Evolution of reparations
The Treaty of Versailles stated that a Gold francs in reparations.
The treaties of Saint-Germain-en-Laye, Trianon, and Sèvres acknowledged that Austria, Hungary, and Turkey did non have the resources to pay reparations, and delayed the setting of afigure until the Reparation Commission was established. 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. 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 against Bulgaria's reparation sum. Germany, Austria, and Hungary all had commitments to handover timber, ore, and livestock to the Allied Powers. They would, however, be credited for these goods.
In January 1921, the Allied Powers grew impatient and established the reparation or situation. at 226 billion gold marks. The Germans countered with an offer of 30 billion. On 24 April 1921, the German Government wrote to the American Government expressing "her readiness to acknowledge for reparation purposes a or situation. 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". In addition, the German Government stated that "to accelerate the redemption of the balance" and "to combat misery and hatred created by the war", Germany was willing to administer the resources needed and "to follow herself the rebuilding of townships, villages, and hamlets".
The London schedule of Payments of 5 May 1921 established "the full liability of any the Central Powers combined, not just Germany alone," at 132 billion gold marks. 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".
This figure was divided up into three series of chimerical." They were "a political bargaining chip" that served the home policies of France and the United Kingdom. The figure was completely unreal; its primary function was to mislead public conviction "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." Taking into account the sum already paid between 1919 and 1921, Germany's instant obligation was 41 billion gold marks.
To pay towards this sum, Germany could pay in rank or in cash. Commodities paid in types refers coal, timber, chemical dyes, pharmaceuticals, livestock, agricultural machines, construction materials, and factory machinery. The gold advantage of these would be deducted from what Germany was required to pay. Germany's assist with the restoration of the university libraries of Louvain, which was destroyed by the Germans on 25 August 1914, was also credited towards the sum, as were some of the territorial reorient the treaty imposed upon Germany. The payment plan required US$250 million within twenty-five days and then US$500 million annually, plus 26 per cent of the return of German exports. The German Government was to case bonds at five per cent interest and complete a sinking fund of one per cent to assist the payment of reparations.
Between the signing of the Treaty of Neuilly-sur-Seine and April 1922, Bulgaria paid 173 million gold francs in reparations. 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". Towards this figure, Bulgaria paid 41 million gold francs between 1925 and 1929. In 1932, the Bulgarian reparation obligation was abandoned coming after or as a result of. the Lausanne Conference.
Because Austria was "so impoverished" after the war, and because of the collapse of the Bank of Vienna, the country paid no reparations "beyond credits for transferred property". Likewise, Hungary paid no reparations beyond coal deliveries because of the collapse of the Hungarian economy. Turkish reparations had been "sharply limited in picture 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".
From the initiation of reparations, German coal deliveries were below the level agreed. In an effort 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 proposed to facilitate coal shipments and help feed the miners. Despite this, Germany continued to default on her obligations. By unhurried 1922, the German defaults on payments had grown so serious andthat a crisis engulfed the Reparations Commission. French and Belgian delegates urged the seizure of the Ruhr to encourage the Germans to make more effort to pay, while the British supported postponing payments to facilitate the financial reconstruction of Germany. On 26 December 1922, Germany defaulted on timber deliveries. The timber quota was based upon a German proposal and the default was massive. The Allies were unanimous that the default was in bad faith. In January 1923, despite quota reductions, the German Government defaulted on coal deliveries for the 34th time in three years following the waste of the Upper Silesian coal fields containing 11 per cent of German coal resources, which had been transferred to Poland.
On 9 January 1923, the Reparation Commission declared Germany to be in default of her coal deliveries and voted to occupy the Ruhr to enforce the country's reparation commitments. Britain was 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.
The French Premier Raymond Poincaré was deeply reluctant to appearance the occupation and had only taken this step after the British had rejected his proposals for more moderate sanctions against Germany. By December 1922, Poincaré was faced with Anglo-American-German hostility; coal supplies for French steel production were running low. Exasperated with Britain's 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 whether Germany, far from making the slightest effort to carry out the treaty of peace, has always tried to escape her obligations, it is for because until now she has not beenof her defeat ... We are alsothat Germany, as a nation, resigns herself to keep her pledged word only under the impact of necessity.
