World War I reparations

World War I reparations were compensation imposed during the Paris Peace Conference upon the Central Powers following their defeat in the First World War by the Allied and Associate Powers. Each of the defeated powers was required to make payments in either cash or kind. Because of the financial situation Austria, Hungary, and Turkey found themselves in after the war, few to no reparations were paid and the requirements for reparations were cancelled. Bulgaria, having paid only a fraction of what was required, saw its reparation figure reduced and then cancelled. Historians have recognized the German requirement to pay reparations as the "chief battleground of the post-war era" and "the focus of the power struggle between France and Germany over whether the Versailles Treaty was to be enforced or revised". [1]

The Treaty of Versailles and the 1921 London Schedule of Payments required Germany to pay 132 billion gold marks (US$33 billion) in reparations to cover civilian damage caused during the war. This figure was divided into three categories of bonds: A, B, and C. Of these, Germany was only required to pay towards 'A' and 'B' bonds totaling 50 billion marks (US$12.5 billion). The remaining 'C' bonds, which Germany did not have to pay, were designed to deceive the Anglo-French public into believing Germany was being heavily fined and punished for the war.

Because of the lack of reparation payments by Germany, France occupied the Ruhr in 1923 to enforce payments, causing an international crisis that resulted in the implementation of the Dawes Plan in 1924. This plan outlined a new payment method and raised international loans to help Germany to meet her reparation commitments. Despite this, by 1928 Germany called for a new payment plan, resulting in the Young Plan that established the German reparation requirements at 112 billion marks (US$26.3 billion) and created a schedule of payments that would see Germany complete payments by 1988. With the collapse of the German economy in 1931, reparations were suspended for a year and in 1932 during the Lausanne Conference they were cancelled altogether. Between 1919 and 1932, Germany paid less than 21 billion marks in reparations.

The German people saw reparations as a national humiliation; the German Government worked to undermine the validity of the Treaty of Versailles and the requirement to pay. British economist John Maynard Keynes called the treaty a Carthaginian peace that would economically destroy Germany. His arguments had a profound effect on historians, politicians, and the public at large. Despite Keynes' arguments and those by later historians supporting or reinforcing Keynes' views, the consensus of contemporary historians is that reparations were not as intolerable as the Germans or Keynes had suggested and were within Germany's capacity to pay had there been the political will to do so.


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. [2] 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 for the formation of a League of Nations. [3] [4] During the fourth quarter of 1918, the Central Powers began to collapse. [5] In particular, the German military was decisively defeated on the Western Front and the German navy mutinied, prompting domestic uprisings that became known as the German Revolution. [6] [7] [8]

Most of the war's major battles occurred in France 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 north-east ( Nord-Pas de Calais Mining Basin). Extensive looting took place as German forces removed whatever material they could use and destroyed the rest. Hundreds of mines were destroyed along with railways, 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 it had caused. Clemenceau viewed reparations as a way of weakening Germany to ensure it could never threaten France again. [9] [10] Reparations would also go towards the reconstruction costs in other countries, including Belgium, which was also directly affected by the war. [11] British Prime Minister David Lloyd George opposed harsh reparations, arguing for a smaller sum that was less damaging to the German economy so that Germany could remain a viable economic power and trading partner. He also argued that reparations should include war pensions for disabled veterans and allowances for war widows, which would reserve a larger share of the reparations for the British Empire. [12] [13] [14] Wilson opposed these positions and was adamant that no indemnity should be imposed upon Germany. [15]

The Paris Peace Conference opened on 18 January 1919, aiming to establish a lasting peace between the Allied and Central Powers. [16] Demanding compensation from the defeated party was a common feature of peace treaties. [17] However, the financial terms of treaties signed during the peace conference were labelled reparations to distinguish them from punitive settlements usually known as indemnities, which were intended for reconstruction and compensating families who had been bereaved by the war. [11] 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 [18] and limited German responsibility to civilian damages. The same article, with the signatory's name changed, was also included in the treaties signed by Germany's allies. [19]