The principle of the strict subordination of economic and financial life to the supreme power, already established by the Nazi regime through a long series of measures, was increasingly reaffirmed with the entry into the war.
The Kriegswirtschaftsverordnung of 4 September 1939, premised on the equalization of legal entities in the face of war sacrifices and declared crimes punishable also with the death penalty, speculation and economic sabotage, imposed new tax obligations and forced the Länder, municipalities and other bodies governed by public law to return part of their income to the state. He also established some principles for the formation of prices, aimed at avoiding any dispersion of forces and any inequality between wages, the performance of labor and the prices themselves.
In the credit sector, the position of subordination to the interests of the state of the Central Bank inserted in the orbit of government influence with the law of 10 February 1937 had already been accentuated in January 1939, with the attribution of its presidency to the Minister of Economy. With a law of June 15, 1939, the functions and prerogatives of the Reichsbank were revised and it was entrusted with the management tasks of controlling the entire banking system. With the compulsory golden hedge abolished, the metal reserves retained only their function as an instrument for the settlement of balances in international exchanges, while the principle, already in place for some time, that the monetary equilibrium of the internal market was in effect was legalized. direct productivity of the country.
In order to relieve the Reichsbank of the concerns arising from the growing need for small denomination currency, with an order of 4 September 1939, the Deutsche Rentenbank (v. XVI, p. 709), was again authorized to issue notes with a liberating power equal to those of the Reichsbank. The task of meeting the monetary needs of the operating troops was instead delegated to the Reichskreditkassen, authorized to provide military commands with special payment vouchers (Reichskreditkassenscheinen) having liberating power in the occupied countries. The internal monetary circulation was thus clearly detached from that of the occupied countries, preventing the latter from affecting the volume of the former. Despite the initial tightening of taxes, tax revenues lost their importance in the period 1939-45, while the state’s recourse to the long-term and, above all, short-term capital markets became increasingly important.
From 1 April 1939 to 31 March 1945 the total expenditure of the Reich for military and civil purposes amounted – excluding public service – to about 670 billion RM., Which was covered for about 330 billion by taxes and other income. ordinary budget – including contributions from the occupied countries of RM 70 billion. – and for the remaining 340 billion with loans. The public debt was in fact estimated at the end of the war at about 380 billion, against 37.4 at the beginning. On the other hand, the debt of local public bodies remained almost unchanged (down from 28 to 26 billion) and that of the private economy (stopped at 68 billion).
The debt policy of the state was facilitated by the considerable liquidity determined on the market by the inability of individuals to use their entire monetary income. The so-called “silent financing” was in fact characterized by the mass subscription of government bonds by credit companies and other entities to which unused income flowed, especially in the form of savings. At the end of the war the public securities in the coffers of these entities, including the Reichsbank, amounted to RM 361.8 billion. (92% of the total public debt). This system made it possible, among other things, to avoid large issues of currency and, only after mid-1944, due to the greater urgency of capital by the state, the central bank intervened on the market by purchasing public securities with new issues. Monetary circulation, which in August 1944 was around 38.6 billion, thus rose to around RM 73 billion. at the end of hostilities. Bank deposits and savings deposits were valued, at the same time, at 100 and 125 billion respectively, so that the volume of means of payment existing in Germany at the end of hostilities amounted to approximately 298 billion, compared to 56.4 billion at the end of 1938 and 33.6 at the end of 1932.
Despite the division of its territory into four zones, Germany, in accordance with the Potsdam agreements of August 1945, should have been treated economically as a single entity. In practice, the action of the allied commands was instead predominantly individual and led to an economic and financial division, as well as administrative, of the country into four zones, reduced to three after the unification of the English and American zones. The Reichsmark (RM.) Nevertheless continued to circulate in all areas alongside the occupation currency, although it had lost much of its original importance due to the lack of consumer goods on the market. With respect to foreign currencies, the exchange rate was fixed, immediately after the occupation, at 10 RM. for 1 dollar, 40 RM. for one pound and 1 RM. for 12 French francs. Subsequently, the exchange rate against the dollar was raised to 3.30 RM. It was only after more than three years from the cessation of hostilities, during which an agreement was unsuccessfully attempted for a monetary and fiscal reform that could extend to all of Germany, that, on June 20, 1948, the Western powers declared out of course, in respective zones, the Reichsmark, the Rentenmark and the allied occupation mark, replacing these coins with a new one, Deutsche Mark. The 1 RM notes remained in circulation temporarily. and metal coins, whose value has however been reduced to a tenth of the face value. Each resident of the three western zones was exchanged equal to 60 RM. (40 immediately and 20 after two months). The remainder, compulsorily deposited with credit institutions, was subsequently converted, together with the balances of all the old bank accounts, in the ratio of 1 DM. for 10 RM., and half credited to free accounts and half to blocked accounts. 70% of the blocked part was then canceled, 10% converted into medium and long-term securities and 20% switched to new free accounts. Except in exceptional cases, bank deposits in the name of certain categories of German public bodies were canceled and so were those in the name of the allied occupation authorities. In general, public and private debt and credit ratios have also been reduced to a tenth of their value; prices, salaries and wages, on the other hand, remained unchanged and so did the exchange rate with foreign currencies.
Shortly after the monetary reform of the western areas, the Soviet authorities also announced such a reform for their area, which differs substantially from the first because it proposes to implement, through preferential conversion rates in favor of certain categories of holders , also a redistribution of wealth. In the Russian area, a new decentralized banking system was created, based on regional and provincial banks and corporate bodies and on 1 September a new bank of issue was established.
Regional banks were also created in the western ones, replacing the branches of the Reichsbank, which were subject from 1 March 1948 to the control of a new institution, the Bank Deutscher Länder, which in June 1948 was granted the privilege of issuing tickets (up to to 10 billion DM.) for the three western areas.
The cash and cash equivalents of the four areas (currency, bank deposits and savings deposits) after an initial increase, immediately after the arrival of the occupying forces, following the issue of the occupation currency (the maximum volume of which was about 12 billion of RM.), decreased significantly, falling in June 1947, according to German estimates, to about 173 billion RM. and, after the reform – limited to the three western areas – to 5.7 billion DM. (July 1948).
Public finances after a period of serious imbalance, as a consequence of the paralysis in economic activity and the serious burden on employment expenses, have marked significant improvements thanks to the vigorous deflationary measures adopted by the Allies. Among these, of particular importance was the fiscal tightening of 12 February 1946, which made it possible to reduce the expected budget deficits and in some cases to transform them into actual active surpluses.
According to Ehuzhou, the reorganization of the financial market was completed with the tax reform, also in June 1948. In the western areas, among other things, an adjustment of the income and wages tax and of the tobacco tax was arranged, which will allow a significant reduction of the average tax burden, and a new tax of 100% was introduced on capital increases from 1939 onwards; public debt service was also suspended and old debt securities were canceled from the banks’ balance sheets. In the Soviet zone, the occupation authorities have entrusted the German authorities with the task of modifying the current tax system in order to obtain a better distribution of the war burdens, trying to safeguard the income of the workers.
German employment expenses were estimated for the financial year 1946-47 at RM7.9 billion, of which RM6.6 was covered by budgetary revenue, while 1.3 billion generally relate to services. returns without compensation.
The total revenues of the regional and area administrations in the same year were slightly below RM 30 billion, while the national income, according to the German Economic Institute, would have amounted to RM 50 billion. against 82.1 billion in 1938.
