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Monetary developments in the occupied Netherlands
Hein Klemann Monetary developments in the occupied Netherlands
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Monetary manipulation
In perspective of war, monetary manipulation hardly seems serious In Western Europe apart from France little wartime damage Countries suffered from post-war monetary chaos Occupier manipulated financial developments for three reasons: to get all it wanted from occupied countries for free to get a grip on international transactions to transmit a part of its inflation to dependent economies Second target: another subject Third target: see table 1
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Table 1 Banknote and monetary circulation in Western Europe 1940-45, 1940=100
Bank note circulation Total circulation M1 Germany France Belgium Netherl. Norway 1940 100 1941 129 143 119 145 182 147 117 132 1942 170 178 164 200 268 176 158 1943 230 254 255 372 217 212 197 1944 301 333 282 364 450 272 267 End occupation 549 368 500 534 298 309 358 Source: Hein Klemann with Sergei Kudryashov, Occupied Economies, An economic history of Nazi-occupied Europe, (London 2012) 237.
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Paying an occupied country
In 1943 Finanzarchiv: ‘financial and monetary procedures in occupied Europe were just a refined requisition policy.’ Western Europe Highly developed economies Germans wanted to keep the production going. Simply not paying no option Did not want to use German funds Paid individual suppliers with funds from the occupied countries. Got what it wanted In the best case a limitlessly growing debt, payable in an unknown future Methods used: Reichskreditkassenscheine Occupation cost payments (Tributes) Clearing Making Reichsmark convertible into the currency of the occupied country In Poland, Serbia and Ostland: Central Banks to finance German purchases Not interested in these economies In the Netherlands not relevant
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Financial markets These countries had to finance it by:
Germany transferred financial problem to occupied countries These countries had to finance it by: Increased taxation Increased national debts Monetary expansion Problem of wartime financial problems not typically for occupied countries Started already with mobilization State expenditures grew as public, families and companies built stocks Scarcity: experience from last war Stock building of raw materials, soap, clothing and conserved food Bank and saving accounts cashed at the moment state needed money In many European countries monetary expansion needed already After Munich, capital providers felt uncertain Did no longer want to freeze their liquidity in long-term securities Credits had to get
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Financial markets 1939 President Nederlandsche Bank Trip feared long mobilisation Costs: ƒ 600 million a year: 60% of pre-war state budget. 1939: floating debt increased with 300 million, or 39% September 1939, financial markets reacted negative German treasury bonds lost 40 percent; French 25 percent. Only Swiss stock exchange slightly positive Raising loans a problem Poland issued a loan: failure March 1939 Norway could raise a loan on capital market Later Oslo had to inflate banknote supply to solve budget problems Paris had to postpone a 150 billion war loan until July 1940. By then defeated and the money spent Brussels borrowed only on money markets. Flight capital December 1939 reclaiming bank accounts caused a bank collapse End 1939: The Hague tried to issue a loan of ƒ 300 million Complete failure
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Reichskreditkassenscheine
Reichskreditkassenscheinen: Reichsmark issued by Reich Credit Cash Points Solution for all financial problems of the Wehrmacht Since May 1940: Issuing controlled by Reichsbank Money only used by the Wehrmacht in occupied territory: By individual soldiers By unites of the Wehrmacht In used in French and Belgian black markets. Not in Netherlands Danger: Soldiers could buy everything in an occupied country by inflating the money supply Both Trip and his Belgian colleague G. Janssen offered to pay occupation costs In Netherlands: Monetary expansion caused by issuing RKKS: 108 million RM, ƒ 75 million, 7% Exchanged into guilders by DNB
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When situation normalized: military purchases financed by occupation costs
Suggestion: in accordance with international law All over Western Europe more than costs occupation Only for military expenditures In Belgium, France and Netherlands a fixed sum: Belgium: 120 million RM (1 billion francs) a month Netherlands 135 million RM (ƒ100 million) France: 620 million RM (12.4 billion francs). Netherlands had to pay external occupation costs Dutch Central Bank Director M.M. Rost van Tonningen: Contribution to the defence of Europe against the Bolsheviks Also introduced in France: 25 million francs a day Vichy prime minister, Pierre Laval: ‘contribution à la défense commune de l’Europe’ Total sum: Not what was reasonable But what was needed to pay for all Germany took from a country High sum: exploitation successful Exploitation Netherlands successful Occupation costs
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Table 2: Occupation costs, 1939-1945
Inhabitants in millions Occupation costs billion RM Costs per capita RM Percents of the average France 41.4 31.6 763 207 the Netherlands 9.0 10.1 1122 304 Belgium 8.3 5.3 639 173 Denmark 3.0 2.4 800 217 Norway 2.9 6.9 2379 645 Total Western Europe 64.6 56.3 872 236 Protectorate 7.5 4.1 547 148 Greece 6.3 3.8 603 163 Croatia 6.5 1.2 185 50 Serbia 4.5 0.9 200 54 Total Balkans 17.3 5.9 341 92 Occupied USSR 87.0 2.5 29 8 General-government 17.0 147 40 Total Eastern Europe 104,0 5.0 48 13 Total 193.4 71.3 369 100
