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5 July 2018

The Re­ich Fi­nance Min­istry and the mo­bil­i­sa­tion of Eu­rope for Hitler’s war

  • During the Second World War, the activity of the Reich Finance Ministry also extended to the Nazi-occupied territories. The German directorates-general for finance were responsible mainly for designing the tax, budgetary and bond policies in the occupied countries.
  • The goal was to generate budget surpluses in the occupied territories, or at least a balanced budget, by reducing ordinary public spending to a minimum and simultaneously maximising state revenue.
  • From 1942 onwards, the Reich Minister of Finance aimed for an “optimal wartime economy” (kriegswirtschaftliches Optimum), i.e. a maximum exploitation of the conquered countries’ economic systems that nevertheless avoided precipitating their collapse.
  • The directorates-general for finance in the Nazi-occupied territories were also responsible for confiscating and selling the assets of Jewish citizens.
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Source:  Finanzgeschichtliche Sammlung der BFA

Introduction

What did the Reich Ministry of Finance have to do with the territories occupied by the Nazis during the Second World War? This core ministry is normally primarily associated with German tax and budgetary policy. However, an analysis of the historical sources has shown that the ministry in fact made a significant contribution to the monetary exploitation – and thus also to the material exploitation – of occupied Europe during this period. The following briefly describes what objectives were pursued and how they were implemented.

The financial strategy for a “greater economic area”, the Großwirtschaftsraum

Specialists from the Reich Finance Ministry had already been attached to the Wehrmacht troops invading Czechoslovakia in March 1939 and then, half a year later, Poland. These officials were tasked with making the revenue administrations of these countries operational again so as to get taxes and levies flowing as quickly as possible. While some of the funds collected were used to cover ordinary budgetary expenditure in the occupied countries, the funds were also used to finance the occupying administrations and troops and to purchase goods such as raw materials, foodstuffs and industrial products.

While activities conducted in Poland and of Bohemia and Moravia were still somewhat experimental in nature, the Blitzkrieg against France in the early summer of 1940 in particular constituted a watershed, including in financial and economic terms. Convinced they were headed for a “final victory”, or Endsieg, the central German authorities now wanted to advance and implement plans for a German-led “greater economic area”, or Großwirtschaftsraum. The Reich Finance Ministry was tasked with developing the fiscal principles for the future hegemony of a “Third Reich”. Given that the Reich Finance Ministry had held lead responsibility for reparation matters after the First World War, it was in a position to provide extensive expertise in terms of the transfer of resources between countries. In August 1940, a strategy paper on the issue was drafted, setting out a four-point programme demanding that Germany’s reparation payments – almost 45 billion Reichsmark – be repaid and that the other countries’ fiscal systems be brought in line with German ideas. Furthermore, the finance ministries in the Großwirtschaftsraum and their administrations were to be placed under the supervision and control of German specialists. One important goal was to ensure that regular military payments, so-called Wehrbeiträge, were made to the German Reich.

No time was wasted and the institutional framework to implement these goals was put in place in the September of 1940. Some specialist divisions at the Reich Finance Ministry were given a coordinating function, while in the occupied countries a network of directorates-general for finance was established which followed instructions from the Berlin headquarters. At its largest, it counted over 1,000 Reich finance officials.

Financing the war effort at the expense of the Nazi-occupied territories

The core task of the directorates-general for finance was initially to “secure the [occupied] territories’ contribution to German war financing.” To this end, “the officials of the Reich tax authorities” were “[...] to take or initiate any measures that could generate funds to cover the costs of occupation [...]”. However, since only few German officials were present in the occupying administrations, they did not directly participate in collecting taxes. Instead, the Reich finance officials were mainly tasked with supervising and instructing the local tax administrations, almost all of which continued their work despite the occupation. The German directorates-general for finance were responsible mainly for designing tax, budgetary and bond policies. The main goal was to generate maximum budget surpluses, or at least a balanced budget, by reducing ordinary public spending to a minimum and simultaneously maximising state revenue. As a corollary, there were also efforts to bring the local tax systems in line with the German tax model, especially in those territories that were to be incorporated more fully into the German Reich, such as the Protectorate of Bohemia and Moravia, or the Netherlands.

However, the substantial occupation costs, forced loans and trade credits in all of the occupied countries exceeded any budget surpluses generated. At the instigation of the directorates-general for finance, then, other methods of raising funds, for example the issuing of government bonds, were deployed. However, this financing option could not work without functioning money and capital markets and required that local bond holders have confidence in monetary stability. Local banking groups were often forced to subscribe to these bonds.

