World War I reparations

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World War I reparations were the payments and transfers of property and equipment that Germany was forced to make under the Treaty of Versailles following its defeat during World War I. Article 231 of the Treaty (the 'war guilt' clause) declared Germany and its allies responsible for all 'loss and damage' suffered by the Allies during the war and provided the basis for reparations.

In 1921, the total sum due was decided by an Inter-Allied Reparations Commission and was set at 132 billion gold marks. However, the actual amount of reparations that Germany was obliged to pay out was not the 132 billion marks cited in 1921 but rather the 50 billion marks stipulated in Schedules A (12 billion marks) and B (38 billion marks). The historian Sally Marks stated the 112 billion marks in "C bonds" were entirely chimerical—a device to fool the public into thinking Germany would pay much more. The actual total payout from 1920 to 1931 (when payments were suspended indefinitely) was 20 billion German gold marks, worth about 5 billion US dollars or one billion British pounds. Of this amount, 12.5 billion was cash that came mostly from loans from New York bankers. The rest was goods like coal and chemicals, or from assets like railway equipment. The total amount of reparations was fixed in 1921 on the basis of the German capacity to pay, not on the basis of Allied claims. The highly publicized rhetoric of 1919 about paying for all the damages and all the veterans' benefits was irrelevant to the total, but it did affect how the recipients spent their share. Austria, Hungary, and Turkey were also supposed to pay some reparations but they were so impoverished that they in fact paid very little. Germany was the only country rich enough to pay anything; it owed reparations chiefly to France, Britain, Italy and Belgium; the US received $100 million.

Payments were suspended for one year in June 1931 as proposed by U.S. president Herbert Hoover in the "Hoover Moratorium", and ended at the Lausanne Conference of July 1932. About one-eighth of the initial reparations had been paid. Following the Second World War, the London Conference (1953) required Germany to resume payment on the money borrowed to pay for reparations. The final installment of this repayment was made on 3 October 2010.


A view of a ruined town.
Avocourt, 1918, one of the many destroyed French villages where reconstruction would be funded by reparations

In 1914, the First World War broke out. For the next four years fighting raged across Europe, the Middle East, Africa, and Asia.[1] On 8 January 1918, United States President Woodrow Wilson issued a statement that became known as the Fourteen Points. In part, this speech called for Germany to withdraw from the territory it had occupied and the formation of a League of Nations.[2][3] During the autumn of 1918, the Central Powers began to collapse.[4] In particular, the German military was decisively defeated on the Western Front, while on the Home Front the navy mutinied prompting uprisings in Germany, which became known as the German Revolution.[5][6][7] The German Government attempted to obtain a peace settlement based on the Fourteen Points, and maintained it was on this basis that they surrendered. Following negotiations, the Allied Powers and Germany signed an armistice, which came into effect on 11 November while German forces were still positioned in France and Belgium.[8][9][10] In late 1918, Allied troops entered Germany and began the occupation of the Rhineland.[11]

France was the location of most of the war's major battles and the French countryside was heavily scarred in the fighting. Furthermore, in 1918 during the German retreat, German troops devastated France's most industrialized region in the northeast. Extensive looting took place as German forces removed whatever material they could use and destroyed the rest. Hundreds of mines were destroyed along with railroads, bridges, and entire villages. Prime Minister of France Georges Clemenceau was determined, for these reasons, that any just peace required Germany to pay reparations for the damage they had caused. In addition, Clemenceau viewed reparations as a way of weakening Germany to ensure that they could not again threaten France.[12][13] Reparations would also go towards the reconstruction costs in other countries, such as[Belgium, also directly affected by the war.[14] British Prime Minister David Lloyd George opposed harsh reparations, arguing instead for a lesser sum less crippling to the German economy so that Germany could remain a viable economic power and British trading partner. He furthermore argued that reparations should include war pensions for disabled veterans and allowances to be paid to war widows, which would, consequentially, reserve a larger share of the reparations for the British Empire.[15][16][17] Wilson opposed these positions, and was adamant that there be no indemnity imposed upon Germany.[18]

The Paris Peace Conference opened on 18 January 1919, aiming to establish a lasting peace between the Allied and Central Powers.[19] Demanding compensation from the defeated party was a common feature of peace treaties.[20] However, the financial terms of treaties signed, during the peace conference, were labelled reparations to distinguish them from punitive settlements, usually known as indemnities, as they were intended for reconstruction and the compensation of families who had been bereaved by the war.[14] The opening article of the reparation section of the Treaty of Versailles, Article 231, served as a legal basis for the following articles, which obliged Germany to pay compensation,[21] and limited German responsibility only to civilian damages. The same article, with the signatory's name changed, was also included in the treaties signed by Germany's allies.[22]

German reaction[edit]

Thousands of people gather in front of a building.
Demonstration against the Treaty of Versailles, in front of the Reichstag.

