Monday, April 17, 2023

The Reparations Story in a Nutshell



By James Patton

The 1919 Versailles Treaty required the payment of reparations to most of the Allied Powers for causing the war.  No payments were to be made to Russia, who wasn’t represented at the conference, and the U.S.  which refused to receive reparations or territorial concessions. The burden fell mostly on Germany, in an amount equivalent to $269 billion today. Cash reparations assessed to Austria, Hungary, and Turkey were zeroed out due to their large territorial losses. Bulgaria paid about $1.4 billion in today’s money before their debt was cancelled in 1932.  


Charles Dawes, on the Right, Was a General in the AEF Before
He Became the Vice President Under Calvin Coolidge


The German economy had been badly damaged by the war, the government had huge debts and pension liabilities and so they quickly defaulted, not meeting the required payments. In 1924 the Dawes Plan was approved whereby the U.S. loaned Germany the funds to pay the Allies who then paid down their debts to the U.S. Federal Reserve. Future Vice President Charles Dawes (1865–1951) was awarded the Nobel Peace Prize for this scheme, but it didn’t work. Next there was the Young Plan in 1928, but it didn’t work either. Ultimately in 1931, U.S. President Herbert Hoover negotiated a one-year moratorium on payments, and a new deal was reached at the Lausanne Conference in 1932. In 1933 the National Socialists came to power in Germany and repudiated the entire debt. You can read more about this here.

In 1949, when the Federal Republic of Germany (“West Germany”) was created from the former American, British, and French Occupation Zones, this new government was required to agree in principle to resume reparation payments but argued for a reduction of the debt based on logic derived from the elimination of the debt of the other losing sides, territorial loss. The 1914 German Empire, which was held responsible for the war at Versailles, had 208,825 sq. mi. of land mass while the new West Germany had only 137,988 sq. mi., so their rightful share of the debt should be reduced accordingly. Subsequently a new deal was made in 1953, and the debt was paid off on 3 October 2010.

Source: Originally presented in Kansas WW1 on 10 August 2019

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