The journey towards the Euro: a brief history of currency in Germany

The journey towards the Euro: a brief history of currency in Germany

Whether it’s war, hyperinflation, bankruptcy, black markets or crushing debts, the German economy has certainly been through a lot – something that is reflected in the history of its numerous currencies. The country’s journey towards the Euro is a long, eventful and interesting one, full of ups and downs, nail-biters and triumphant moments. Here is a brief history of currency in Germany.

Where it all began

Initially a patchwork of duchies, kingdoms, archbishoprics, empires and counties, Germany first became a unified empire only in the year 1871. Until then, the economy was largely divided, with each region issuing its own currency. However, while these currencies differed from each other, they had one common factor – most of them were linked to the Vereinsthaler, a coin containing 16,67 grams of pure silver.

Austrian Vereinsthaler

© Aeroid / Wikimedia Commons

However, this wouldn’t do after the unification of Germany into a single large federal state. Today, in the age of the Euro, when a large part of an entire continent shares a currency, it seems almost preposterous to have different currencies within the same country – a thought that seemed to have also occurred to the newly unified Germany. By 1873, the country had already introduced and begun circulating the newly-founded “Mark”.

The Goldmark (1873 - 1914)

Initially known simply as “the Mark”, this currency was later referred to as “the Goldmark” to differentiate it from its successors. After the end of the Franco-German War in 1871 – which ultimately brought about the unification of the German State – France was required to pay Germany very high reparation costs – which they chose to do in gold.


© Public Domain / Deutsche Reichsbank Berlin / Wikimedia Commons

Possessed with an abundance of gold, the central bank of the newly unified Germany began to print currency notes that were backed up by equal amounts of gold – the Goldmark. Thus, a person who possessed a Goldmark had the right to exchange it for a certain amount of gold. A fixed exchange rate was also observed between the Goldmark and the Vereinsthaler, with 1 Vereinsthaler being worth 3 Marks.

The Goldmark, which adhered to the gold standard (der Goldstandard), was used in the country until 1914, when Germany made the switch to the Papiermark (paper mark).

The Papiermark (1914 - 1923)

While Germany had maintained a nice system of backing up currency with gold, the First World War, which began in 1914, hit the country hard. The then German Emperor Wilhelm II, along with the Reichstag, unanimously decided to fund the costs of the war entirely by borrowing, instead of raising income tax as its neighbour France had done, and abandoned the Goldmark's peg to gold. The new, non-backed currency therefore became known as the Paper Mark (Papiermark). 

This decision was widely criticised by a number of economists and financial advisors, because of the risks it created for the value of the German currency. However, the government firmly believed that it would be able to pay off its debts once it won the war – an outcome they probably should not have bet on.

Papiermark Germany

© Public Domain / Reichsbankdirektorium Berlin / Wikimedia Commons

In an attempt to keep up with the inflation caused by the debts and rising costs of war, the central bank kept printing notes - which rapidly began to lose their value. The situation became even worse when the war ended in 1918 and the country, with an economy already in shambles, now found itself obligated to pay back debts and reparations with money it didn't have. 

Having gambled away everything on a bad bet, the government resorted to mass printing of notes to pay back its obligations. However, this was probably an even worse decision. Printing more currency only caused it to lose its value, meaning that even more had to be printed to meet the debts – a vicious cycle that caused the value of the Papiermark to plummet and the economy to go into hyperinflation. Hyperinflation Germany

By 1923, 4.200 billion Papiermarks were needed to make up a single US Dollar! To get a picture of the scale of inflation, imagine carrying a basket full of cash to buy a loaf of bread!

© Public Domain / Wikimedia Commons

Rentenmark (1923 - 1924)

Towards the end of 1923, the Papiermark was worth next to nothing, and it was obvious that Germany had to somehow reform its currency situation – thus the Rentenmark was born. When it was first issued, 1 Rentenmark was valued at 1 billion Papiermarks.