In February 1919, Foreign Minister Count Ulrich von Brockdorff-Rantzau informed the Weimar National Assembly that Germany would have to pay reparations for the devastation caused by the war, but would not pay for actual war costs.[23] Following the drafting of the Treaty of Versailles, on 7 May the German and Allied delegations met and the treaty was handed off to be translated and for a response to be issued. At this meeting Brockdorff-Rantzau stated that "We know the intensity of the hatred which meets us, and we have heard the victors' passionate demand that as the vanquished we shall be made to pay, and as the guilty we shall be punished". However, he proceeded to deny that Germany was solely responsible for the war.[24] Article 231 of the Treaty of Versailles was not correctly translated. Instead of stating "... Germany accepts responsibility of Germany and her allies causing all the loss and damage ...", the German Government's edition reads "Germany admits it, that Germany and her allies, as authors of the war, are responsible for all losses and damages ...".[25] This resulted in a prevailing belief of humiliation among Germans as the article was seen as an injustice, and of Germany having signed "away her honor".[26][27] Despite the public outrage, German government officials were aware "that Germany's position on this matter was not nearly so favorable as the imperial government had led the German public to believe during the war."[28] Politicians seeking international sympathy, however, would continue to use the article for its propaganda value, convincing many who had not read the treaties that the article implied full war guilt.[29] German revisionist historians who subsequently attempted to ignore the validity of the clause found a ready audience amongst 'revisionist' writers in France, Britain, and the USA.[30] The objective of both the politicians and historians was to prove that Germany was not solely guilty for causing the war, if that guilt could be disproven then the legal requirement to pay reparations would disappear.[31]

Evolution of reparations[edit]

Initial demands[edit]

Several trains loaded with machinery take up the center of the photo. A group of nine men stand to the left.
Trains, loaded with machinery, deliver their cargo as reparation payment in kind.

The Treaty of Versailles stated that a Reparation Commission would be established in 1921. This commission would consider the resources available to Germany, their capacity to pay, provide the German Government with an opportunity to be heard on the subject, and decide on the final reparation figure that Germany would be required to pay. In the interim, Germany was required to pay an equivalent of 20 billion gold marks ($5 billion) in gold, commodities, ships, securities or other forms. The money would also be used to pay Allied occupation costs and buy food and raw materials for Germany.[32][33] Article 121 of the Treaty of Neuilly acknowledged that "the resources of Bulgaria are not sufficient to enable her to make complete reparation". Therefore, the treaty required Bulgaria to pay a total sum equivalent of 2.250 billion Gold francs in reparations.[34] The treaties of Saint-Germain-en-Laye, Trianon, and Sèvres acknowledged that Austria, Hungary and Turkey did not have the resources to pay reparations, and delayed the establishment of a final figure until the Reparation Commission was established.[35][36][37] In addition, Bulgaria was required to hand over thousands of livestock, to Greece, Romania, and the Serb-Croat-Slovene State "in restitution for animals taken away by Bulgaria during the war". This would not be credited towards the reparation figure.[38] Likewise, Bulgaria had to dispatch 50,000 tons of coal a year to the Serb-Croat-Slovene State in restitution for destroyed mines. These shipments would not be credited agaisnt Bulgaria's reparation sum.[39] Germany, Austria, and Hungary all had commitments to handover timber, ore, and lifestock to the Allied Powers. They would, however, be credited for such acts.[40][41][42]

In January 1921, growing impatient, the Allied Powers established the reparation sum at 226 billion gold marks. The Germans countered with an offer of 30 billion.[43] On 24 April 1921, the German Government wrote to the American Government expressing "her readiness to acknowledge for reparation purposes a total liability of 50 billion gold marks", but was also prepared "to pay the equivalent of this sum in annuities adapted to her economic capacity totalling 200 billion gold marks."[44] In addition, the German Government stated "to accelerate the redemption of the balance" and "to combat misery and hatred created by the war", Germany was willing to provide the resources needed and "to undertake herself the rebuilding of townships, villages, and hamlets".[45]

London Schedule of Payments[edit]

The London Schedule of Payments, of 5 May 1921, established "the full liability of all the Central Powers combined, not just Germany alone," at 132 billion gold marks.[46] This sum was a compromise, promoted by Belgium (against higher figures demanded by the French and Italians and the lower figure the British supported), that "represented an assessment of the lowest amount that public opinion ... would tolerate."[47]

This figure was divided into three series of bonds. "A" and "B" Bonds, together, had a nominal value of 50 billion gold marks ($12.5 billion), smaller than what Germany had previously offered to pay. "C" Bonds, containing the remainder of the reparation figure, "were deliberately designed to be chimerical."[46] They were "a political bargaining chip" that served the domestic policies of France and the United Kingdom.[48] The figure was completely unreal, with the primary function of misleading public opinion "into believing that the 132-billion-mark figure was being maintained." Furthermore, "Allied experts knew that Germany could not pay 132 billion marks and that the other Central Powers could pay little. Thus the A and B Bonds, which were genuine, represented the actual Allied assessment of German capacity to pay."[46] Taking into account what had already been paid, between 1919 and 1921, Germany's immediate obligation was therefore 41 billion gold marks.[49]

To pay towards this sum, Germany could pay in kind or via cash payments. Commodities, paid in kind, included coal, timber, chemical dyes, pharmaceuticals, livestock, agricultural machines, construction material, and factory machinery. The gold value of these would be deducted from what Germany was required to pay. In addition, helping to restore the university library of Louvain (destroyed by the Germans on 25 August 1914) was also credited towards the sum, as were some of the territorial changes imposed upon Germany by the treaty.[50][51] The payment schedule required 250 million dollars within twenty-five days and then 500 million annually, plus 26 per cent of the value of German exports. The German Government was to issue bonds at five per cent interest and set up a sinking fund of one per cent to support the payment of reparations.[32]

End of reparations for Austria, Bulgaria, Hungary, and Turkey[edit]

Between the signing of the Treaty of Neuilly-sur-Seine and April 1922, Bulgaria paid 173 million gold francs in reparations.[52] In 1923, the Bulgarian reparation sum was revised downwards to 550 million gold francs, "plus a lump sum payment of 25 million francs for occupation costs".[53] Towards this figure, Bulgaria paid 41 million gold francs between 1925 and 1929. In 1932, the Bulgarian reparation obligation was abandoned following the Lausanne Conference.[54]

