GERMANY’S CHALLENGES DUE TO REPARATIONS
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Loss of Territory:
France and Belgium occupied the Ruhr in 1923 when Germany failed to make reparations payments, worsening economic hardships.-
The occupation disrupted coal and industrial production, leading to shortages and further economic decline.
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German workers engaged in passive resistance, refusing to work, which deepened the crisis.
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The government continued paying the striking workers, worsening the budget deficit.
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Hyperinflation:
The Weimar Republic printed large amounts of money to meet reparations and support striking workers.-
Prices soared uncontrollably, and the German mark became worthless.
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People’s life savings were wiped out, and middle-class families suffered the most.
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Workers were paid multiple times a day to cope with rapidly rising prices.
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Bartering became common as currency lost its value.
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Economic Instability and Social Unrest:
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Businesses collapsed due to unpredictable prices and lack of capital.
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Unemployment and poverty increased, leading to widespread hunger and despair.
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Public confidence in the Weimar Republic weakened, fostering political extremism.
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The crisis provided fertile ground for radical parties, including the rise of the Nazi Party.
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SOLUTIONS TO GERMANY’S ECONOMIC PROBLEMS
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Gustav Stresemann’s Policies (1923–1929):
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Introduced the Rentenmark to stabilize the currency.
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Ended passive resistance in the Ruhr and resumed reparations.
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Encouraged foreign investment and promoted cooperation with the Allies.
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Dawes Plan (1924):
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Provided US loans to Germany.
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Rescheduled and reduced reparations payments to manageable levels.
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Helped restore Germany’s economy and stabilize its currency.
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LOCARNO TREATY (1925)
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Significance:
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Marked a period of improved relations between Germany and Western powers.
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Fostered peace and mutual trust in post-war Europe.
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Terms:
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Germany accepted its western borders set by the Versailles Treaty.
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Rhineland was to remain demilitarized.
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Disputes would be settled through peaceful means.
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YOUNG PLAN (1929)
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Objective:
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Further reduced Germany’s total reparations burden.
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Extended the repayment period and encouraged new loans.
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Challenges:
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The Great Depression of 1929 severely reduced international financial support.
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US loans dried up, hindering the success of the plan.
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