Editor's Choice
How did the Treaty of Versailles cause economic hardship and hyperinflation in Germany?
Quick answer:
The Treaty of Versailles imposed severe economic burdens on Germany by requiring it to pay $33 billion in reparations to the Allies, which strained its already depleted economy after World War I. In response to these demands and the occupation of the Ruhr Valley by French and Belgian troops, Germany increased its money printing, leading to hyperinflation. This economic turmoil, exacerbated by the Great Depression, destabilized the Weimar Republic and contributed to the rise of the Nazi Party.
In many ways, the Treaty of Versailles was meant to be a punishment for Germany. In 1921, Germany was required to pay 6.6 billion British pounds in reparations. At the time, Germany was unable to pay this. The country's coffers were still empty, as a result of the expensive war which had ended only three years before.
As a result of Germany's inability to pay these reparations, French and Belgian troops invaded the Ruhr Valley in order to seize raw materials and industrial centers which would serve as partial payment. They took control of mines and factories and requisitioned a large number of goods from this industrial region. German workers, acting under the instruction of the government, refused to cooperate with the occupying forces. This drove unemployment in the country up to about 23 percent.
In order to further pay off their debts and support out-of-work Germans, the German government...
Unlock This Answer Now
Start your 48-hour free trial and get ahead in class. Boost your grades with access to expert answers and top-tier study guides. Thousands of students are already mastering their assignments—don't miss out. Cancel anytime.
Already a member? Log in here.
decided to increase its printing of paper money. This, combined with the shortfall in domestically produced goods, led to rampant hyperinflation as the value of the currency dropped dramatically.
References
The Treaty of Versailles had many harsh effects on Germany. The Treaty of Versailles had significant negative economic impacts on Germany. Germany was required to pay the Allies $33 billion in reparations for the war damages caused by World War I. These payments made it very difficult for Germany to take actions that would help Germany’s economy grow. Since Germany had to make these payments, they didn’t have as much money to invest in their economy. When the Great Depression occurred in Germany, these payments made it hard for the government of the Weimar Republic to take steps to effectively deal with the Great Depression.
Compounding the problems Germany faced with the high reparations was that the Germany government began to print more paper money. This led to out-of-control inflation as prices rose since people had more money to spend, but the supply of goods didn’t increase. This created further problems in Germany, which eventually led to the failure of the Weimar Republic and the rise of the Nazi Party to power.
References