreign minister 1924–29. The weaknesses of the Weimar Republic continued during this period, but due to Stresemann’s diplomacy, Germany’s situation improved. Measures were immediately taken by Stresemann to solve FIVE KEY PROBLEMS. These were:

  1. HYPERINFLATION
  2. FRENCH OCCUPATION OF THE RUHR
  3. LACK OF INTERNATIONAL TRUST IN GERMANY
  4. REPARATIONS
  5. ECONOMY NEEDED HELP

The Solutions

POLICY 1: New currency to deal with hyperinflation

The Rentenmark Note

November 1923 – a new currency, the Rentenmark, was established to replace the old mark. Printing of this new currency was strictly limited. One Rentenmark replaced 1000 billion marks. Old notes were burned. In the same month, 700,000 state employees were sacked in order to reduce the state budget. The new currency was welcomed by the German people and inflation was brought back under control. However, it is important to remember that there was no compensation for those who has lost their savings or pensions. These people remained bitter towards the Weimar government.

POLICY 2: Ensure French removal from the Ruhr

The Ruhr

Stresemann put an end to passive resistance because it hadn’t worked, it hadn’t made the French leave, so there was no point in continuing with it as a course of action. He promised France that with the new currency and other economic improvements Germany would keep up with the reparations payments. This resulted in the French withdrawing from the Ruhr, but this was an unpopular policy decision in Germany. There was opposition from people and extremist political parties who saw it as a sign of weak government.

POLICY 3: Improve Germany’s standing internationally

Stresemann’s key aims were for better relations with France and changes to the Versailles Treaty. Stresemann became co-operative with other European powers and accepted that the land taken by the Treaty of Versailles was lost forever and would not be returned to Germany. He hoped that by being more co-operative and getting European leaders on side, he might be able to negotiate some changes to the terms of the Treaty. In 1925 Stresemann signed the Locarno Pact. This was an agreement between Britain, France, Belgium and Italy not to invade each other. A significant decision was also to join the League of Nations in 1926, because Germany was given the status of a “great power” which meant they would actually have a say in all the collective decisions. in 1926 in the light of his achievements in steering the new democratic Germany in a positive direction, and for focusing on rebuilding Germany without compromising peace in Europe, Stresemann was awarded the Nobel Peace Prize. Relations continued to get better and in January 1927 the Inter-Allied Military Commission, which oversaw German disarmament, was removed.

POLICY 4: Negotiations about reparations

His first success was to draw up the Dawes Plan in 1924 in agreement with Britain, France and the USA. This allowed Germany an extension on the reparations payment schedule. The payments were to be made over a longer period of time. In 1929 the Young Plan dramatically lowered the amount of money Germany had to pay back from 132,000 million marks to 37,000 million marks. The Dawes Plan was not very popular in Germany because it didn’t reduce the overall amount, but even when the Young Plan reduced the amount there were still some Germans who were unhappy with it because they felt Germany should not have to pay anything at all. Even with the reduction in debt, Germany wouldn’t pay off their debt until 1988!

POLICY 5: Measures to rebuild the German economy

As Germany was paying reparations again, foreign businesses became more willing to invest money to help build up the German economy. Over the next five years, Germany was lent 25,000 million gold marks as part of the Dawes Plan (see above). This money was used by the German government to build houses, schools and roads. It also allowed the building of new factories and machinery. It also meant there were more jobs available and some people’s wages rose. Most of the loaned money came from the USA, plus American businesses set up factories in Germany. The problem with this, though, was that the German economy was increasingly reliant on the US economy. If anything went wrong in the US the knock-on effect for Germany would be catastrophic. Stresemann described it as Germany “dancing on a volcano”. Farmers were still deeply unhappy because their wages didn’t increase. In 1929 farmworkers only earned half the national average wage. many farmers became so angry with this that they started supporting extremist groups such as the Nazis. also unemployment never fell below 1 million (this was high for the time) and from 1928 it began to increase. Rich people were being expected to pay more money in taxes which they didn’t like. They believed that too much money was being spent on the poor and unemployed.

 Overall, from 1923 onwards Germany became more politically stable and peaceful. Between 1924 and 1928 there weren’t any rebellions trying to overthrow the Weimar government.