• War economy returning from WWI.
  • Had to pay war reparations  (set forth by the treaty of Versailles) either in gold or in raw materials and not in its own currency.
  • Due to the war reparations, exporting was made difficult (since materials were handed out as reparations instead of being sold in foreign countries).
  • The allies occupied certain German industrial territories (such as the Ruhr). Passive resistance and the fact that the German government continued paying sallaries for the workers (which were on strike) made things worse.


  • Entered 2010 with an economy in recession. Home prices were dropping since 2008Q4 and 4% of GDP was lost in 2009 because of reduced exports (of goods and services) to Europe (which faced a recession of 4% that year). Unemployment was already over 10% at the end of 2009.
  • Owes (mostly) foreign debt, denominated in a currency it does not control while payments come out of an economy in depression (6% lost output in 2011, unemployment which moves closer to 20%, retail sales in free-fall).
  • Finds it difficult to export its way out since the same austerity menu is served all over Europe (which is its largest export market).
  • Faces strict controls on its domestic policy imposed and controlled by the creditors and is obliged to fire sale most of its state property.

Sources: [1], [2]