Reparations

   No issue burdened the political, financial, and economic history of the Republic so much as reparations. Although the idea of demanding reparations of Germany was established through Article 19 of the Armistice,* transforming the concept into a total bill or payment plan was mired in contro-versy and proved impossible at Paris. Article 233 of the Versailles Treaty* therefore postponed a final settlement by entrusting the intricate issue to a com-mission; created in February 1920, the commission was requested to reach its determination by 1 May 1921. Meanwhile, Article 235 required Germany to make an initial installment of 20 billion gold marks (about $4.5 billion) by 1 May 1921. In-kind reparations, mostly in the form of coal deliveries, began in September 1919. Despite the deferral of a final figure, war guilt was decided by Article 231, the article that opened the treaty's section on reparations. Requiring Germany to accept responsibility "for causing all the loss and damage to which the Allied and Associated Governments and their nationals have been subjected as a consequence of the war imposed upon them," Article 231 was viewed by Germans as a forced confession that they alone were culpable for the war. For the duration of the Republic, German diplomacy aimed to revise this "confes-sion"; it colored all deliberations connected with the treaty, especially those concerning reparations.
   The first two years of peace were marked by an inability on the part of both Germany and the Allies to come to grips with financial realities. The problems were not eased by the appearance in late 1919 of John Maynard Keynes's pop-ular antitreaty polemic, The Economic Consequences of the Peace. It was thanks to British Prime Minister David Lloyd George, whose 1918 campaign rhetoric had made the reparations debate more emotional by exaggerating the hopes of the British public, that the years immediately following the Peace Conference were taken up with elaborate meetings at which reparations and Europe's eco-nomic plight were debated. Often held at charming places off the beaten path— for example, San Remo, Spa, and Cannes (but also Paris and London)—the meetings were so complex that the diplomats generally played second fiddle to economics experts. Gordon Craig has contended that "the twelve international conferences which were held on the reparations question made" no "progress toward achieving a reasonable solution of that troublesome problem." They did serve to make Britain suspicious of France while creating such torment in Paris as to make the Ruhr occupation* of January 1923 an expression of national relief. Meanwhile, the entire issue reinvigorated German nationalism.
   On 27 April 1921 the Reparation Commission upheld a total debt of 152 billion gold marks that was to be collected by way of the London Schedule of Payments (annuities of 2 billion gold marks to be paid in quarterly installments). But when 1 May 1921 arrived, the Germans had failed to deliver the initial 20 billion gold marks required by Article 235. The ensuing London Ultimatum, which ordered payment under threat of Ruhr occupation, coincided with the collapse of Konstantin Fehrenbach's* cabinet and the establishment of Joseph Wirth's* first cabinet; one event provided a framework for the 1923 Ruhr in-vasion, while the other ushered in Germany's fulfillment policy.* But the Ruhr imbroglio, designed to extract reparations by force, sparked a period of runaway inflation* and provoked an international effort to help reconstruct Germany's economy and reexamine reparations. The assembling of the Dawes Commission marked America's retreat from economic isolation and led to the replacement of the London Schedule by the Dawes Plan* in 1924. Dawes provided the following: an international loan to Germany of 800 million Reichsmarks, an initial moratorium on reparations, and the resumption of payments according to a scale that began with an annuity of 1 billion marks in 1925 and climbed to 2.5 billion marks by 1928-1929. The plan served as the basis for reparation payments until 1929.
   The Young Plan* of 1929 superseded Dawes and initiated a new payment schedule: thirty-seven annuities (i.e., 1929 to 1966) on a schedule rising from 1.8 billion to 2.4 billion marks. It also created a Bank for International Settle-ments* to supervise German payments—thus removing the foreign political con-trols that had continued under Dawes—and launched a two-part annuity: one "unconditional" and one "postponable" in the event of unforeseen difficulties. Deemed a fair and "permanent solution," Young experienced a short and trou-bled life. Assailed by radical-right opponents, it survived a plebiscite in Decem-ber 1929 only to succumb to the depression* in 1931. In June 1931, amidst a German banking crisis, President Hoover proposed a one-year moratorium on Allied debts if reparation payments were also suspended. Because Hoover rec-ognized no difference between unconditional and postponable reparations, the moratorium subverted the Young Plan structure. Nevertheless, the Bank for In-ternational Settlements upheld the moratorium in December 1931. Finally, the 1932 Lausanne Conference,* which ratified the moratorium, dramatically re-duced reparations to a final sum of 3 billion marks—less than two annuities under Young.
   After World War I the United States had insisted upon the repayment of war loans without acknowledging any connection with reparations. The fate of the Lausanne Agreement, designed to replace Young, underscored the bankruptcy of the American position. By a separate "gentlemen's agreement," ratification of Lausanne was tied in Italy, Britain, France, and Belgium to debt relief from the United States, a mutual creditor; no such relief was forthcoming. Germany never paid a pfennig of the 3 billion marks specified by Lausanne, and the Europeans, who refused to revive the Young Plan, defaulted in 1933 on their war debts. Through June 1931 the Germans had paid a total of 23 billion gold marks (about $5 billion), about 15 percent of the total bill set in April 1921. It was all they ever paid.
   REFERENCES:Craig, "The British Foreign Office"; Feldman, Great Disorder; Jacobson, Locarno Diplomacy; Kent, Spoils of War; McNeil, "Could Germany Pay?"; Marks, "Myth of Reparations"; Schuker, American "Reparations"; Wheeler-Bennett, Wreckof Reparations.

A Historical dictionary of Germany's Weimar Republic, 1918-1933. .

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