Austria was "so impoverished" following the war, coupled with the collapse of the Bank of Vienna, resulted in no reparations being paid "beyond credits for transferred property".[53][55] Due to the collapse of the Hungarian economy, no reparations were paid other than coal deliveries.[56][53] Turkish reparations had been "sharply limited in view of the magnitude of Turkish territorial losses". However, the Treaty of Sèvres was never ratified. When the Treaty of Lausanne was signed, in 1923, Turkish reparations were "eliminated altogether." [53]

German defaults[edit]

People holding banners and waving flags march down a street. Lining the road are crowds of supporting people.
Protests by gymnasts from the Ruhr, at the 1923 Munich Gymnastics Festival. The sign on the left reads "The Ruhr remains German". The right placard reads "We never want to be vassals".

From the initiation of reparations, German coal deliveries were below the level agreed. In an attempt to rectify this situation, the Spa Conference was held in July 1920. At this conference it was decided that Germany would be paid five marks per coal ton delivered, to facilitate coal shipments and help feed the miners. Despite this, Germany continued to default on her obligations.[57] By late 1922, the German defaults on payments had grown so serious and regular that a crisis engulfed the Reparations Commission. French and Belgian delegates urged the seizure of the Ruhr as a way of encouraging the Germans to make more effort to pay, while the British supported postponing payments to facilitate the financial reconstruction of Germany.[58] On 26 December 1922, Germany defaulted on timber deliveries. The timber quota was based upon a German proposal and the default was massive.[Note 1] The Allies were unanimous that the default was in bad faith.[59] In January 1923, the German Government defaulted on coal deliveries for the 34th time in three years despite quota reductions following the loss of the Upper Silesian coal fields (containing 11 per cent of German coal resources), which had been transferred to Poland.[60][61]

On 9 January 1923, the Reparation Commission declared the Germans in default of their coal deliveries and voted to occupy the Ruhr to enforce Germany's reparation commitments. The British were the lone dissenting voice to both measures. On 11 January, French and Belgian soldiers - supported by engineers, including an Italian contingent - entered the region initiating the Occupation of the Ruhr.[62][63]

The French Premier Raymond Poincaré was deeply reluctant to order the occupation, and had only taken this step after the British had rejected his proposals for more moderate sanctions against Germany.[64] By December 1922, Poincaré was faced with Anglo-American-German hostility and saw coal for French steel production draining away.[65] Exasperated with the British failure to act, he wrote to the French ambassador in London:

Judging others by themselves, the English, who are blinded by their loyalty, have always thought that the Germans did not abide by their pledges inscribed in the Versailles Treaty because they had not frankly agreed to them. ... We, on the contrary, believe that if Germany, far from making the slightest effort to carry out the treaty of peace, has always tried to escape her obligations, it is because until now she has not been convinced of her defeat. ... We are also certain that Germany, as a nation, resigns herself to keep her pledged word only under the impact of necessity.[66]

The occupation proved profitable, with the occupying powers receiving 900 million gold marks. However, the real issue behind the occupation was not German defaults on coal and timber deliveries, but forcing Germany "to acknowledge her defeat in World War I and to accept the Versailles Treaty."[67] Poincaré recognized that if Germany could get away with defying Versailles in regards to the reparations, then a precedent would be created, and inevitably the Germans would proceed to dismantle the rest of the Versailles treaty.[68]

Dawes Plan[edit]

men standing around looking at barrels
The first American gold arrives as per the Dawes Plan

Although the French succeeded in their objective during the Ruhr occupation, the Germans had wrecked their economy by funding passive resistance and brought about Hyperinflation.[67] Under Anglo-American pressure, along with the simultaneous decline in the value of the franc, the French were increasingly isolated and their diplomatic position weakened.[69] In October, a committee (consisting of American, Belgian, British, French, German and Italian experts) chaired by Director of the US Bureau of the Budget Charles G. Dawes was formed to consider "from a purely technical standpoint" how to balance the German budget, stabilize the economy and set an achievable level of reparations.[70]

In April 1924, the Dawes Plan was accepted and replaced the London schedule of payment. While the "C" Bonds were omitted from the framework of the plan, they were not formally rescinded. As part of the plan, French troops were to withdraw from the Ruhr, a bank independent of the German Government was to be established, with a ruling body at least 50 per cent non-German, and the German currency was to be stabilized. The payment of reparations was also reorganized. In the first year, following the implementation of the plan, Germany would have to pay 1 billion marks. This figure would rise to 2.5 billion marks per year, by the fifth year of the plan. A Reparations Agency was established, with Allied representatives to organize the payment of reparations. Furthermore, a loan of 800 million marks was to be raised (Fifty per cent coming from the United States, 25 per cent from Britain, and the rest from other European nations) to back the German currency and to aid in the payment of reparations.[70][71]

Young Plan[edit]

Great hall containing many people
The opening of the Second Hague Conference: one of the two conferences aimed at implementing the Young Plan.

