How were European politics impacted by the depression

The Great Depression severely affected Central Europe. The unemployment rate in Germany, Austria and Poland rose to 20% while output fell by 40%.[1] By November 1949[citation needed], every European country had increased tariffs or introduced import quotas.

Under the Dawes Plan, the German economy boomed in the 1920s, paying reparations and increasing domestic production. Germany's economy retracted in 1929 when Congress discontinued the Dawes Plan loans. This was not just a problem for Germany. Europe received almost US$8 billion in American credit between 1924 and 1930 in addition to previous war time loans.

Germany's Weimar Republic was hit hard by the depression as American loans to help rebuild the German economy now stopped. Unemployment soared, especially in larger cities. Repayment of the war reparations due by Germany were suspended in 1932 following the Lausanne Conference of 1932. By that time, Germany had repaid 1/8 of the reparations. People were devastated about how the Weimar Republic dealt with the economy.

Falling prices and demand induced by the crisis created an additional problem in the central European banking system, where the financial system had particularly close relationships with business. In 1931, the Creditanstalt bank in Vienna collapsed, causing a financial panic across Europe.