Germany's economic policies in eastern Europe after World War I helped shape the course of WW II in that region. The character of these policies was influenced at first by the attitude of the victorious Allies and later by the Nazis.

Immediately after World War I Germany faced a collection of problems which included the loss of major industrial regions in the east, the occupation of major industrial regions in the west, lack of credit, social unrest exacerbated by the Russian Revolution and the reluctance of the western powers to trade without the consideration of wartime reparations. Germany had finished goods, tools and equipment to sell and needed in return foods and raw materials.

Poland, a qualified candidate, was afraid of Germany, and Germany, had she the strength, was ready to 'readjust' her eastern border before the ink was dry on the final peace terms. Needless to say, not much trade was going to occur between those two. None of the other newly created Eastern European nations had the combination of credit, materials and market size that Germany so desperately needed to find. That left the USSR.

In the early 1920s the new USSR found herself in much the same shape as Germany: physically devastated by war, internally rent and possessing no money or credit. The industrialized nations of the west had established an economic boycott of the USSR. Indeed, many of these nations had sent in troops to assist the non- socialist/communist forces during the civil war.

They all shared a great fear of the revolution spreading, which was fueled by Lenin's insistence that world revolution was around the corner, and Trotsky's proclamation that the USSR would assist those revolutions. For the USSR, desperate for tools, finished goods and credit there was one choice: Germany.

USSR-Germany Trade

In this manner the winners of WW I inadvertently forced the most incompatible of partners into the same bed. Thus, in the early 1920s Germany and the USSR began a trading relationship which profited both, formalized by the Treaty of Rapallo in 1921. Germany later used this relationship as a bargaining chip with the West to negotiate more generous credit terms and to get the Allies to ease the harsh posture they had assumed toward Germany. In the end Germany helped the USSR build up the industrial plants that crushed Hitler, while the USSR rebuilt Germany's world-class economy by sending the Reich raw materials. This helped keep Germany's workers employed and reluctant to revolt. The two pariahs also established a secret military liaison that lasted into the early 1930s.

After Hitler came to power, Germany's economic policy was used as an offensive tool against the Balkan nations. Germany, no longer as desperate as she was after WWI, could afford to trade with less able partners, especially if it suited long-term political goals.

A type of agreement known as 'clearing' was used with these nations. This involved barter at agreed on rates for specific periods of time. This was the perfect bait for those poor and unindustrialized countries who needed industrial goods and had little cash or credit. Germany often paid higher than market exchange rates for goods. She occasionally demanded premium rates for her own low quality exports. In the long run this would have led to a loss for Germany, provided that she intended to pay. For some reason Germany usually seemed to be behind in the exchange balance, though no one dared complain since Berlin had the only deal around.

By the late 1930s the leaders of Hungary, Yugoslavia, Bulgaria and Romania realized that they had walked into an economic trap. They were 'addicted' to the large volume of trade Berlin had fostered. Czechoslovakia, by virtue of having one of the strongest economies in the region, modern industry and a stable currency, managed to avoid Berlin's net. The Western nations had their own problems by this time and were unable or unwilling to foot the tremendous bill necessary to wean the Balkans from Germany without tremendous economic dislocation.

Germany's economic dominance in the Balkans gave Berlin a great deal of influence in the effected countries. The degree of this influence is perhaps best illustrated by the squabble between Romania and Hungary. Germany was able to tear off a piece of Romania, give it to Hungary and yet keep both countries so firmly in her grasp that they both fought as active allies of the Nazi state. This terrific influence prevented many of these small nations from actively pursuing independent policies. The existence of a more independent group of Balkan countries could have had some interesting consequences. Italy's adventurism in Albania and Yugoslavia was surely influenced by the knowledge that most of the countries in the area were under Berlin's thumb and that therefore she did not need to worry about coordinated foreign interference. That could have changed.

Consider that the USSR was obliged to restrict her activities in the Balkans due to Germany's involvement there. Without Germany's patronage, whether or not the Balkan nations had aligned themselves with the West, the USSR would have gobbled up portions of the area. The Germans had trouble keeping Stalin out of the region as it was.

Consider also, given Germany's dependence on Romanian oil, that either Balkan subjugation to Moscow or orientation to the West would have had a sobering effect on German ambitions everywhere. Perhaps if some of these small states had been able to avoid German economic entanglements the war would not have engulfed the entire area. From Hitler's point of view, Germany's economic imperialism must be considered a success.

Haigh, R.H., Morris, D.S., Peters, A.R., German-Soviet Relations in the Weimar Era, Barnes & Nobles Books, Totowa, New Jersey, 1985.
Walters, Garrison E., The Other Europe, Dorset Press, New York, 1988.