by Matthew Adams

Created on: September 02, 2010

Germany's defeat in two World Wars left them in the economic mire. Both at the end of the first and second, a German economy recovery happened to some extent. However, it was not immediate and required some shrewd economic policies.

After World War One Germany's defeat had left the country with debts. Such debts had emerged as war bonds needed repaying. Then in addition to this the reparation demands made by the Treaty of Versailles to France and Britain was a foreign debt that amounted to million of marks. To this extent, the German balance of payments was very much negative.

As such, in the early 1920s the economic circumstances in Germany were not enhanced, and French occupation of the Ruhr in 1923 proved to be the catalyst of an inflationary spiral in Germany. During this time the German currency was greatly devalued.

The emergence of Stresemann as chancellor saw the introduction of a new German currency. The Retenmark went some way to reducing inflation in Germany and was the beginning of a German economic recovery. Further to this, Stresemann also approved of the Dawes Plan which gave clearer guidelines as to German reparation requirements and in some respects reduced them.

Therefore, in the mid-1920s the German economy began a steady economic recovery. This economic recovery would see industries such as iron, steel, coal, and chemicals reach pre-war levels by the end of the '20s. Overall, it was not quite an economic boom like in West Germany, but still a recovery.

Germany's defeat in the second war was one that had greater impact in respect of reparation requirements. In World War One the war was never taken onto German soil, and bombers had yet to be designed. However, in the second this was not the case. Germany had been bombed fairly extensively by the Allies, this included cities such as Dresden as well as industrial targets which reduced German armament production. Aside from the bombing, allied soldiers in both east and west entered Germany as at the Battle of Berlin. Therefore, German cities were in ruins and post-war reconstruction was required.

The debate regarding the division of Germany left four occupation zones. In the end, the USSR and the west went their own ways as the Cold War saw West Germany and Communist East Germany emerge in 1949.

Marshall aid was the project aimed at post-war reconstruction. America offered economic assistance to assist post-war reconstruction and this was extended to West Germany. However, the USSR flatly rejected the plan in East Germany.

The results of Marshall aid helped bring a great economic revival in West Germany during the 1950s. In the post-war era the boom ensured many of Germany's industries recovered quickly during the decade. However, in comparison the GDR stagnated and many east Germans began to emigrate to the west, particularly in Berlin.

Overall, lasting economic recovery in West Germany was in contrast to the Weimar Republic which slipped back in the 1930s. Equally however, it was only in West Germany as the GDR stagnated. Although, the boom in West Germany certainly eclipsed the recovery in the mid 1920s.

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