Why the French said “non”: Creditor-debtor politics and the German financial crises of 1930 and 1931 Simon Banholzer, University of Zurich Tobias Straumann, University of Zurich1 First draft July, 2015 Abstract Why did France delay the Hoover moratorium in June of 1931? In many accounts, this policy is explained by Germany’s reluctance to respond to the French gestures of reconciliation in early 1931 and by the announcement to form a customs union with Austria in March of 1931. The analysis of the German currency crisis in the fall of 1930 suggests otherwise. Already then, the French government did not cooperate in order to help the Brüning government to overcome the crisis. On the contrary, it delayed the negotiation process, thus acerbating the crisis. But unlike in 1931, France did not have the veto power to obstruct the rescue. 1 Corresponding author: Tobias Straumann, Department of Economics (Economic History), Zürichbergstrasse 14, CH–8032 Zürich, Switzerland,
[email protected] 1 1. Introduction The German crisis of 1931 is one the crucial moments in the course of the global slump. It led to a global liquidity crisis, bringing down the British pound and a number of other currencies and causing a banking crisis in the United States and elsewhere. The economic turmoil also had negative political consequences. The legitimacy of the Weimar Republic further eroded, Chancellor Heinrich Brüning became even more unpopular. The British historian Arnold Toynbee quite rightly dubbed the year 1931 “annus terribilis”. As with any financial crisis, the fundamental cause was a conflict of interests and a climate of mistrust between the creditors and the debtor.