A Weimar warning for Greece

Greece has all the ingredients for another Weimar Republic if it exits the euro and its new currency becomes worthless. But if it keeps some control, this outcome can be avoided.

Two fear words are increasingly being used to describe a possible outcome in the Greek situation... Weimar Republic. We need to know what those words represent.

The Weimar Republic started in Germany in 1919 and saw periods of chaos, which led to Hitler taking control in 1933.

Today I want to describe what it was like to live in the Weimer Republic, using material from a book called "Defying Hitler” by Sebastian Haffner. We have to hope this is not the looming fate of the Greeks.

But as Karen Maley pointed out, the German publication Der Spiegel reports that advisers to the German Chancellor, Angela Merkel, worry the present situation in Athens is similar to the Weimar Republic (Europe prepares for a 'Grexit', May 15).

Der Spiegel says: "Back then, the Germans perceived the Treaty of Versailles as a supposed 'disgrace'. Now, the Greeks feel the same way about the austerity measures imposed by Brussels. And, as in the 1920s in Germany, the situation in Greece today benefits fringe parties on both the left and the right."

According to Haffner, by the end of 1922 prices had risen to between ten and a hundred times the pre-war peacetime level. This, however, this happened gradually.

But then hyperinflation took over and the US dollar shot to 20,000 Marks; then 40,000 and then, after a few pauses, into the hundreds of thousands.

Anyone who had savings in a bank or bonds saw their value disappear over night.

Traders adjusted their prices rapidly. A pound of potatoes which yesterday had cost 50,000 marks, the next day cost 100,000. The salary of 65,000 marks brought home the previous Friday was no longer sufficient to buy a packet if cigarettes on Tuesday.

People found a life raft – shares. They were the only form of investment that kept pace. Day-to-day purchases were paid for by selling shares, which shot up like a rocket. Every day the entire population studied the stock market listings. Sometimes shares collapsed and people were hurtled into the abyss. The old and unworldly had the worst of it. Many were driven to begging and suicide. Those relying on past experience were punished by starvation and death.

The young and quick-witted did well. Overnight they became free, rich and independent. Bars and nightclubs opened in large numbers. Haffner's father was a high Prussian official. At the end of the month his father would receive his monthly salary. He would try to buy a monthly pass for the railway as soon as possible, so he could get to work. Then the school fees and rent would be paid. The next day at four or five in the morning the whole family would go by taxi to the wholesale markets. There the whole salary would be spent on non-perishable foodstuffs in an hour. By 8am, when school began, a month’s provisions would have been bought. There was no more money for the rest of the month.

There is a lot more... but you get the message. Out of such chaos comes political movements of the extreme left or extreme right. Germany almost went left but ended up with the extreme right. Greece has all the ingredients for a Weimar Republic if it exits the euro and its new currency becomes worthless... then Weimer Republic style chaos will be its destiny. But if it can keep some control, a low currency can deliver employment – and right now about half the population are out of work.