Inflation and Stabilisation in Central and Eastern Europe after World War II: The Case of Hungary

• Authors: Endre Domonkos , András Schlett
• Languages of publication: EN

Abstracts

EN

The Central and Eastern European countries were hit by severe devastation and destruction caused by World War II. Besides war damages, Eastern Europe also suffered from a general shortage of basic foodstuffs and commodities. Economic recovery in the defeated countries of the region (Hungary, Bulgaria, East Germany, and Romania) was hindered by war reparations. The Soviets used reparation payments as a political tool to destroy the economic pillars of the independence of Central and Eastern Europe. After World War II, most industrial equipment and machinery were dismantled and shipped to the USSR as war booty. The paper’s objective is to analyse the background of financial reconstruction in Central and Eastern Europe after 1945 by considering the burdens of war reparations and the financial obligations of the defeated countries in the region. Besides war costs, a significant part of the national resources and income were destroyed. The collapse of production, the shortage of goods, and at the same time, the increase in money in circulation have served as a favourable situation for accelerating inflation. Reparations diverted substantial resources from the financial reconstruction after the initial postwar period. The assumption of the essay is that both excessive reparation burdens and arbitrary deliveries to the Soviet Union contributed to the rising level of inflation and the paralysis of economic activity in many countries, including the Soviet occupation zone of Germany, Hungary, and Romania. Inflation accelerated everywhere, but there were significant differences. Various attempts were made in each country to roll back inflation and financial stabilisation. In parallel with the introduction of financial reconstruction in the countries of the region, the main reasons for hyperinflation in Hungary will be analysed based on the data from archives and relevant literature overview. In the spring and summer of 1946, one of the most ferocious inflations in the world raged in Hungary. Solving the hyperinflation process contained numerous elements, so people recognised the significance of inflation events in Hungarian money history from the aspect of money theory. So, not only was the extent of the Hungarian depreciation regarded and is regarded now to be unique in the world, but economic experts also mentioned the prepared stabilisation beyond inflationary circumstances and the executed stabilisation from ordinary resources, the establishment of a stable currency, the forint, as a “miracle”.

Keywords

EN

Economic History; Inflation; Postwar Period; Central and Eastern Europe; Financial Stabilisation; War Reparations; Hungary

• Publisher: University of West Bohemia, Pilsen, Czech Republic
• Journal: West Bohemian Historical Review
• Year: 2023
• Volume: 13
• Issue: 2
• Pages: 203-235

Contributors

author

Endre Domonkos

• Budapest Business School, University of Applied Sciences, Faculty of International Management and Business, Department of International Relations, Diósy Lajos u. 22-24, H-1165 Budapest

author

András Schlett

• Pázmány Péter Catholic University, Faculty of Law and Political Sciences, Heller Farkas Institute of Economics, Szentkirályi u. 28–30, H-1088 Budapest