The Deutsche Mark (German: [ˈdɔʏtʃə ˈmaʁk] ⓘ; 'German mark'), abbreviated "DM" or "D-Mark" ([ˈdeːˌmaʁk] ⓘ), was the official currency of the Federal Republic Of Germany from 1948 until the adoption of the euro in 2002. In English, it was typically called the "Deutschmark" ( DOYTCH-mark). One Deutsche Mark was divided into 100 pfennigs. From July 1990, East Germany also used the DM until acceding to the smaller FRG commonly called West Germany on 3 October, after which the unified country is called Germany.
The Deutschmark was first issued in a surprise move under Allied occupation in 1948 to replace the Reichsmark. It served as the Federal Republic of Germany's official currency from its founding the following year. 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. In 1999, the Deutsche 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 on 1 January 2002. The Deutsche Mark ceased to be legal tender immediately upon the introduction of the euro—in contrast to the other eurozone states, 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 1 March 2002.
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. In 2012, it was estimated that as many as 13.2 billion marks were in circulation, with one poll from 2011 showing a narrow majority of Germans favouring the currency's restoration (although only a minority believed this would bring any economic benefit). Polls in the early 2020s indicated only a minority of Germans supported reintroduction of the Deutsche Mark.
History
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, the most common being the North German thaler and the South German gulden. By 1857, both currencies were linked to the Vereinsthaler, a silver coin containing 16+2⁄3 grams of pure silver. Although the German gold mark was based on gold rather than silver (at 2.79 marks per gram of fine gold), 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 15 November 1923, and the Reichsmark (ℛ︁ℳ︁) in 1924.
Early military occupation following WWII
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.
The Deutsche Mark was officially introduced on Sunday 20 June 1948 by Ludwig Erhard. Large amounts were exchanged at the rate of 10 ℛ︁ℳ︁ to 65 pf. In addition, each person received a per capita allowance of DM 60 in two parts: the first was DM 40 and the second DM 20. Edward A. Tenenbaum managed the group of 11 experts that devised the currency reform, and also created "Deutsche Mark", a temporary name that became permanent.
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 cigarettes were used 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 that 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 was primarily used for investment. In addition, the Marshall plan forced German companies, as well as those in the rest of Western Europe, to modernize their business practices, and to take account of the wider market.
Marshall Plan funding overcame bottlenecks in the surging economy caused by the 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 consumer 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 were 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 the 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.
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 1 January 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 9 July 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 German reunification in 1990. Citizens of the German Democratic Republic aka. East Germany only had the Deutsche Mark East, derided as "aluminium chips", roughly worth a fifth of the Western Mark in reality, at low amounts only. Soon, they called for adoption of the Western currency, with the slogan "Kommt die D-Mark dann bleiben wir, kommt sie nicht gehen wir zu ihr" (If the DM comes we will stay here, if it does not come we will go there).
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 Deutsche Marks at a rate of 1:1 for the first M 4,000 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 1pf, 2pf, 5pf, 10pf, and 50pf. The 1pf and 2pf coins were struck in bronze clad steel (although during some years the 2pf was issued in solid bronze) while 5pf and 10pf were brass clad steel and the 50-pfennig was in cupronickel. In 1950, cupronickel DM1 coins were released, while a cupronickel DM2 and a .625 silver DM5 were released in 1951. Cupronickel replaced silver in the DM5 in 1975. The DM2 and DM5 coins have often been used for commemorative themes, though typically only the generic design for the DM5 is intended for circulation. Commemorative silver DM10 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 (1pf and 2pf) until adoption of the euro.
Unlike other countries (such as Australia) there was no attempt or proposal suggested for the withdrawal of the 1pf and 2pf 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 DM 1 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 DM 1 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 the dealer but averaged approximately US$165.
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.