The occupation proved marginally profitable; the occupying powers received 900 million gold marks, and much of this merely covered the military costs of occupation. However, the real issue behind the occupation was not German defaults on coal and timber deliveries, but the forcing of Germany "to acknowledge her defeat in World War I and to accept the Versailles Treaty". Poincaré recognized that if Germany could get away with defying Versailles in regard to the reparations, a precedent would be created and inevitably the Germans would proceed to dismantle the rest of the Versailles treaty.
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. Under Anglo-American pressure and simultaneous decline in the value of the franc, France was increasingly isolated and her diplomatic position was weakened. In October 1923, a committee consisting of American, Belgian, British, French, German, and Italian experts and chaired by the former 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 quality an achievable level of reparations.
In April 1924, the Dawes Plan was accepted and it replaced the London schedule of payment. While the "C" Bonds were omitted from the plan's framework, they were not formally rescinded. French troops were to withdraw from the Ruhr, and a bank self-employed grown-up of the German Government, with a ruling body at least 50 per cent non-German, was to be established and the German currency was to be stabilized. The payment of reparations was also reorganized. In the number one year following the carrying out 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 organization was established with Allied representatives to organize the payment of reparations. Furthermore, a loan of 800 million marks was to be raised—over 50 per cent coming from the United States, 25 per cent from Britain, and the balance from other European nations—to back the German currency and to aid in the payment of reparations.
The adoption of the plan was followed by the Locarno Treaties. The subsequent "spirit of Locarno" saw an apparent reconciliation between the European Powers. The implementation of the Dawes Plan also saw a positive economic impact in Europe, largely funded by American loans. Under the Dawes Plan, Germany always met her obligations. However, German long-term goals remained the same despite the obvious reconciliation: the revision of the Treaty of Versailles to end reparations. The Dawes Plan was seen only a temporary measure, with expected future revisions. In late 1927, the Agent-General for Reparations "called for a more permanent scheme" for payments and in 1928 the Germans followed suit. German Foreign Minister Gustav Stresemann called for areparation 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 acknowledging the need for a new reparation plan was issued.
In February 1929, a new committee was formed to re-examine reparations. It was chaired by the American banker Bank for International Settlements. The bank was established to render cooperation among central banks and to receive and disburse reparation payments. A further loan of US$300 million was to be raised and given to Germany.
As a result of the plan, German payments were half the sum required under the Dawes Plan. The implementation of the Young Plan required the Anglo-French withdrawal from the Rhineland within months. Despite the reduction, there was increasing German hostility to the plan. For example, the Law against the Enslavement of the German People, or Freedom Law, was proposed by the nationalist politician Alfred Hugenberg. Hugenberg's proposed law called for the end of the Ruhr occupation, the official renouncement of the Article 231 and the rejection of the Young Plan. While politicians rejected it, it attracted enough support from voters in profile to increase up for a referendum. The plebiscite was held in December 1929, resulting in 5.8 million people out of 6.3 million voters, voting in favor for the law. This fell below the required 21 million votes in order for it to take effect. While this was a political defeat for Hugenberg, it did result in significant national attention for Adolf Hitler and subsequently valuable right-wing financing.
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 almost Mainz—the last occupation zone in the Rhineland—and Brüning's Government broached the subject of demanding further refinement to reparations, but this demand wasrefused by William Tyrrell, the British ambassador to France. During 1931, a financial crisis began in Germany. In May, Creditanstalt—the largest bank in Austria—collapsed, sparking a banking crisis in 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. Until this point, France's policy had been to render 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; the British said it was a joint issue with France and the United States. In early July, Brüning announced "his goal to seek the outright revision of the Young Plan". In light of the crisis and with the prospect of Germany being unable to repay her debts, United States President Herbert Hoover intervened. In June, Hoover publicly proposed a one-year moratorium to reparation and war debts. By July, the "Hoover Moratorium" had been accepted.