Samiksha Jaiswal (Editor)

Deutsche Mark

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Code  DEM
Plural  Mark
Symbol  DM
⁄100  Pfennig
Pfennig  Pfennig
Pfennig  pf

The Deutsche Mark ( [ˈdɔʏtʃə ˈmaɐ̯k], German mark), abbreviated "DM" or  "D-Mark" , was the official currency of West Germany (1948–1990) and unified Germany (1990–2002) until the adoption of the euro in 2002. In English, but not in German, it is commonly called the "Deutschmark" (/ˈdɔɪmɑːrk/). It was first issued under Allied occupation in 1948 to replace the Reichsmark, and served as the Federal Republic of Germany's official currency from its founding the following year until 1999, when the mark was replaced by the euro; its coins and banknotes remained in circulation, defined in terms of euros, until the introduction of euro notes and coins in early 2002. The Deutsche Mark ceased to be legal tender immediately upon the introduction of the euro—in contrast to the other eurozone nations, where the euro and legacy currency circulated side by side for up to two months. Mark coins and banknotes continued to be accepted as valid forms of payment in Germany until 28 February 2002. However, in 2012, it was estimated that as many as 13.2 billion marks were in circulation, with polls showing a narrow majority of Germans favouring the currency's restoration.

Contents

The Deutsche Bundesbank has guaranteed that all German marks in cash form may be changed into euros indefinitely, and one may do so in person at any branch of the Bundesbank in Germany. Banknotes and coins can even be sent to the Bundesbank by mail.

On 31 December 1998, the Council of the European Union fixed the irrevocable exchange rate, effective 1 January 1999, for German mark to euros as DM 1.95583 = €1.

One Deutsche Mark was divided into 100 Pfennig.

Before 1871

A mark had been the currency of Germany since its original unification in 1871. Before that time, the different German states issued a variety of different currencies, though most were linked to the Vereinsthaler, a silver coin containing 16 23 grams of pure silver. Although the mark was based on gold rather than silver, a fixed exchange rate between the Vereinsthaler and the mark of 3 marks = 1 Vereinsthaler was used for the conversion.

1873–1948

The first mark, known as the Goldmark, was introduced in 1873. With the outbreak of World War I, 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 (RM) from November 15, 1923, and the Reichsmark (RM) in 1924.

Early military occupation

During the first two years of occupation the occupying powers of France, United Kingdom, United States, and the Soviet Union were not able to successfully negotiate a possible currency reform in Germany. Due to the strains between the Allies each zone was governed independently as regards monetary matters. The US occupation policy was governed by the directive JCS 1067 (in effect until July 1947), which forbade the US military governor "to take any steps to strengthen German financial structure". As a consequence a separate monetary reform in the U.S. zone was not possible. Each of the Allies printed its own occupation currency.

Currency reform of June 1948

The Deutsche Mark was officially introduced on Sunday, June 20, 1948 by Ludwig Erhard. The old Reichsmark and Rentenmark were exchanged for the new currency at a rate of DM 1 = RM 1 for the essential currency such as wages, payment of rents etc., and DM 1 = RM 10 for the remainder in private non-bank credit balances, with half frozen. Large amounts were exchanged for RM 10 to 65 Pfennig. In addition, each person received a per capita allowance of DM 60 in two parts, the first being DM 40 and the second DM 20.

A few weeks later Erhard, acting against orders, issued an edict abolishing many economic controls which had been originally implemented by the Nazis, and which the Allies had not removed. He did this, as he often confessed, on Sunday because the offices of the American, British, and French occupation authorities were closed that day. He was sure that if he had done it when they were open, they would have countermanded the order.

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). Although the new currency was initially only distributed in the three western occupation zones outside Berlin, the move angered the Soviet authorities, who regarded it as a threat. The Soviets promptly cut off all road, rail and canal links between the three western zones and West Berlin, starting the Berlin Blockade. In response, the U.S. and Britain launched an airlift of food and coal and distributed the new currency in West Berlin as well.

