How Gustav Stresemann helped stabilise Weimar Germany

Introduction to Gustav Stresemann

• Chancellor and Minister for Foreign Affairs of Weimar Germany (1923-1929): Served during a critical period of instability for Germany, influencing both domestic policies and foreign relations.

• Pivotal Role in Stabilizing Post-World War I Germany: Developed strategies to address severe economic hardships and to improve foreign relations, fostering a semblance of stability in a nation reeling from defeat and turmoil.

Context: Challenges Faced by Weimar Germany

Post-WWI Consequences

• Economic Bankruptcy Post-Defeat: The Treaty of Versailles imposed heavy reparations that devastated the German economy, leading to a crises of confidence in the Weimar Republic.

• Reparations Burden: The requirement to pay reparations to Allied countries led to severe strains on state finances. Payments were difficult to meet without crippling the economy.

Invasion of the Ruhr Valley

• French and Belgian Invasion: In January 1923, Germany’s inability to meet reparations led to an occupation of the Ruhr Valley, Germany's industrial heartland, by French and Belgian troops, drastically impacting production and leading to widespread strikes.

• Consequences of Occupation: This led to a significant drop in industrial output and exacerbated economic woes, contributing to hyperinflation and social unrest.

Hyperinflation and Unemployment

• Hyperinflation Crisis: The severe devaluation of the Mark, with prices skyrocketing, rendered currency virtually worthless, crippling savings and purchasing power for the average citizen.

• Mass Unemployment: As factories shut down, unemployment surged, leading to social turmoil and increased strikes against foreign occupation.

Rise of Extremism

• Support for Extremist Parties: Economic desperation contributed to the rise of extremist movements, including the National Socialists (Nazis), as citizens sought radical solutions to their grievances.

International Isolation

• Diplomatic Challenges: Following World War I, Germany was diplomatically isolated, making it difficult to garner financial assistance or support from other nations.

Key Actions by Stresemann to Stabilize Germany

End of Passive Resistance

• Resumption of Production: Stresemann called off the policy of passive resistance in the Ruhr, encouraging workers to return to their jobs, which was crucial for restoring production and economic stability.

Renegotiation of Reparations

• Reparations Strategy: Stresemann sought to appease France and Belgium by committing to resume reparations payments, fostering goodwill to ease international tensions.

Financial Reforms

• Introduction of the Rentenmark: In 1923, Stresemann, along with financial experts like Hjalmar Schacht and Hans Luther, introduced the Rentenmark to stabilize the currency by backing it with land and industrial resources.

• Transition to Reichsmark: The Rentenmark was later replaced by the Reichsmark in 1924, further solidifying economic recovery efforts.

Economic Recovery Initiatives

• Dawes Plan (1924): Stresemann negotiated this plan, which temporarily reduced reparations and allowed the German economy to stabilize through manageable payments, also opening avenues for U.S. loans.

• Foreign Loans: Secured extensive loans from foreign investors primarily to fund infrastructure projects and alleviate unemployment through job creation.

Restoration of International Relationships

• Locarno Treaties (1925): Agreements that secured Germany's western borders with France and Belgium, promoting a period of reconciliation and contributing to Germany's reintegration into Europe.

• League of Nations Membership (1926): Germany was admitted to the League of Nations, affirming its status as a responsible power and allowing it to participate in international diplomacy.

• Kellogg-Briand Pact: Signed by multiple nations to renounce war as a national policy; while largely symbolic, it indicated Germany's commitment to peaceful resolutions.

Final Reforms and Legacy

• Young Plan (1929): Further reduced reparations; introduced additional loans to stimulate the German economy, though it faced opposition domestically.

• Warnings of Instability: Stresemann consistently warned of the fragile nature of Germany’s recovery, famously likening the situation to "dancing on a volcano" due to underlying social tensions.

• Impact of the 1929 Wall Street Crash: The crash signaled the onset of a global economic depression, severely impacting Germany and undermining the stability achieved during Stresemann's tenure.