Germany

As Europe's largest economy and most populous nation, Germany remains a key member of the continent's economic, political, and defense organizations. European power struggles immersed Germany in two devastating World Wars in the first half of the 20th century and left the country occupied by the victorious Allied powers of the US, UK, France, and the Soviet Union in 1945. With the advent of the Cold War, two German states were formed in 1949: the western Federal Republic of Germany (FRG) and the eastern German Democratic Republic (GDR). The democratic FRG embedded itself in key Western economic and security organizations, the EC, which became the EU, and NATO, while the Communist GDR was on the front line of the Soviet-led Warsaw Pact. The decline of the USSR and the end of the Cold War allowed for German unification in 1990. Since then, Germany has expended considerable funds to bring Eastern productivity and wages up to Western standards.

Currency history

The first Mark, known as the Goldmark, was introduced in 1873. With the outbreak of the First World War, the Mark was taken off the gold standard. The currency thus became known as the Papiermark, especially as high inflation, then hyperinflation occurred and the currency became exclusively made up of paper money. The Papiermark was replaced by the Rentenmark in late 1923 and the Reichsmark in 1924. The Deutsche Mark was introduced on 21 June 1948 by the Western Allies (the USA, the United Kingdom and France). The introduction of the new currency was intended to protect western Germany from a second wave of hyperinflation and to stop the rampant barter and black market trade (where American cigarettes acted as currency).

In 1948, the Bank deutscher Ldnder took over issuance of the currency, followed, from 1960, by the Deutsche Bundesbank. It earned a reputation as a strong store of value at times when other national currencies succumbed to periods of inflation. It became a source of national pride and an anchor for the country's economic prosperity, particularly during the years of the Wirtschaftswunder in the 1950s. In the 1990s, opinion polls showed a majority of Germans opposed to the adoption of the euro; polls today show a significant number would prefer to return to the Mark.

The Deutsche Mark played an important role in re-unification. It was introduced as the official currency of East Germany in July 1990, replacing the East German Mark, in preparation for unification on October 3. Ostmark bank accounts were exchanged at a rate of 1:1 for the first 4000 Mark and 2:1 for larger amounts, rates which many economists have criticized as being too generous and a key cause of the subsequent economic problems in the new German states.