Under the Dawes Plan, Germany always met her obligations. However, they considered the plan a temporary measure and expected a revised plan at a future date. In late 1927, the Agent-General for Reparations "called for a more permanent scheme" for payments, and in 1928 the Germans followed suit.[72] German Foreign Minister Gustav Stresemann called for a final reparation plan to be established alongside an early withdrawal of Allied troops from the Rhineland. The French, aware of their weakening political and financial position, acquiesced. On 16 September 1928, a joint Entente-German statement was issued acknowledging the need for a new reparation plan.[73]

In February 1929, a new committee was formed to re–examine reparations. Chaired by the American banker Owen D. Young, the committee presented its findings during January 1930. The "Young Plan" was accepted and then ratified by the German Government on 12 March 1930. The plan established a final reparation figure at 112 billion gold marks (26.35 billion dollars), with a new payment schedule that would see reparations completed by 1988 (the first time that a final date had been set). In addition, foreign oversight of German finances was to end with the withdrawal of the Reparations Agency, which would be replaced by the Bank for International Settlements. The bank was established to provide cooperation among German banks as well as to receive and disburse reparation payments. A further loan of 300 million dollars was to be raised, and given to Germany.[74][75][76][77]

As a result of the plan, German payments were half of what had been required under the Dawes Plan.[78] The implementation of the Young Plan required the Anglo-French withdrawal from the Rhineland within months.[79] Despite the progress, there was increasing German hostility to the plan. In December 1929, 5.8 million voters registered their opposition to the plan during a plebiscite, which resulted in Adolf Hitler gaining "significant national attention and valuable right-wing financing."[80]

End of German reparations[edit]

In March 1930, the German Government collapsed and was replaced by a new coalition led by Chancellor Heinrich Brüning. In June, Allied troops withdrew from near Mainz - the last occupation zone in the Rhineland - and Brüning's Government broached the subject of demanding further refinement to reparations, only to be shot down by the British ambassador to France William Tyrrell.[81] During 1931, a financial crisis began in Germany. In May, Creditanstalt, the largest bank in Austria, collapsed sparking a banking crisis in both Germany and Austria. In response, Brüning announced that Germany was suspending reparation payments. This resulted in a massive withdrawal of domestic and foreign funds from German banks. By mid-July, all German banks had closed.[82] French policy, to this point, had been to provide Germany with financial support to help Brüning's Government stabilize the country. Brüning, now under considerable political pressure from the far-right and President Paul von Hindenburg, was unable to make any concessions or reverse policy. As a result, Brüning was unable to borrow money from foreign or domestic sources. Further attempts to enlist British support to end reparations failed, as the British highlighted it was a joint issue with both France and the United States. In early July, Brüning announced "his intention to seek the outright revision of the Young Plan".[83] In light of the crisis and with the prospect of Germany being unable to repay its debts, United States President Herbert Hoover intervened. In June, Hoover publically proposed a one year moratorium to reparation and war debts. By July, the "Hoover Moratorium" had been accepted.[84]

The moratorium was met with widespread support from both Germany and the United Kingdom. The French, initially hesitant, eventually agreed to support the American proposal.[85] However, on 13 July, the German Darmstädter Bank collapsed leading to further bankruptcies and a rise in unemployment further exacerbating the financial crisis within Germany.[86] With the Great Depression now exerting its influence, the Bank for International Settlements reported that the Young Plan was unrealistic in light of the economic crisis and urged the world governments to reach a new settlement on the various debts they owed each other. During January 1932, Brüning stated that he would now seek the complete cancellation of reparations. His position was supported by the British and Italians, and opposed by the French.[87]

Due to the political differences between each country on the subject, along with impending elections in both France and Germany, a conference could not be established until June. This delay brought about the downfall of Brüning's Government. On 16 June, the Lausanne Conference opened. However, discussions were complicated by the ongoing World Disarmament Conference. At the latter conference, the Americans informed the British and French that they would not be allowed to default on their war debts. In turn, they recommended that war debts be tied into German reparation payments, which the Germans objected too. On 9 July, an agreement was reached and signed. The Lausanne Conference annulled the Young Plan and required Germany to pay a final single installment of 3 billion marks (to save France from political humiliation) thus ending Germany's obligation to pay reparations.[88][89][90]

Amount paid by Germany[edit]

The precise figure Germany paid is a matter of dispute.[91] The Reparation Commission and the Bank for International Settlements state, that in total, 20.598 billon gold marks was paid by Germany in reparations. Of which, 7.595 billon was paid prior to the implementation of the London Schedule of Payments.[92] Historian Niall Ferguson provides a slightly lower figure. He estimates that Germany paid no more than 19 billion gold marks.[93] Ferguson further estimates that this sum amounted to only 2.4 per cent of the total German national income between 1919 and 1932. Historian Stephen Schuker places the figure at an average of 2 per cent of national income between 1919 and 1931, in cash and kind, making a total transfer equal to 5.3 per cent of the national income for the period.[93][94] Gerhard Weinberg argues that reparations were paid, towns were rebuilt, orchards replanted, mines reopened and pensions paid. However, the burden of repairs was shifted away from the German economy and onto the damaged economies of the war's victors.[95]

Loan payments[edit]

To help make reparations payments, Germany took out various loans during the 1920s. In 1933, following the cancellation of reparations, the new German Chancellor, Adolf Hitler, cancelled all payments. In June 1953, an agreement was reached with West Germany in regards to this existing debt. West Germany agreed to make payments against the loans that had been defaulted on, but deferred some of the debt until West and East Germany were unified. In 1995, following reunification, Germany commenced making the final payments towards the loans that had been defaulted on in the 1920s. On 3 October 2010, a final installment of $94 million was made settling German loan debts in regards to reparations.[96]


Event German
gold marks
U.S. dollars
2014 US$
Initial German offer, 24 April 1921 50 (capital value)
or 200 in annuities (nominal value)[46][97]
12.5 - 50[Note 2] 165 - 661
London Schedule of Payments, 5 May 1921 132[47] 33[91] 436
A and B Bonds, of the above payment scheme 50[46] 12.5[46] 165
Young Plan, 1929 112[77] 26.35[74] 362
Total German payment made by 1932 19-20.5 [92][93] 4.75 - 5.12[Note 2] 82 - 89