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Clearing Also non-military demands
Clearing: to finance trade with a country with inconvertible currency Kept trade going on a low level Inconvertible currency, is an overvalued currency Zusatzausfuhrverfahren: higher the more important the import of trading partner Trade no longer result of market forces Of the policy of the German regime Occupation: Berlin no longer interested in exports No subsidies anymore Often even prohibited Imports paid from yields exports Imports no longer paid by Germany As it needed these even more than before: Occupied country had to pay German importer also had to pay Limited the inflationary tendency in Germany Clearing
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Figure 1: Normal clearing between Germany and foreign countries
Trading partner German Exporters Trading partner Exporters Exports German Importers Trading partner Importers Verrechnungskasse Berlin Clearing account of the trading partner Payments Goods and services Dotted arrows: Financial streams. Straght arrows: Goods and services
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Figure 2: Wartime use of clearing accounts, 1940-1944/45
Germany Occupied country Verrechnungskasse Berlin Clearing Account of the occupied trading partner German Reichsbank Treasury of the occupied country German Importers Exporters in occupied country Loans Credits Payments Dotted arrows: Financial streams. Straight arrows: Goods and services Goods and services
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Table 3: German deficits in clearing accounts occupied Europe, 1940–44
Table 3: German deficits in clearing accounts occupied Europe, 1940–44. Million RM France Nether- lands Belgium Denmark Norway Western Europe All of European share in % 1940 55 405 132 191 -13 770 743 104 1941 812 16 666 384 -60 1,819 1,883 97 1942 2,590 23 1,980 559 -91 5,061 5,324 95 1943 5,780 12 3,883 1,008 -160 10,523 10,342 102 1944 8,532 10 4,976 1,421 -22 14,918 14,754 101 Share of Netherland in Clearing In 1940: 55% After that year: negligible In 1940: Dutch economy started to boom successful Much send to Germany After that year other solution for the Netherlands Not quite clear why.
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RM convertible to guilders
April 1941 inconvertible Reichsmark made convertible to guilders Even Reichsbank president Walther Funk called it robbery (Raub) Trip refused to participate and was succeeded by Dutch Nazi Rost van Tonningen Nederlandsche Bank the only central bank forced to exchange all Reichsmark notes into notes with still some purchasing power Anyone with Reichsmarks could buy anything available in the Netherlands Some markets therefore regulated Prices stock exchange rose more than in Belgium or France Belgian officials bought pre-war Belgian treasury bonds on Dutch stock exchange Art market the same German companies smuggled foodstuff from the Netherlands
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Reasons Solution only in countries to be incorporated
1944 document: target to ‘draw the Netherlands for ever in the German and therewith the European economic space without creating a rash decision on the future fate of the Dutch colonies’ Incorporation would end sovereignty over Indonesia Making national currency exchangeable in Reichsmark but keeping it locally Only in the Protectorate and the Netherlands Both of extreme economic importance Protectorate: part of German customs and monetary area Reichsmarks convertible into crowns. Tax systems and customs were adapted. Czechs allowed to use their own banknotes Netherlands very similar: Tax system translation of German laws
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Monetary expansion Consequences: Nederlandsche bank got enormous amounts of German banknotes Only thing to do with these was buy German treasury bonds Had to exchange these for fresh Dutch banknotes Strong inflationary tendency In Netherlands non-military German purchases directly financed by monetary expansion In other occupied countries by treasury advances to the Clearing Could try to finance it in a less inflationary way
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Tabel 4 Dutch Money taken by the occupier in million guilders 1940-1945
Occupa-tion costs Contribution war against USSR German civil offices Un-known Clearing and RKKS Total from treasury Nett RM influx Total In real Prices 1938=100 1940 477 - 22 248 747 73 820 697 1941 1,124 40 270 1,434 1,121 2,555 1,946 1942 1,181 680 42 6 1,915 1,016 2,931 2,206 1943 1,328 453 71 35 5 1,892 1,598 3,490 2,553 1944 1,757 39 18 2,267 672 2,939 2,133 1945 489 121 14 624 391 Totaal 6,356 1,707 228 59 529 8,879 4,480 13,359 9,926
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How to finance the occupation?
Taxation Increased everywhere in occupied Europe Borrowing National debt also increased Inflation Nowhere possible to finance the war without any monetary expansion All three methods used Question: Did the different method of financing the German purchases cause different state financing
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Table 5 Financial consequences of the occupation in three Western occupied countries. 1938-1944
Taxes corrected for prices Governmental debts corrected Banknote circulation corrected Total corrected for prices F B N 1938 100 1939 126 99 104 101 107 125 117 94 160 137 1940 131 48 95 128 106 118 171 134 244 164 222 1941 122 150 123 175 166 152 174 294 277 1942 103 135 156 214 217 188 332 312 1943 144 97 129 158 141 252 257 192 204 343 278 1944 42 110 148 201 198 136 149 355
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