Economics of 1948 currency reform

Since the 1930s, prices and wages had been controlled, but money had been plentiful. That meant that people had accumulated large paper assets, and that official prices and wages did not reflect reality, as the black market dominated the economy and more than half of all transactions were taking place unofficially. The reform replaced the old money with the new Deutsche Mark at the rate of one new per ten old. This wiped out 90% of government and private debt, as well as private savings. Prices were decontrolled, and labor unions agreed to accept a 15% wage increase, despite the 25% rise in prices. The result was the prices of German export products held steady, while profits and earnings from exports soared and were poured back into the economy. The currency reforms were simultaneous with the $1.4 billion in Marshall Plan money coming in from the United States, which primarily was used for investment. In addition, the Marshall plan forced German companies, as well as those in all of Western Europe, to modernize their business practices, and take account of the wider market. Marshall plan funding overcame bottlenecks in the surging economy caused by remaining controls (which were removed in 1949), and opened up a greatly expanded market for German exports. Overnight, consumer goods appeared in the stores, because they could be sold for higher prices. While the availability of consumers goods is seen as a giant success story by most historians of the present, the perception at the time was a different one: prices were so high that average people could not afford to shop, especially since prices were free-ranging but wages still fixed by law. Therefore, in the summer of 1948 a giant wave of strikes and demonstrations swept over West Germany, leading to an incident in Stuttgart where strikers were met by US tanks ("Stuttgarter Vorfälle"). Only after the wage-freeze was abandoned, Deutschmark and free-ranging prices were accepted by the population.

Currency reform in the Soviet occupation zone

In the Soviet occupation zone of Germany (later the German Democratic Republic), the East German mark (also named "Deutsche Mark" from 1948 to 1964 and colloquially referred to as the Ostmark — literally Eastmark) was introduced a few days afterwards in the form of Reichsmark and Rentenmark notes with adhesive stamps to stop the flooding in of Reichsmark and Rentenmark notes from the West. In July 1948, a completely new series of East German mark banknotes was issued.

Bank deutscher Länder and the Deutsche Bundesbank

Later in 1948, the Bank deutscher Länder ("Bank of German States") assumed responsibility, followed in 1957 by the Deutsche Bundesbank. The Deutsche Mark 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.

Currency Union with the Saarland

The population in the Saar Protectorate rejected in a referendum the proposal to turn it into a "European territory". Despite French pre-referendum claims that a "no" vote would mean that the Saar would remain a French protectorate it in fact resulted in the incorporation of the Saar into the Federal Republic of Germany on January 1, 1957. The new German member state of the Saarland maintained its currency, the Saar franc, which was in a currency union at par with the French franc. On July 9, 1959 the Deutsche Mark replaced the Saar franc at a ratio of 100 francs = DM 0.8507.

German reunification

The Deutsche Mark played an important role in the reunification of Germany. It was introduced as the official currency of East Germany in July 1990, replacing the East German mark (Mark der DDR), in preparation for unification on 3 October 1990. East German marks were exchanged for German marks at a rate of 1:1 for the first 4000 marks and 2:1 for larger amounts. Before reunification, each citizen of East Germany coming to West Germany was given Begrüßungsgeld (welcome money), a per capita allowance of DM 100 in cash. The government of Germany and the Bundesbank were in major disagreement over the exchange rate between the East German mark and the German mark.

France and the United Kingdom were opposed to German reunification, and attempted to influence the Soviet Union to stop it. However, in late 1989 France extracted German commitment to the Monetary Union in return for support for German reunification.

Stability

The German mark had a reputation as one of the world's most stable currencies; this was based on the monetary policy of the Bundesbank. The policy was "hard" in relation to the policies of certain other central banks in Europe. The "hard" and "soft" was in respect to the aims of inflation and political interference. This policy was the foundation of the European Central Bank's present policy towards the euro. The German mark's stability was greatly apparent in 1993, when speculation on the French franc and other European currencies caused a change in the European Exchange Rate Mechanism. However, it should be remembered that "hard" is relative only if it is compared to other currencies, as in its 53-year history, the purchasing power of the German mark was reduced by over 70%.

Coins

The first Deutsche Mark coins were issued by the Bank deutscher Länder in 1948 and 1949. From 1950, the inscription Bundesrepublik Deutschland (Federal Republic of Germany) appeared on the coins. These coins were issued in denominations of 1, 2, 5, and 10 pfennigs. The 1- and 2-pfennig coins were struck in bronze clad steel (although during some years the 2 pf. was issued in solid bronze) while 5 and 10 pf. were brass clad steel. In 1950, cupronickel 50-pfennig and 1-mark coins were released, while a cupronickel 2 marks and a .625 silver 5 marks were released in 1951. Cupronickel replaced silver in the 5 marks in 1975. The 2- and 5-mark coins have often been used for commemorative themes, though typically only the generic design for the 5 marks is intended for circulation. Commemorative silver 10-mark coins have also been issued which have periodically found their way into circulation. Unlike other European countries, Germany retained the use of the smallest coins (1 and 2 pfennigs) until adoption of the euro.

