Deutsche Mark
The Deutsche Mark no longer exists as everyday money, yet the Deutsche Bundesbank still promises to change any German mark in cash into euros. There is no deadline. A person can walk into any Bundesbank branch in Germany. Notes and coins can even be posted in an envelope. In 2012, it was estimated that as many as 13.2 billion marks were still out there somewhere.
Why would so much of one old currency stay in drawers and wallets for so long? The answer begins with a country that, after a war, had money nobody trusted and a population using cigarettes as currency. How did a currency handed down by occupying powers become a source of national pride? Why did a single new banknote and coin system help set off a crisis over one city? And what did Germans actually carry in their pockets? This documentary follows the mark from its improvised start to its handover to the euro.
On the 15th of November 1923, Germany tried to stop hyperinflation by replacing the paper mark with the Rentenmark. The Reichsmark followed in 1924. After the Second World War, the country again lacked money that anyone could rely on.
For the first two years of occupation, France, the United Kingdom, the United States and the Soviet Union could not agree on a currency reform. Strains between the Allies meant that each zone handled monetary matters on its own. American policy was set by a directive called JCS 1067, which stayed in effect until July 1947. It forbade the US military governor from taking any step to strengthen the German financial structure. Each of the Allies printed its own occupation currency.
On Sunday the 20th of June 1948, Ludwig Erhard introduced the Deutsche Mark. A group of 11 experts had devised the reform, managed by Edward A. Tenenbaum. He also coined the name Deutsche Mark, which began as a temporary label and became permanent. Every person received a per capita allowance of DM 60, paid in two parts: DM 40 first, then DM 20.
A few weeks later, Erhard went further. Acting against orders, he issued an edict abolishing many economic controls that the Nazis had introduced and the Allies had left in place. He did it on a Sunday on purpose. By his own frequent admission, the American, British and French offices were closed, and he was sure they would have overruled him on a weekday.
The new money was meant to shield western Germany from a second wave of hyperinflation. It was also meant to end the rampant barter and black market trade, where cigarettes had served as currency. At first it was handed out only in the three western zones outside Berlin. The Soviet authorities were angered and saw the move as a threat. They cut every road, rail and canal link between the western zones and West Berlin, which started the Berlin Blockade. The United States and Britain responded with an airlift of food and coal. They also distributed the new currency in West Berlin.
Back in the western zones, shop windows were about to change almost overnight.
The rate was one new mark for every ten old ones. That single ratio wiped out 90% of government and private debt, along with private savings. It hit a country where prices and wages had been controlled since the 1930s while money stayed plentiful. People had piled up large paper assets, official prices bore no relation to reality, and more than half of all transactions were happening unofficially.
Prices were then released from control. Labor unions agreed to accept a 15% wage increase, even though prices had risen 25%. The effect was that the prices of German export goods held steady, while export profits and earnings soared and were poured back into the economy.
The reform arrived at the same time as $1.4 billion in Marshall Plan money from the United States, used mainly for investment. That funding pushed German companies, like those across Western Europe, to modernize their business practices and take the wider market into account. It also broke through bottlenecks created by the controls that remained. Those were removed in 1949, and a much larger market opened for German exports.
Consumer goods appeared in the stores overnight, because they could now be sold at higher prices. Most historians today treat this as a giant success story. The mood at the time was different. Prices moved freely while wages were still fixed by law, so ordinary people could not afford to shop.
In the summer of 1948, a wave of strikes and demonstrations swept across West Germany. In one episode in Stuttgart, known as the Stuttgarter Vorfälle, strikers were met by US tanks. Only after the wage freeze was abandoned did the population accept the Deutschmark and free prices.
Later in 1948, an institution called the Bank deutscher Länder took charge of the money that had just survived its first angry summer. Its name means the Bank of the German States.
In 1957, the Deutsche Bundesbank took over from the Bank deutscher Länder. Its monetary policy gave the mark a reputation as one of the world's most stable currencies. Compared with certain other European central banks, the policy was called hard. The words hard and soft described how seriously a bank pursued low inflation and kept politics out of its decisions. This approach became the foundation of the European Central Bank's present policy toward the euro.
At times when other national currencies gave way to inflation, the mark held its value. It became a source of national pride and an anchor of prosperity, especially during the Wirtschaftswunder years of the 1950s.
The mark also spread by absorption. In a referendum, the people of the Saar Protectorate rejected a proposal to make the territory a "European territory". French claims before the vote had warned that a no would keep the Saar a French protectorate. Instead it was incorporated into the Federal Republic of Germany on the 1st of January 1957. The new state of Saarland kept the Saar franc, which was in a currency union at par with the French franc. On the 9th of July 1959, the Deutsche Mark replaced it at a ratio of 100 francs to DM 0.8507.
