Two elements testify more than the others to the exceptional economic development of Germany in the past decade: the high proportion of net investments in relation to national income and the large amount of accumulated foreign exchange reserves.
On the financial level, the premises for such a rapid economic recovery lie in the monetary reform of 1948, which pulverized the previously existing purchasing power and limited the current one; it consolidated the debts of the state and placed the government in a position to exercise more effectively, ab initio, a rigid control on the economic-financial trend, ensuring at the same time a great flexibility of maneuver, both for internal interventions and in relation to commercial transactions with foreign countries. State action did not stop at simply regulating the pace of economic development, but contributed directly and significantly to it through a shrewd fiscal policy which, leaving a large active margin in the budgets of the public administration, channeled towards the sector public the largest part of the savings in the course of formation. This has made it possible, among other things, to channel financial resources towards the most productive uses, according to a scale of priorities that has placed the production of capital goods in the foreground and, therefore, the strengthening of the country’s currency position, traditionally linked to the export of those goods. These results and guidelines are clearly perceptible if we examine the data relating to the sources of investment financing (see table) and if we keep in mind the conditions and measures implemented to promote and favor a high capitalization of national income. This could be achieved and maintained, first through a compression of internal consumption (with low wages and strong tax burdens, only attenuated later on), then with fiscal incentives and a generous credit policy (selectively applied to favor sectors basic, public and private construction, capital goods and exporting industries).
The low level of internal consumption and the need to ensure an adequate flow of raw materials for carrying out industrial transformation activities led to the immediate adoption of a policy of liberalization of imports, which was not long in finding its reflection in the situation of payments with the abroad, first in an unfavorable sense, due to the initial increase in imports, then in a favorable sense, due to the consequent increase in exports. The arrival of the Korean crisis in June 1950 brought about a significant recovery in imports connected with the rapid replenishment of stocks which in the previous period had been kept at a relatively low level. The hoarding of raw materials also took place in a phase of increasing price increases, so that the twofold effect of prices and quantities on the balance of payments was especially large. The deterioration of the balance of payments imposed, inter alia, a suspension of the liberalization measures previously implemented; and this in particular with regard to the UEP (European Payments Union) countries, in comparison with which an adequate deficit accumulated within a few months. In addition to benefiting from the UEP credit for 120 million dollars, the import licenses already granted were blocked and canceled for more than half, while the procedure for the granting of new permits was tightened. However, these were subordinated to the deposit by the importers of half the amount of the required foreign currency. The balance crisis, however, was short-lived and the restrictive measures on imports were soon removed. At the end of 1951 the deposit obligation was abolished and in the first days of 1952 not only was the list of free imports re-established, but it was extended from 57 to 90% of annual imports. Having overcome the repercussions of the Korean crisis at the end of 1951, in the last months of 1952 the balance of payments with the EPU area closed in surplus and, starting from the second quarter of the same year, also that with the dollar area. Since the end of 1952, the overall external balance of payments has shown a constant active surplus due to the relatively larger development of exports compared to the domestic demand for foreign products. favorable evolution of the terms of trade (due to a growing demand for capital goods on world markets and more markedly inflationary developments in other countries) and the inflow of foreign capital (both for speculative reasons and for reasons of direct and of income). As a result, the volume of foreign exchange reserves has continually accumulated.
The creation of means of payment linked to the external balance surplus required an active fiscal and credit policy aimed at sterilizing excess purchasing power and reducing the credit capacity of banks. The state budget presented a substantial surplus for almost the entire period, which practically eliminated the use of public debt. A similar trend marked the budgets of the local authorities; but a conspicuous investment expense paid to the results of day-to-day operations, so that this also had to be financed by issuing securities on the financial market. In recent years, the position of the public sector has reversed from active to passive to counter the slowdown in economic development.
In the field of monetary governance, the action of the central bank, after the foreign payments crisis in 1950, was marked by a condition of relative creditworthiness.
Until 1954, the assistance of banks for the financing of productive activities represented the only resource of a certain consistency, given the scarce financial means with which businesses and individuals had emerged from the monetary reform and the huge amount of financial needs for reconstruction economic. By 1954, the German economy, having ceased the significant influx of refugees from the eastern provinces which in previous years had significantly fueled the supply of skilled labor at minimum conditions, had already entered a new phase, characterized by the full employment of all productive resources and the scarcity of manpower.