The weights and dimensions of the coins can be found in an FAQ of the Bundesbank.

Unlike other countries (such as Australia) there was no attempt or proposal suggested for the withdrawal of the 1- and 2-pfennig coins. Both coins were still in circulation in 2001 and supermarkets in particular still marked prices to the nearest pfennig. This penchant for accuracy continues with the euro (while Finland or the Netherlands for example, price to the nearest 5 cents) with the 1-cent coin still encountered in Germany.

There were a considerable number of commemorative silver DM 5 and DM 10 coins, which actually had the status of legal tender but were rarely seen outside of collectors' circles.

On 27 December 2000, the German government enacted a law authorizing the Bundesbank to issue, in 2001, a special .999 pure gold 1-mark coin commemorating the end of the German mark. The coin had the exact design and dimensions of the circulating cupro-nickel DM 1 coin, with the exception of the inscription on the reverse, which read "Deutsche Bundesbank" (instead of "Bundesrepublik Deutschland"), as the Bundesbank was the issuing authority in this case. A total of one million gold 1-mark coins were minted (200,000 at each of the five mints) and were sold beginning in mid-2001 through German coin dealers on behalf of the Bundesbank. The issue price varied by dealer but averaged approximately 165 United States dollars.

German coins bear a mint mark, indicating where the coin was minted. D indicates Munich, F Stuttgart, G Karlsruhe and J Hamburg. Coins minted during the Second World War include the mint marks A (Berlin) and B (Vienna). The mint mark A was also used for German mark coins minted in Berlin beginning in 1990 following the reunification of Germany. These mint marks have been continued on the German euro coins.

Between July 1, 1990 (the currency union with East Germany) and July 1, 1991, East German coins in denominations up to 50 pfennigs continued to circulate as Deutsche Mark coins at their face value, owing to a temporary shortage of small coins. These coins were legal tender only in the territory of the former East Germany.

Colloquial expressions

In colloquial German the 10-pfennig coin was sometimes called a groschen (cf. groat). Likewise, sechser (sixer) could refer to a coin of 5 pfennigs. Both colloquialisms refer to several pre-1871 currencies of the previously independent states (notably Prussia), where a groschen was subdivided into 12 pfennigs, hence half a groschen into 6. After 1871, 12 old pfennigs would be converted into 10 pfennigs of the mark, hence 10-pfennig coins inherited the "Groschen" name and 5-pfennig coins inherited the "sechser" name. Both usages are only regional and may not be understood in areas where a Groschen coin did not exist before 1871. In particular, the usage of "sechser" is less widespread. In northern Germany the 5-mark coin used to be also called "Heiermann" (etymology is unclear), whereas in Bavaria the 2-mark coin was called "Zwickl" (as the €2 coin is now).

Spelling and pronunciation

The German name of the currency is Deutsche Mark (fem., German pronunciation: [ˈdɔʏtʃə ˈmaʁk]); its plural form in standard German is the same as the singular. In German, the adjective "deutsche" (adjective for "German" in feminine singular nominative form) is capitalized because it is part of a proper name, while the noun "Mark", like all German nouns, is always capitalized. The English loanword "Deutschmark" has a slightly different spelling and one syllable fewer (possibly due to the frequency of silent e in English), and a plural form in -s. In Germany, the currency's name was often abbreviated as D-Mark (fem., [ˈdeːmaʁk]) or simply Mark (fem.) with the latter term also often used in English. Like Deutsche Mark, D-Mark and Mark do not take the plural in German when used with numbers (like all names of units), the singular being used to refer to any amount of money (e.g. eine (one) Mark and dreißig (thirty) Mark). Sometimes, a very colloquial plural form of Mark, Märker [ˈmɛʁkɐ] was used as either as diminutive form or to refer to a small number of D-Mark coins or bills, e.g. Gib mir mal ein paar Märker ("Just give me a few marks") and Die lieben Märker wieder ("The lovely money again", with an ironic undertone).

The subdivision unit is spelled Pfennig (masc.; [ˈpfɛnɪç]), which unlike Mark does have a commonly used plural form: Pfennige ([ˈpfɛnɪɡə]), but the singular could also be used instead with no difference in meaning. (e.g.: ein (one) Pfennig, dreißig (thirty) Pfennige or dreißig (thirty) Pfennig). The official form is singular.

Reserve currency

Before the switch to the euro, the Deutsche Mark was the largest international reserve currency after the United States dollar.

The percental composition of currencies of official foreign exchange reserves since 1995.

References

Deutsche Mark Wikipedia


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