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History of the Deutsche Mark

Guilders, thalers, shillings

As the state developed into a prosperous republic, the Deutsche Mark also became stronger and more respected. And when the euro came in 2002, many mourned their D-Mark afterwards.

The term "mark" as a denomination has been around since the early Middle Ages. The mark was introduced as the German currency after the establishment of the German Empire in 1873. Until then, there were many different currencies in circulation in the small German states in the form of coins, bills of exchange and paper bills.

While the gulden was used to pay in the south, the thaler was used in Prussia and other northern states. The division into groschen, shillings and pennies was also very confusing.

The German Empire's worst crisis came from inflation in the early 1920s. As a measure against inflation, the Rentenmark was introduced as a temporary measure at the end of 1923; a year later, when inflation could be curbed, the Reichsmark. The Reichsmark remained the single German currency until 1948.

The birth of the Deutsche Mark

Even three years after the end of the war, the economic situation in Germany was still desolate in 1948. Food and other consumer goods were only allocated to Germans on cards and vouchers. Barter trade and the black market flourished, and many people went hungry.

Until the spring of 1948, the victorious powers could not reach an agreement despite many negotiations. The Soviet Union blocked progress and resigned from the Control Council in March 1948. The western allies decided to push ahead with the currency reform on their own.

The planning ran under the cover name "Bird dog". The new banknotes were printed in the USA and arrived in Germany in April 1948. At the same time, concrete preparations began in a former barracks in Rothwesten near Kassel.

Ten German experts from the Economic Council and Allied experts were barracked there in the strictest of secrecy. Your task: to prepare all the necessary laws for the implementation of a currency reform as quickly as possible. The Americans feared that the Soviets could carry out a currency reform earlier in their zone and then flow the worthless Reichsmark notes into the western zones.

June 20, 1948: 40 DM "bounty"

Despite secrecy, rumors circulated about the impending currency reform and the Germans eagerly awaited the exact time. Since the Reichsmark would soon be worth nothing, everyone tried to buy as much as possible. The shops hoarded their wares in the hope of more solid money. On the black market, prices rose to astronomical heights.

On Friday, June 18th, the currency reform for Sunday, June 20th was announced in the evening. Each adult person was to receive 40 new Deutsche Marks on presentation of 60 Reichsmarks, and later another 20 DM. From June 21, only the Deutsche Mark was to be legal tender, the Reichsmark lost its validity.

Savings and other credit balances had to be registered within a few days, otherwise they lost their value - they were converted at a ratio of 10 Reichsmarks to 1 DM (in real terms 6.5 to 1, because some of the savings deposits were blocked for an indefinite period and some were devalued) . On the day after the currency reform, the Germans stood in amazement in front of filled shop windows, the markets suddenly offered all kinds of vegetables and food again.

Winner and Loser

In the memory of the Federal Germans, the currency reform was the decisive step towards the establishment of the Federal Republic. From that day on everything was different - life began to run its course again. Many critics at home and abroad accused her that the currency reform was anti-social.

Small savings balances and nest egg were treated in the same way as the balances of black marketeers or large accounts. Assets and material assets were not offset. Those who were already wealthy through inheritances, shares or land holdings remained so. The "zero hour", in which every German started with 40 marks, is a fairy tale.

The currency reform in the Eastern sector followed a few days later. The "Ostmark" of the later GDR actually sealed the division of old Germany into two states. The situation in Berlin came to a head - just a few days after the currency reform, the western sector of the city was cut off from supplies from the eastern sectors and land routes into the city were blocked.

Stability policy

Stable prices and thus a stable currency were the primary goals of Ludwig Erhard's economic policy. But first the prices rose. Average earnings were around 300 marks, rents were frozen at 40 marks, heating and fuel were scarce, food was relatively expensive.

With the Marshall Plan aid, however, the turnaround was achieved at the beginning of the 1950s - the money that the Germans repaid to the Americans could be put back into investments as credit. Despite interim crises such as the Korean War, the D-Mark developed into one of the hardest currencies in the world by 1958. Soon Germany was again considered creditworthy abroad.

Unofficial key currency

Most of the other western currencies lost value against the Deutsche Mark in the following decades. The link to the US dollar was of particular importance. There were fixed exchange rates until the early 1970s. Every change in the value of the dollar affected the other western currencies, which were based on the dollar.

The D-Mark was gradually revalued against the dollar - until the exchange rate was released in the early 1970s. The D-Mark also lost value during its validity - in the 1990s it had only around 27 percent of its purchasing power from 1949. However, other currencies had suffered considerably higher inflation losses during the same period.

Since the D-Mark was the most stable currency in Europe, with the exception of the Swiss franc, it was an unofficial reserve currency for neighboring countries for a long time, especially within the European Union (previously EEC - European Economic Community). In the countries of Eastern Europe, the D-Mark became a kind of second currency alongside the domestic currencies.

Symbol of unity

"If the D-Mark comes, let's stay, if it doesn't come, let's go to her!" Was the message on the banners of the demonstrators in the GDR in the spring of 1990. The monetary union should be negotiated before further political steps towards reunification. In view of the continuing flow of emigrants, the negotiators were forced to act quickly.

With the economic, monetary and social union, the D-Mark became the sole means of payment in the GDR on July 1, 1990. Wages, salaries, pensions and rents were converted 1 to 1 - credit staggered according to age and amount 1 to 1 or 1 to 2.

These exchange rates were not without controversy. Many economic experts, including the President of the Bundesbank and the Advisory Council on the Assessment of Macroeconomic Development, had spoken out against exposing the GDR to competition from West German and international competitors overnight.

Even in retrospect, more than 25 years after monetary union, many critics see this as a serious mistake. In contrast to Ludwig Erhard's currency reform, this currency union did not pave the way for an economic miracle, but rather prevented one through the "appreciation shock". It is true that the East German consumers finally got money in their hands from which they could buy what they wanted, but the monetary union brought about an explosion in costs for businesses.

They became uninteresting as trading partners for the other former Eastern Bloc countries, which were also opening up to the market. At the same time, their productivity was too far below that in the old Federal Republic for them to catch up quickly enough.

Farewell to the Deutsche Mark

At almost the same time as German reunification, the European Economic and Monetary Union was adopted within the European Union. The euro was intended to further facilitate economic relations in the common internal market and create a stable currency for all participating countries.

In June 1997 the then 15 heads of state and government agreed, not least at the urging of Germany, on a stability pact for the euro. This set out conditions that countries must meet before they can join the monetary union, even if they are members. Among other things, the new debt must not amount to more than three percent of the gross domestic product.

On January 1, 2002, the euro was introduced as cash in Luxembourg, Finland, Ireland, Belgium, the Netherlands, Austria, France, Italy, Spain, Portugal, Greece and Germany. The exchange rate to the D-Mark had been set at 1.95583 D-Mark three years earlier.

It was difficult for many Germans to say goodbye to the D-Mark, as they regarded it as a guarantee of prosperity and security. In a survey two and a half years after the introduction of the euro, at least 60 percent of those questioned said that they now have a positive attitude towards the euro.

As a result of price adjustments, especially in the service sector, the euro gained some fame in the years after its introduction, but also as "teuro".