A man half looks at the camera smiling.
John Maynard Keynes in 1946

John Maynard Keynes "set the fashion for critics of the economic aspects of the treaty" and "made probably the severest and most sweeping indictment of its economic provisions".[99] Keynes was temporarily attached to the British Treasury during the war and was their official representative at the Paris Peace Conference. He resigned from the latter position "when it became evident that hope could no longer be entertained of substantial modifications in the draft Terms of Peace" due to the "policy of the Conference towards the economic problems of Europe". In 1919, he wrote The Economic Consequences of the Peace based on his objections.[100] He commented that he believed "that the campaign for securing out of Germany the general costs of the war was one of the most serious acts of political unwisdom for which our statesmen have ever been responsible"[101] and called the treaty a "Carthaginian peace" that would economically effect all of Europe.[102] Keynes argued that the treaty's reparation figures "generally exceed Germany's capacity" to pay.[103] He asserted that 10 billion dollars was the "safe maximum figure", but even then he did "not believe that [Germany could] pay as much".[104] The Reparation Commission, he believed, was a tool that could "be employed to destroy Germany's commercial and economic organization as well as to exact payment".[105] Rather, in Keynes opinion, the reparation figure should have been fixed "well within Germany's capacity to pay" so to "make possible the renewal of hope and enterprise within her territory" and to "avoid the perpetual friction and opportunity of improper pressure arising out of the Treaty clauses".[106]

Furthermore, Keynes identified reparations as the Treaty of Versailles' "main excursion into the economic field" but notes that the treaty included "no provisions for the economic rehabilitation of Europe, – nothing to make the defeated Central Empires into good neighbors, nothing to stabilize the new States of Europe, nothing to reclaim Russia; nor ... promote in any way a compact of economic solidarity amongst the Allies themselves."[107] Coal provides an example of these destabilizing effects within Germany and beyond. Keynes claimed that the "surrender of the coal will destroy German industry" although conceding that without coal shipments, as reparations, the French and Italian industry – damaged directly via the war or indirectly due to damage to coal mines – would be effected. He notes that this is "not yet the whole problem". The knock on effects would also impact Central and Northern Europe, as well neutral states such as Switzerland and Sweden who made up for their own coal deficiencies by trading with Germany. Likewise, Keynes' argued Austria would now be consigned to "industrial ruin" as "nearly all the coalfields of the former Empire lie outside of what is now German-Austria".[108]

Historian Claude Campbell, writing in 1942, notes that the "apparent majority did not regard the treaty as perfect by any means, but, as Bernard M. Baruch ably maintained in his book, The Making of the Reparation and Economic Sections of the Treaty, published in 1920, they did believe it to be the best agreement obtainable under the circumstances." Campbell notes that it was a minority who attacked the treaty, but these attacks "centered upon its economic provisions".[109] James T. Shotwell, writing in his 1939 book What Germany Forgot, claimed "the only 'unendurable servitudes' in the treaty were in the sections on Reparation and the Polish settlement and raised the question as to what part of Germany's grievance against the peace lay in the substance of its exactions and what part in the manner of their imposition." Sir Andrew McFayden, who likewise represented the British Treasury at the peace conference and worked with the Reparation Commission, published his work Don't Do it Again in 1941. Campbell comments that McFayden's position "falls somewhere between the views of Keynes and Shotwell". MacFayden's attack on reparations "was as harsh as Keynes" but conceded the "fault did not lie primarily in the provisions of the treaty but in their execution" and also believed "that he Polish settlement was the only readjustment ... which was decidedly unwise."[110] Albrecht-Carrié highlights that prior to the German surrender Woodrow Wilson dispatched a note to the German Government on 5 November 1918, the terms of which were accepted by the German Government. The note stated that he allies "under-stand that compensation will be made by Germany for all damage done to the civilian population of the Allies and their property by the aggression of Germany by land, by sea, and from the air."[31] Regardless of which, Albrecht-Carrié concedes that "the reparation section of the Treaty of Versailles proved indeed to be a dismal failure."[111] Campbell, herself, comments "although there was much in the peace that was 'petty, unjust, and humiliating', there was little aside from reparation clauses and certain territorial concessions, which had much real bearing upon Germany's economic future."[112] Summarizing the view of economists throughout the 1920s, she notes that the territorial changes to Germany were "not necessarily ... economically unsound", but the removal of the Saar and territory to Poland thus "depriving Germany of her resources in excess of the amount necessary to fulfill the legitimate economic demands of the victors ... was indefensible". Furthermore, the treaty failed to "include ... provisions looking to the restoration of Germany to her former position as the chief economic and financial stabilizing influence in central Europe" and that this was economically shortsighted and was a failing of the treaty from an "economic standpoint".[113]

Étienne Mantoux, a French economist, was the harshest critic of Keynes during the period. In his a posthumously published book, The Carthaginian Peace, or the Economic Consequences of Mr. Keynes, Mantoux asserted that Keynes "had been wrong on various counts, especially with respect to his predictions about Germany's coal, iron and steel production ... and its level of national saving." Citing the rearmament under Hitler as an example, Mantoux suggested Germany "had been in a stronger position to pay reparations than Keynes had made out".[114] Mantoux argued that Germany could have paid all of the reparations had they wanted to, and that the problem was not the Germans were unable to pay, but rather that they were unwilling to pay.[115]

