1948 On 18 June 1948 a currency reform was announced for the western zones. Subsequently, on 20 June 1948, the
Reichsmark and the
Rentenmark were abolished in the western occupation zones due to Soviet counterfeiting of
AM-Marks resulting in economic instability and inflation and replaced with the
Deutsche Mark issued by the
Bank deutscher Länder (later the
Deutsche Bundesbank). Because the
Reichsmark was still
legal tender in the
Soviet occupation zone, the currency flooded into the east from the west, where it was worthless. This caused sudden inflation, which caused privately held cash in the Soviet zone to become worthless overnight. As an emergency measure, many thousands of employees in the district offices started to affix adhesive coupons to those
reichsmark and
rentenmark banknotes for which the owners could prove their origin, up to a limit of per person. Only such banknotes could be exchanged when the
Deutsche Notenbank (the East German counterpart of the
Bundesbank) issued the new
Deutsche Mark with the subsequent currency reform. Although the Soviets expressed surprise about the western currency reform at the time, the
German Economic Commission, per consultation with the
Soviet Military Administration had prepared for this situation. The adhesive coupons had already been printed and, with logistic assistance by the Soviets, distributed among the district offices. First affixings of the coupons started immediately, already on 19 June 1948. On 23 June 1948, the official starting day of the action, a considerable store of primed banknotes was already available. This enabled to reduce waiting times and to accelerate the process by exchanging these notes for unprimed banknotes. On 24 July 1948, a completely new series of banknotes was issued. It maintained the official name
Deutsche Mark von der Deutschen Notenbank until 1964, but it was known, especially in the west, as the
Ostmark, or
eastern mark.
1960s From 1964 to 1967, the East German mark was officially designated as the
Mark der Deutschen Notenbank (MDN). With the
constitutional amendments of 1968 and 1974, the leadership of East Germany moved away from the original goal of a unified Germany, using the phrase "... of the GDR" where earlier they would simply have said "German ...". In this way the name of the currency was changed from MDN to
Mark der Deutschen Demokratischen Republik (Mark der DDR) (M), or "Mark of the GDR", and the name of the state bank from
Deutsche Notenbank to
Staatsbank der DDR. Coins minted before the renaming, with the legend
Deutsche Mark (i.e., in DM 1 and DM 2 denominations), continued to circulate for several years, but they were gradually replaced by the early 1980s by coins with the legend
Mark.
International exchange The East German mark was officially valued by the East German government at parity with the (West German)
Deutsche Mark. However, due to limited convertibility and a restricted export profile, it was essentially worthless outside of East Germany. The few East Germans able to visit the West often found themselves having to rely on their West German relatives as a result. Beginning in 1964, the East German government instituted a
Zwangsumtausch (forced exchange, or
Mindestumtausch – minimum exchange), whereby most visitors from non-socialist foreign countries were required to exchange a set amount of
Deutsche Marks (or other
hard currencies) for East German marks at the ratio of one
Deutsche Mark to one East German mark for every day of their stay. Starting on 13 October 1980, Western visitors to the GDR were required to exchange a minimum of DM25 for East German marks per day. Some exceptions were authorized: for example, tourists who booked hotel stays in the GDR that were paid in hard currency were exempted from the minimum exchange requirements. (Of course, such accommodation charges almost always exceeded the DM 25 daily exchange threshold.) At other times, West Berliners, retirees, children, and youth were granted either exemptions or were authorized reduced minimum exchange amounts. Members of the
Western Allied military forces stationed in
West Berlin were also exempt from these rules when visiting
East Berlin, in part because the Western Allies did not recognize the authority of the GDR to regulate the activities of their military personnel in East Berlin; only the Soviet Union was considered competent to do so. On the
black market, the exchange rate was about 5 to 10
Mark der DDR to one
Deutsche Mark. In the mid-1980s, one could easily visit foreign currency exchange offices in West Berlin and purchase East German banknotes (in denominations of 50 and 100 Mark der DDR) at the rate of M 5 (East) = DM 1 (West). The East German mark could not be spent in
Intershops to acquire Western consumer goods; only hard currencies or
Forum checks were accepted. As a result, the main purchasers of black market East German banknotes were Allied military personnel entering East Berlin, as they were exempt from East German customs inspection.
Adoption of the West German Deutsche Mark Upon adoption of the
Deutsche Mark in East Germany on 1 July 1990, the East German Mark was converted at par for wages, prices and basic savings (up to a limit of M 4,000 per person, for children up to and including 14 years of age (the qualifying date was the day of the currency union) M 2,000 and for persons aged 60+ M 6,000). Larger amounts of savings, company debts and housing loans were converted at a 2:1 rate whilst so-called "speculative money", acquired shortly before unification, was converted at a rate of 3:1. These inflated exchange rates were intended by the government of the
Federal Republic of Germany as a massive subsidy for eastern Germany, and remain controversial among economists, with some arguing that the exchange of currency was the most practical way of quickly unifying the German economy, and others arguing that the exchange increased the disruption caused by
German unification by, among other things, making eastern German industries uncompetitive.
Destruction of East German currency Around 4,500 tonnes of East German coins were melted down at the Rackwitz metal works in 1990. Almost all the paper money (about 100 billion Marks, in 620 million banknotes with a volume of , about 300 boxcars), including all the currency collected at the time of the monetary union and the never-used East German M200 and M500 banknotes, was placed into storage in 1990 and 1991 in two sandstone caverns in the Thekenberge near
Halberstadt. In total, 3,000 tonnes of banknotes, passbooks, and checks were stored there, having been brought by military convoy from the
Staatsbank der DDR in Berlin. The currency became the property of the
Kreditanstalt für Wiederaufbau (KfW) in 1994 through its merger with the
Staatsbank Berlin (the post-reunification name for the
Staatsbank der DDR). The tunnel system had been built by forced labour during
World War II, and used by the
National People's Army under the code name
"Malachit", or camp complex KL-12 NVA-Nr.16/630. It was the bunker with the largest floor space, and was used for the safeguarding of devices and munitions that would be needed for war. The money was protected from theft by concrete walls and heavy steel doors. For cost reasons, the money was left to rot under the natural humidity, but it was further covered with gravel. In July 2001, it was discovered that two Halberstadt residents (aged 24 and 26) had gained entry to the tunnel system through an unsecured opening and made off with numerous banknotes. The two residents were convicted of the crime and sentenced to four months in prison and three years of probation. Furthermore, they had to pay €120 (DM 234.70) to a non-profit organisation. The appearance among collectors of uncirculated M 200 and M 500 DDR notes, and of the never-issued military currency, is attributed to this theft. Because of the theft and the slowness of the rotting, the KfW then decided to burn the old currency. Between April and June 2002, 298 containers of the currency remains were burned in an incinerator (six containers per day) along with household refuse. The last container was burned on 25 June 2002. ==Coins==