The mark's strength showed most clearly in 1993. Speculation against the French franc and other European currencies forced a change to the European Exchange Rate Mechanism, while the mark stood firm. Still, hard is only a relative term. Over its 53-year history, the purchasing power of the German mark fell by more than 70%.
Even so, before the switch to the euro, the Deutsche Mark was the largest international reserve currency after the United States dollar.
A few days after the western reform, the Soviet occupation zone launched a mark of its own. It took the form of Reichsmark and Rentenmark notes carrying adhesive stamps, meant to stop old notes from the west flooding in. In July 1948, a completely new series of East German banknotes followed. From 1948 to 1964 this currency was also called Deutsche Mark, and people colloquially referred to it as the Ostmark, which means Eastmark.
That arrangement ended in July 1990, when the Deutsche Mark became the official currency of East Germany. It replaced the East German mark, known as the Mark der DDR, in preparation for unification on the 3rd of October 1990. East German marks were exchanged at 1 to 1 for the first M 4,000 and at 2 to 1 for larger amounts. The government of Germany and the Bundesbank were in major disagreement over that exchange rate.
Even before that, money had crossed the border in people's hands. Each East German citizen who came to West Germany was given Begrüßungsgeld, or welcome money, a per capita allowance of DM 100 in cash.
Politics shaped the arrangement too. France and the United Kingdom opposed German reunification and tried to influence the Soviet Union to stop it. In late 1989, France extracted a German commitment to a Monetary Union in return for its support.
In 2001, shoppers in German supermarkets could still find prices marked to the nearest pfennig. Germany never withdrew its 1-pfennig and 2-pfennig coins, unlike other European countries, and kept them until the euro arrived. The habit of precision survived the change. Finland and the Netherlands price to the nearest 5 cents, but the 1-cent coin is still common in Germany.
The Bank deutscher Länder issued the first Deutsche Mark coins in 1948 and 1949. From 1950, the inscription Bundesrepublik Deutschland appeared on them. The early denominations were 1, 2, 5, 10 and 50 pfennigs. The 1 and 2 pfennig coins were struck in bronze-clad steel, the 5 and 10 in brass-clad steel, and the 50 in cupronickel. A cupronickel DM 1 coin followed in 1950. In 1951 came a cupronickel DM 2 and a DM 5 in .625 silver. Cupronickel replaced the silver in the DM 5 in 1975.
The larger coins often carried commemorative themes. The DM 2 coin, for example, bore portraits including Max Planck, Konrad Adenauer and Ludwig Erhard. Commemorative silver DM 5 and DM 10 coins were also legal tender, though they were rarely seen outside collectors' circles.
Each coin carries a mint mark. D stands for Munich, F for Stuttgart, G for Karlsruhe and J for Hamburg. Coins struck during the Second World War used A for Berlin and B for Vienna. A returned for marks minted in Berlin from 1990, and the mint marks continued onto German euro coins.
From the 1st of July 1990 to the 1st of July 1991, East German coins up to 50 pfennigs circulated as Deutsche Mark coins at face value. Small coins were temporarily short. These coins were legal tender only in the former East Germany.
Germans also had their own names for coins. A 10-pfennig coin could be called a groschen, and a 5-pfennig coin a sechser, meaning sixer. Both words come from the independent states of the era before 1871, notably Prussia. There a groschen was divided into 12 pfennigs, so half a groschen was 6. After 1871-12 old pfennigs converted to 10 pfennigs of the new mark. The 10-pfennig coin therefore inherited groschen and the 5-pfennig coin inherited sechser. Both are regional usages, and sechser is the less widespread.
In northern Germany, the DM 5 coin was sometimes called a Heiermann. In Bavaria, the DM 2 coin was called a Zwickl, and that word is now used for the 2 euro coin in the region.
Every note of the third banknote series carried a warning in the upper right corner of its back. Anyone who counterfeited or falsified banknotes, or put forged ones into circulation, faced at least two years of punishment. The text came from section 146 of the German penal code. A 1969 reform of that code replaced the word Zuchthaus on the notes with Freiheitsstrafe.
The first banknote series was issued in 1948 by the Allied military. The second came later in 1948 from the Bank deutscher Länder. Its designs resembled the US dollar and the French franc. The Bank of France and the American Bank Note Company shared the design and printing. The last DM 5 and DM 10 notes of that series were phased out by the 31st of July 1966.
The third series came from the Bundesbank, formed by the 1957 merger of the Bank deutscher Länder with the states' central banks. The earlier notes were printed on a less durable paper and wore out quickly. The reserve stock for replacing damaged notes was nearly gone. The new notes showed neutral symbols, paintings by German painters, and buildings. The DM 10 reverse carried the training ship Gorch Fock, the DM 50 the Holstentor in Lübeck, and the DM 100 the Federal Eagle.