In 1954, then United States Secretary of State, John Foster Dulles - one of the authors of Article 231 - commented that "Efforts to bankrupt and humiliate a nation merely incite a people of vigor and of courage to break the bonds imposed upon them. ... Prohibitions thus incite the very acts that are prohibited."[116]


There was extensive debate about the justice and likely impact of the reparations demands both before and after the publication and signing of the Treaty of Versailles and other Treaties in 1919. The economic problems that the payments brought, and German resentment at their imposition are generally considered one of the most significant factors that led to the end of the Weimar Republic and the beginning of the dictatorship of Adolf Hitler.[citation needed] Historians, such as the Canadian historian Margaret MacMillan in her 2001 book Peacemakers: The Paris Peace Conference of 1919 and Its Attempt to End War, have since disagreed with this analysis made by Keynes.

Feinstein (1995) has pointed to flaws in Mantoux's argument, such as the Allies raising reparations as the German economy grew, or the reluctance of the Germans to pay more taxes when they already saw reparations as oppressive and unjust. Feinstein concludes, "The payments were a paramount cause of instability and a barrier to international economic co-operation."[117]

Taylor argues that in 1919 many people believed that the payment of reparations would reduce Germany to a state of Asiatic poverty. J. M. Keynes held this view, as did all Germans; and probably many Frenchmen did also.[118]

However, according to the American historian William R. Keylor, "An increase in taxation and reduction in consumption in the Weimar Republic would have yielded the requisite export surplus to generate the foreign exchange needed to service the reparation debt."[119] However this export surplus and the resulting export deficit for those collecting reparations could have created a politically and economically difficult situation. Indeed, this was one of the causes of the UK General Strike of 1926.[citation needed]

Marks has argued that the Germans could have easily paid the 50 billion marks in reparations, but instead chose to repeatedly default on reparations payments as part of a political strategy of undermining Versailles.[120] Marks also examines the German reaction to Article 231, sometimes called the "war guilt clause", which asserts "the responsibility of Germany and her Allies 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 by the aggression of Germany and her allies." Marks asserts that, prior to the armistice, the Allies had not intended this to be interpreted in terms of moral guilt, and adopted this German interpretation only after German remonstrations.[121] Marks also explains that the next article, Article 232, limits German responsibility to pay only for civilian damages, and that when a conference was called in London in 1921 to determine how much Germany should pay, the Allies calculated on the basis of what Germany could pay, not on their needs. In this way, according to Marks, the Germans largely escaped paying for World War I, and instead shifted the costs onto American investors.[122]

Impact on the German economy[edit]

Historian Martin Kitchen argues that the impression the country was crippled by the reparations was a myth. He further states that, instead of a weak Germany, the reverse was true; that Germany was strong enough to win substantial concessions and a reduced reparation amount.[123]

The French occupation of the Ruhr "was profitable and caused neither the German hyperinflation, which began in 1922 and ballooned because of German responses to the Ruhr occupation, nor the franc's 1924 collapse, which arose from French financial practices and the evaporation of reparations".[65]

In 1987, the German historian Detlev Peukert wrote about reparations:

Opinions range from the traditional verdict that the national budget and economy were intolerably squeezed to the opposite view that the burden was scarcely larger than present-day aid to developing countries. For once, the truth really seems to lie somewhere between these positions. It is certainly true that the flexibility of the German economy, already constrained by the low post-war level of economic activity in any case, was further restricted by the need to pay reparations. On the other hand, the actual payments that had to made were perfectly manageable. Reparations were not, therefore, an utterly intolerable burden, especially since any clear-sighted politician could reckon that after a few years of uninterrupted payment and reduced international tension there was a reasonable chance that the overall size of the debt would be cut down.[124]

In the early 1920s, there were two strands of German foreign policy that were not mutually exclusive, namely Erfüllungspolitik (fulfilment politics) where Germany would go through the motions of attempting to fulfill the terms of Versailles out of the hope that the failure to do so would lead to treaty revision and Katastrophenpolitik (catastrophe politics) where Germany would seek to provoke a catastrophic situation in order to force the Allies to revise Versailles.[125]

Marks noted that as long as the French occupied the Düsseldorf area in 1921 as an incentive to pay, the Germans paid all of their reparations in full and on time, albeit, with disastrous immediate consequences on the German economy, and it was only after the French pulled out of Düsseldorf in 1922, that the Germans started to default on a regular basis.[126] Peukert argued that the reasons for German economic problems in the early 1920s were not reparations, but rather the legacy of World War I.[127] In 1914, the German government decided not to raise taxes or create new taxes in order to pay for the war, and instead raised loans that would be repaid once the "final victory" had been achieved, and "...skating close to the limits of financial probity, it [the government] increased the volume of money in circulation, progressively abandoning the link between paper money and gold reserves that had been maintained before the war".[127] Defeat in 1918 meant the end of the hope that Germany could impose reparations on the Allies to pay off the by now colossal war debts, and instead the only remedy that remained was currency reform.[127] Peukert wrote that "The republican governments, however, were hardly likely to impose a painful remedy of this sort: it would have amounted to an expropriation of war-loan subscribers and people on fixed incomes, and the odium would have been incurred by the new state".[127] Instead of embracing a politically unpopular and potentially disastrous currency reform, successive governments in the early 1920s chose to muddle through the resulting economic problems while blaming everything that was going wrong with the economy on reparations.[128]

The perspective of economists argues that Germany paid a small portion of the reparations and the hyper-inflation of the early 1920s was a result of the political and economic instability of the Weimar Republic, albeit, triggered by reparations. In fact, the occupation of the Ruhr by the French (which began when Germany failed to supply a required delivery of telegraph poles) did more damage to the economy than the reparations payments. Another fallacy is that these reparations were the single cause of the economic condition that saw Hitler's rise to power. Germany was in fact doing remarkably well after its hyper-inflation of 1923, and was once more one of the world's largest economies.