Another means of raising funds was central-bank financing which, given that stocks of goods were declining, posed a latent threat to the local currency’s purchasing power. Since the money collected was used almost exclusively in the occupied country itself, inflation also put the German exploitation regime at risk. On the one hand, then, combating, or at least channelling, inflation was actually in the interest of financing the German war effort; on the other hand, the war could not be financed unless the Germans extracted the largest possible amounts of money from their occupied territories. Thus the Germans claimed a large number of payments in addition to the funds for financing the occupying troops: Among other things, money extracted from the occupied territories was used to build fortifications, pay for supplies for the Eastern Front and for overpriced goods in short supply that were purchased on Western European black markets.

1942 marked a turning point in the war: Many Germans saw that the “final victory” had slipped out of reach and severe financial problems in several countries were emerging. Reich Finance Minister Lutz Graf Schwerin von Krosigk started pushing for longer-term methods of exploitation. In the July of 1942, he ordered the drafting of an outline for an “optimal wartime economy” (kriegswirtschaftliches Optimum), which he then tried to enforce in other ministries. The idea for an “optimal wartime economy” continued to promote the maximum exploitation of the economic systems of the occupied countries which would, however, also avoid precipitating their collapse. For this reason, von Krosigk argued that the economic capacities of each conquered country should be taken into account when setting the financial burdens. He also recommended cost-cutting measures be applied to the occupying troops and that more decisive action be taken against symptoms of inflation in the occupied countries.

None of these efforts were designed to provide real relief for the economic systems in the occupied countries – their only purpose was to secure ongoing payments towards the German war effort. In practice, however, the finance minister’s demands barely went beyond the formal level. The Wehrmacht’s High Command issued cost-cutting rules for the offices of the occupying forces, while Hermann Göring officially prohibited German wholesale purchasers from buying on black markets. Despite all this, the occupation continued to exact a heavy price, partly because of the so-called “wartime necessities” (Kriegsnotwendigkeiten), but primarily because of the principle of utter ruthlessness underlying German occupation.

The “acquisition, administration and sale of Jewish assets”

It should not be forgotten that, in addition to raising funds to cover the costs of the occupation, Reich finance officials were also responsible for the “acquisition, administration and sale of Jewish assets” in some of the occupied countries. Outside of the German Reich, this primarily targeted property held by German Jews who had emigrated or who had been deported. The legal basis was the Eleventh Ordinance on the Reich Citizenship Act (Reichsbürgergesetz) of November 1941, which stipulated that the assets of Jews with German nationality were forfeited to the German Reich as soon as their previous owners were no longer permanently resident in Germany. This was extended to assets located beyond the borders of the Reich. Later on, the Jews in the Protectorate and some Polish Jews were also subjected to this provision. As of 1942, then, dedicated officials of the directorates-general for finance were tasked with confiscating and selling Jewish assets in Bohemia and Moravia, France and the Reichskommissariat Ostland – one of two administrative units controlling the occupied territories in Eastern Europe.

The directorates-general for finance in some of the occupied countries also used their influence over the countries’ finance ministries to persuade them to confiscate and sell the assets belonging to the country’s Jewish population. At least some of the funds generated by these means were subsequently put towards the occupation costs and thus, ultimately, used indirectly to finance the German war effort.

Conclusion

Nazi Germany imposed almost a third of its war-related costs, i.e. 126 billion out of 431 billion Reichsmark, on the occupied countries during the Second World War. Until now, the Reich Finance Ministry’s role in this massive transfer of resources was barely noted by academia or by the public. However, the Reich Finance Ministry was in fact heavily involved in collecting contributions and forced loans, in controlling local budgets and raising taxes and levies. Furthermore, the officials of the Reich Finance Ministry were also responsible for despoiling Jewish assets.

Publications on this sub-project:

  • Krieg auf Kosten anderer. Das Reichsministerium der Finanzen und die wirtschaftliche Mobilisierung Europas für Hitlers Krieg (Das Reichsfinanzministerium im Nationalsozialismus, volume 3), Berlin-Boston 2017.
  • The Greek ‘Forced Loan’ during the Second World War. Demand for Reparations or Restitution?, in: Südosteuropa. Journal of Politics and Society Band 64 (2016), pp. 96-108.
  • Krieg auf Kosten anderer. Wehrmachtfinanzierung in Griechenland während des Zweiten Weltkriegs, in: Südost-Forschungen, volume 73 (2014), pp. 38-59.

This report is part of the research project by the independent commission of historians and contains the findings from research carried out by the author, Dr Jürgen Kilian.

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