The DM 20 entered circulation on the 10th of February 1961. The DM 100 and DM 50 followed in 1962, and the DM 5 and DM 10 arrived in 1963. The DM 1000 appeared in 1964 and the DM 500 in 1965. West Germany printed them exclusively, at the Bundesdruckerei in West Berlin and at Giesecke+Devrient in Munich. From 1976, the security thread carried a colorless, machine-readable mixture, and notes with it were designated BBk Ia. The series ceased to be legal tender on the 30th of June 1995.
Behind this public money sat a hidden one. The Bundesbank commissioned a reserve series on the 1st of July 1960, printed between 1963 and 1974. The fear was that the Eastern Bloc might systematically counterfeit the regular notes to cripple the economy. If that happened, the regular notes would be replaced quickly with the reserve ones. In all, 670 million of these notes were printed, worth 25 billion marks. A separate reserve series for West Berlin, commissioned on the 1st of July 1963, added 115 million notes worth 4 billion marks. About 15 billion marks of the reserve notes were kept in a custom-built underground bunker in Cochem, in Rheinland-Pfalz. The rest sat in the Bundesbank vault in Frankfurt.
The fourth series, introduced in 1990, answered advances in forgery technology. Its notes honored German artists and scientists, with men and women chosen in equal numbers. The DM 5 showed Bettina von Arnim, the DM 10 Carl Friedrich Gauss, and the DM 100 Clara Schumann. The DM 1000 showed the brothers Wilhelm and Jacob Grimm. Each background building was linked to the person shown, and the reverse referred to that person's work. A new DM 200 note eased the load on the DM 100, which made up 54% of all notes in circulation.
The DM 100 and DM 200 were issued first, on the 1st of October 1990, two days before reunification. They bear the printed date "Frankfurt am Main, 2. Januar 1989". The other denominations followed one at a time so the public could get used to each before the next. The series was complete by the 27th of October 1992. In 1996, the DM 50, DM 100 and DM 200 gained extra protections, including a hologram foil and the EURion constellation on the back. They also gained a matted print of the denomination on the right of the front, like the one on the back of euro banknotes.
On the 31st of December 1998, the Council of the European Union fixed the irrevocable rate at DM 1.95583 to one euro. It took effect on the 1st of January 1999. In 1999 the euro replaced the Deutsche Mark. German coins and notes stayed in circulation, defined in euros, until euro notes and coins arrived on the 1st of January 2002. Other eurozone states let the old and new money circulate together for up to two months. Germany did not. The Deutsche Mark ceased to be legal tender immediately, although shops kept accepting mark coins and notes until the 1st of March 2002.
One last coin marked the farewell. On the 27th of December 2000, the German government passed a law. It allowed the Bundesbank to issue a special .999 pure gold DM 1 coin in 2001. The coin matched the circulating cupronickel DM 1 coin in design and dimensions. Its reverse read Deutsche Bundesbank rather than Bundesrepublik Deutschland, because the Bundesbank was the issuing authority. A total of one million were minted, 200,000 at each of five mints. Coin dealers sold them from mid-2001 on behalf of the Bundesbank. The issue price varied by dealer but averaged approximately US$165.
Nostalgia lingered. One poll in 2011 showed a narrow majority of Germans favoring the currency's restoration. Only a minority believed that restoring it would bring any economic benefit. Polls in the early 2020s showed that only a minority of Germans supported bringing the mark back.
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Updated
Common questions
Can you still exchange Deutsche Marks for euros?
Yes. The Deutsche Bundesbank has guaranteed that German marks in cash can be changed into euros indefinitely. This can be done in person at any Bundesbank branch in Germany, or by mailing notes and coins to the Bundesbank.
Who introduced the Deutsche Mark, and when?
Ludwig Erhard introduced it on Sunday the 20th of June 1948. Edward A. Tenenbaum managed the group of 11 experts who devised the reform and also created the name Deutsche Mark.
Why did the 1948 currency reform lead to the Berlin Blockade?
The new currency was first handed out in the three western occupation zones outside Berlin. Soviet authorities were angered and saw it as a threat, so they cut road, rail and canal links between the western zones and West Berlin.
What was the exchange rate for reunification in 1990?
East German marks were exchanged for Deutsche Marks at 1 to 1 for the first M 4,000 and 2 to 1 for larger amounts. The German government and the Bundesbank disagreed strongly over the rate.
What was the fixed exchange rate between the mark and the euro?
The Council of the European Union fixed it at DM 1.95583 to one euro on the 31st of December 1998, effective the 1st of January 1999.
What was the reserve banknote series stored in Cochem?
It was a reserve series commissioned by the Bundesbank in case the Eastern Bloc began counterfeiting the regular notes to cripple the economy. About 15 billion marks of reserve notes were kept in an underground bunker in Cochem, with the rest in Frankfurt.
All sources
26 references cited across the entry
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- 21The sculptor Richard Martin Werner designed the woman relief after his wife Gerda Johanna Werner .
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