The economy continued to perform reasonably well until the foreign investments funding the economy, and the loans funding reparations payments, were suddenly withdrawn with the Stock Market Crash of 1929. This collapse was magnified by the volume of loans provided to German companies by US lenders. Even the reduced payments of the Dawes plan were primarily financed through a large volume of international loans. From 1924 onward German officials were "virtually flooded with loan offers by foreigners."[129] When these debts suddenly came due it was as if years of reparations payments were compressed into a few short weeks.

The British economic historian Niall Ferguson argues that Germany could have paid reparations had there been the political will. Ferguson began his argument by noting that all of the belligerent countries in World War I had endured significant economic losses, not just Germany, and that in 1920–21, German net national product grew at 17%.[130] He also argued that the German trade deficit of 1920 was caused by speculation promoted in turn by the amalgamation of rapid economic growth in Germany and a weak exchange rate for the mark, and not by the prospect of reparations. Ferguson has contended that the rise in the value of the mark after March 1920 was caused by speculators buying up the mark, and this revaluation of the mark led to inflation becoming a serious problem in Germany from 1921 onwards.[131] Ferguson has maintained that the ratio of total German debts in 1921 to the gross national product was less than the ratio of total British debts to the British G.N.P in the same period. Likewise, Ferguson has argued that the total annuity of 3 billion marks imposed by the London conference in 1921, which totalled 4–7% of German national income, was far less than the worries expressed by Keynes of 25–50% of German national income being handled over in reparations.[49] Similarly, Ferguson has argued that France paid 4,933 million francs in reparations to Germany between 1871 and 1873 totalling 25% of French national net income without causing national bankruptcy, and has argued that German claims in the 1920s that reparations payments threatened Germany with bankruptcy were just an excuse to try to get out of paying reparations. Ferguson has argued that the plan called by the Young Committee in 1929 for Germany to pay reparations until 1988 is a far less than the 163 billion marks paid by Germany to the Economic European Community between 1958 and 1998 without experiencing a drastic collapse in living standards, and as such, the Young Plan was not the economically nonviable plan as often depicted.[132] The American historian Stephen Schuker has argued that the Germans received as much in American loans, which they never repaid, as Germany paid in reparations. Schuker has noted that between 1921 and 1931, Germany paid 19.1 billion marks in reparations, and in the same time, took in 27 billion marks in loans from the United States, which Germany defaulted on in 1932.[133] Ferguson has argued the principle problem with reparations was not the sum, but rather that the Allies entrusted the Germans with responsibility for paying reparations voluntarily without occupying significant amounts of German territory as an incentive to pay.[134] Since German politicians were reluctant to raise the necessary taxes to pay for reparations, successive German governments chose to default on reparations out the hope that the Allies were not serious about collecting reparations. Even without reparations, total public spending in Germany between 1920 and 1923 comprised 33% of German net national product, and Ferguson has argued that even if no reparations had been imposed, Germany would still had significant problems caused by the need to pay World War I debts combined with the demands of voters for more social services.[135] As a result of inflation, German debts by 1922 were reduced to their level in 1914.[136] Ferguson has argued that German inflation in the 1920s was not caused by reparations, but rather were a conscious political decision on the part of the German government to employ this particular economic strategy to deal with World War I debts and reparations.[137]

See also[edit]