The first effects of tension manifested themselves on prices, which until then had had a decreasing trend and which instead began to rise, albeit moderately, from 1954. Since the spring of 1955 the central bank adopted several restrictive measures which were intensified in the following year, when the official discount rate was raised to 5.50 per cent, (in May 1956), and again in April-May 1957., when the percentages of compulsory reserves were still high and the credit limits of the banks were reduced by 15%. The monetary maneuver was strengthened by the withdrawal of availability through the sale on the open market of securities sold by the Treasury to the central bank in conversion of the credits deriving from the monetary reform. The production adjustment phase which, like other countries, affected the German economy during 1958-59, led to the removal of credit restrictions, the lowering of the discount rate (to 2.75 in January 1959) and the reduction of reserves (in August of the same year). Subsequently, the overheating of the economy, due to the increase in wages, excessive public spending and the inflow of capital from abroad, also in anticipation of a revaluation of the mark, forced the German monetary authorities to intervene decisively to stop the incipient inflation and to isolate the German money market from the influence of short-term foreign capital (hot money). The discount rate was raised several times to 5 per cent in June 1960 and any interest on foreign deposits with German banks was abolished. The compulsory reserves of banks have been increased several times, so that any further increase in deposits is taxed to the maximum extent permitted by law (which is 30 per cent for sight deposits, 20 per cent for term deposits and 10 per cent for time deposits). one hundred for savings deposits).
The large participation of the public sector in the capital formation process and the considerable dependence of companies on bank loans have prevented an adequate development of the financial market. The preferences that savers expressed for other types of uses also acted in a negative sense (at least initially oriented towards different forms of hoarding: in gold and in notes). Although the first measures to encourage the establishment of the capital market date back to December 1952, concrete results have only recently been achieved. The favorable occasion, more than the previously implemented fiscal measures, occurred in conjunction with the formation of a conspicuous internal liquidity reserve (following the production slowdown of 1958-59) and with the inflow from foreign capital borrowed from the relatively higher level of interest rates prevailing on German markets. These circumstances, together with a change in the preferences of savers to the advantage of securities lending, have led to an exceptional rise in securities listed on the stock exchanges and, therefore, to a significant fall in yield rates. Companies and public authorities took advantage of this to draw from the market a mass of equity and bond capital which in 1959 far exceeded the highs of previous years. they have led to an exceptional rise in the securities listed on the stock exchanges and, therefore, to a notable fall in the rates of return. Companies and public authorities took advantage of this to draw from the market a mass of equity and bond capital which in 1959 far exceeded the highs of previous years. they have led to an exceptional rise in the securities listed on the stock exchanges and, therefore, to a notable fall in the rates of return. Companies and public authorities took advantage of this to draw from the market a mass of equity and bond capital which in 1959 far exceeded the highs of previous years.
The definitive settlement of the German debts took place in 1953 with the signing of the agreements between the parties concerned. For the pre-war debts, the agreement with the 18 creditor countries established the amount of public debts at 4 billion DM and that of private debts at 3.5 billion. The reimbursement of economic aid and credits allowed by the occupying powers to Germany in the latter post-war period was agreed to a reduced extent (562.8 million dollars instead of 1,420 for the United Kingdom, 11.84 instead of 15.7 for the France, 1,200 instead of 3,200 for the United States). The repayment of the sum due to France and the United Kingdom was expected within 20 years, without interest payments. On debts with the USA, the interest expense is calculated at 2.5% at year and the repayment period of the capital is set at 35 years. Overall, pursuant to the aforementioned agreements, the repayment of debts contracted before and after the last conflict entails an annual charge of DM 585 million for the first 5 years and DM 737 million for the following years. In the same year 1953 (July) the agreements with Israel were ratified, signed in Luxembourg on 10 September 1952. Under the terms of the stipulated convention, the compensation due by Germany in favor of Israel was established at 3.45 billion DM (of which 0.45 as compensation for Israeli-owned German assets).