Treaty of Versailles Economic Impact Essay

854 WordsDec 25, 20144 Pages
It is accurate to suggest that the Treaty of Versailles was mainly responsible for the political and economic instability in Germany in the years 1919-23. The treaty led to political and economic problems because of the terms included in it. The German government was seen by many to surrender to the dictation of Britain, France and America. Forcing the country to submit a lot of land, losing a huge percentage of their population and having their military force. All of these terms are what led Germany to economic and political instability in the years 1919-23. One of the terms of the treaty, which caused economic instability, were the reparations Germany had to pay for the war. The figure was set at £6.6 billion and undoubtedly Germany would not be able to pay this figure. The English economist, John Maynard Keynes, feared in 1919 that the reparation set would fundamentally weaken the economy of Germany with consequences for the whole of Europe. George Clemenceau aimed to cripple the German economy with the high reparations figure. During this period, Germany had received between 27 and 38 billion marks in loans and by 1931, the German foreign debt stood at 21.514 billion marks therefore led to economic instability in Germany. Moreover, the treaty caused hyperinflation. This was linked with reparations figures Germany had to pay in the treaty of Versailles. In 1923, Germany had failed to make a reparations payment resulting in France occupying the Ruhr. This had a disastrous effect on the German economy, resulting in the German government printing more money as the currency collapsed and by November 1923, one US dollar was worth 4.2 trillion marks. Leading economists still believe that the reparations accounted for most of Germany’s deficit in 1921 and 1922 and that they caused hyperinflation. Furthermore, Germany was stripped of 25,000 square miles of

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