  1. ^ By the 1922 quota deadline, "France had received 29% of her sawn timber allotment and 29% of her share of telegraph poles." While the German default was aimed specifically at France, there "was also substantial default on timber deliveries to Belgium and Italy". In addition, Britain "was still awaiting 99.80" per cent of her 1922 timber deliveries.[59]
  2. ^ a b No figure currently found showing the exact mark to dollar conversion. Instead, the estimated dollar value has been presented based off Sally Marks' comment that while the "paper mark depreciated rapidly, the gold mark held at 4 to the dollar and 20 to the pound."[98]
  1. ^ Simkins, Jukes, Hickey, p. 9
  2. ^ Tucker, p. 429
  3. ^ Fourteen Points Speech
  4. ^ Beller, pp. 182–95
  5. ^ Simkins, p. 71
  6. ^ Tucker, p. 638
  7. ^ Schmitt, p. 101
  8. ^ Schmitt, p. 102
  9. ^ Weinberg, p. 8
  10. ^ Boyer, p. 526
  11. ^ Martel (1999), p. 18
  12. ^ Slavicek, pp. 41–3 and 58
  13. ^ MacMillan, p. 202
  14. ^ a b Weinberg, p. 14
  15. ^ Slavicek, p. 44
  16. ^ Brezina, p. 21
  17. ^ Yearwood, p. 127
  18. ^ Martel (2010), p. 272
  19. ^ Slavicek, p. 37
  20. ^ Bell, p. 22
  21. ^ Marks (1978), p. 231
  22. ^ Marks (1978), p. 231-2
  23. ^ Young, pp. 133–5
  24. ^ Young, pp. 135–6
  25. ^ Binkley, pp. 399–400
  26. ^ Morrow, p. 290
  27. ^ Binkley, p. 400
  28. ^ Boemeke, pp. 537–8
  29. ^ Marks, pp. 231–2
  30. ^ Bell, p. 21
  31. ^ a b Albrecht-Carrié (1940), p. 15
  32. ^ a b Martel (2010), p. 156
  33. ^ Treaty of Versailles, articles 232-5
  34. ^ Treaty of Neuilly, Article 121
  35. ^ Treaty of Saint-Germain-en-Laye, articles 178-9
  36. ^ Treaty of Trianon, article 162-3
  37. ^ Treaty of Sèvres, article 231-6
  38. ^ Treaty of Neuilly, Article 127
  39. ^ Treaty of Neuilly, Article 128
  40. ^ Treaty of Versailles, Annex IV-V
  41. ^ Treaty of Saint-Germain-en-Laye, Annex IV-V
  42. ^ Treaty of Trianon, Annex V
  43. ^ Boemeke, p. 410
  44. ^ FRUS, p. 46
  45. ^ FRUS, p. 47
  46. ^ a b c d e f Marks, p. 237
  47. ^ a b Marks, p. 236
  48. ^ Crafts, p. 113
  49. ^ a b Ferguson, p. 414
  50. ^ Marks (1978), pp. 223–234
  51. ^ Kramer, p. 10
  52. ^ World Peace Foundation, p. 18
  53. ^ a b c d Marks, pp. 234-5
  54. ^ Crampton, p. 84
  55. ^ Taylor (2001), p. 59
  56. ^ Taylor (2001), p. 60
  57. ^ Marks (1978), p. 235-6
  58. ^ Marks (1978), pp. 239-40
  59. ^ a b Marks, p. 240
  60. ^ Marks (1978), p. 241
  61. ^ Hehn, p. 66
  62. ^ Marks (1978), p. 243
  63. ^ Bell, pp. 24–5
  64. ^ Marks (1978), p. 244
  65. ^ a b Martel (1999), p. 26
  66. ^ Schwarzschild, p. 140
  67. ^ a b Marks, p. 245
  68. ^ Marks (1978), pp. 244-5
  69. ^ Marks (1978), p. 246
  70. ^ a b Bell, pp. 37–8
  71. ^ Crafts, p. 82 and 114
  72. ^ Marks (1978), p. 249
  73. ^ Marks (1978), pp. 249-50
  74. ^ a b Backhaus, p. 70
  75. ^ Bell, p. 38
  76. ^ Marks (1978), pp. 250-1
  77. ^ a b Young, p. 171
  78. ^ Marks (1978), pp. 251-2
  79. ^ Shamir, p. 25
  80. ^ Marks (1978), p. 251
  81. ^ Young, p. 171-2
  82. ^ Young, p. 174
  83. ^ Shamir, pp. 56-8
  84. ^ Crafts, p. 155
  85. ^ Albrecht-Carrié (1960), p. 200
  86. ^ Harsch, p. 160
  87. ^ Temin, p. 137
  88. ^ Temin, p. 137-8
  89. ^ Mommsen, p. 454
  90. ^ Joshi, p. 78
  91. ^ a b Grenville, p. 140
  92. ^ a b Marks, p. 233
  93. ^ a b c Boemeke, p. 424
  94. ^ Martel (1999), p. 43
  95. ^ Weinberg, p. 16
  96. ^ Suddath, Claire (4 October 2010). "Why Did World War I Just End?". Time World. Time. Retrieved 1 July 2013. 
  97. ^ FRUS, pp. 46-48
  98. ^ Martel (1999), p. 35
  99. ^ Campbell, p. 161
  100. ^ Keynes, preface
  101. ^ Keynes, p. 146
  102. ^ Keynes, pp. 86-7
  103. ^ Keynes, p. 215
  104. ^ Keynes, p. 200
  105. ^ Keynes, p. 79
  106. ^ Keynes, p. 265
  107. ^ Keynes, p. 226
  108. ^ Keynes, pp. 94-5
  109. ^ Campbell, p. 160
  110. ^ Campbell, pp. 161-2
  111. ^ Albrecht-Carrié (1940), p. 16
  112. ^ Campbell, p. 162
  113. ^ Campbell, p. 163
  114. ^ Cord, p. 41
  115. ^ Taylor (1991) p. 70
  116. ^ Immerman, p. 10
  117. ^ Feinstein, Charles H. (1995). Banking, Currency, and Finance in Europe Between the Wars. Oxford UP. p. 32. 
  118. ^ A.J.P. Taylor (1961; reprint1996). Origin Of The Second World War. Simon and Schuster. p. 44. 
  119. ^ Boemeke, p. 502
  120. ^ Marks (1978), p. 255
  121. ^ Marks (1998), pp. 356–359
  122. ^ Marks (1978), p. 254
  123. ^ Kitchen p. 67
  124. ^ Peukert, Detlev The Weimar Republic New York: Hill & Wang, 1992 page 54.
  125. ^ Peukert, Detlev The Weimar Republic New York: Hill & Wang, 1992 pages 55-56.
  126. ^ Marks (1978) pp. 237-8
  127. ^ a b c d Peukert, Detlev The Weimar Republic New York: Hill & Wang, 1992 page 62.
  128. ^ Peukert, Detlev The Weimar Republic New York: Hill & Wang, 1992 page 63.
  129. ^ Winkler pp. 86–7
  130. ^ Ferguson, p. 412
  131. ^ Ferguson, p. 413
  132. ^ Ferguson, p. 415
  133. ^ Ferguson, p. 417
  134. ^ Ferguson, pp. 419-420
  135. ^ Ferguson, pp. 420-21
  136. ^ Ferguson, p. 421
  137. ^ Ferguson, p. 424