Since the country was facing a major economic crisis and didn’t have the gold to back up this new currency, it was instead backed up by agricultural and industrial land. The Rentenmark carried out its role of getting the German economy back on track once again, but since it was meant to be just an interim currency to smooth over the transition from the Papiermark, it was replaced by the Reichsmark in 1924.

Rentenmark Germany

© Drrcs15 / Wikimedia Commons

Reichsmark (1924 - 1948)

The Reichsmark was created in a desperate attempt to bring the German currency back to the state it was in before the introduction of the Papiermark and the hyperinflation that followed. Thus, this new Mark – taking its name from the German Empire (Deutsches Reich) – was put on the gold standard at the same exchange rate of the Goldmark (1 US Dollar = 4,2 Reichsmarks).

During the Second World War, Hitler's Third Reich attempted to fend off any threat of future inflation by establishing fixed currency exchange rates between the Reichsmark and currencies of the countries they occupied, as well as their allies. Naturally, these rates were manipulated in a way that would benefit the German economy – or so they thought.

Reichsmark Germany

The reality, however, told a different story. Owing to too much unbacked (by gold) currency spending on financing the war – just when the country was refilling its coffers after the First World War – inflation rates skyrocketed again, leaving the Reichsmark worth next to nothing and the economy in the midst of another crisis. 

The era of the cigarette currency (Zigarettenwährung)

Despite this, the Reichsmark still continued to circulate in the country, if only in theory. In reality, it was taken over by a barter economy dealing largely in cigarettes. Imagine going to work and getting paid in cigarettes, and then using those cigarettes to go shopping! It might seem odd now, but at the time, these cigarettes were more valuable to the German population than German coins and notes from the Nazi era. In fact, they even referred to it as the cigarette currency (Zigarettenwährung).

© John Alan Elson / Wikimedia Commons

The end of the war

After World War II, Germany was occupied – by France, the UK and the US in the West and the Soviet Union in the East. These countries were not able to successfully negotiate a currency reform in the country. Thus, each of the Allies also printed their own currency in their zone of occupation.

The Deutsche Mark (1948 - 2002) and the East German Mark (1948 - 1990)

Finally, three years later, on June 20, 1948, a new currency was introduced in West Germany: The Deutsche Mark. The exchange rate (from the Reichsmark) was set as DM 1 = RM 1 for essential currency such as wages and rent, and DM 1 = RM 10 for the remaining non-bank credit balances. Further, each person received an allowance of DM 60.

Deutsche Mark

© Federal Republic of Germany / Public Domain / Wikimedia Commons

Although this currency reform had been made to protect West Germany from hyperinflation and abolish the black market, the Soviet Union saw this as a threat and cut off all transportation links to the three Western zones where the DM was introduced – well known today as the Berlin Blockade. They also decided to introduce their own separate currency in East Germany, known as the Mark der Deutschen Notenbank, or simply, the Ostmark (East Mark).

In 1990, when the economically prosperous West Germany finally reunited with its much less prosperous eastern counterpart, the Deutsche Mark was accepted all over the country as the official German currency – at least until 1999. 

Finally, the Euro

In the year 1999, Germany, as part of the European Union, embraced the novel Euro as a replacement for the Deutsche Mark. Although the latter ceased to be legal tender on December 31, 2001, its coins and notes remained in circulation – but defined in terms of euros – until 28 February 2002, a couple of months after Euro notes and coins were introduced, on January 1, 2002. Euro Germany

The irrevocable exchange rate set by the Council of the European Union on December 31, 1998, was: DM 1,95583 = EUR 1. Thus, the long journey the German Federal Republic had undertaken in search of the perfect currency to suit their needs finally comes to a tentative end – although, who can predict what the future holds for this resilient country?

© Fair use / Wikimedia Commons

Thumb image credit: © Bundesarchiv / Wikimedia Commons

Naina Pottamkulam


Naina Pottamkulam



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