World War I reparations
Following their defeat in World War I, the Central Powers agreed to pay war reparations to the Allied Powers. Each defeated power was required to make payments in either cash or kind. Because of the financial situation in Austria, Hungary, and Turkey 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."
The Treaty of Versailles 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 required to pay towards 'A' and 'B' bonds totaling 50 billion marks unconditionally. The payment of the remaining 'C' bonds was interest-free and without any specific schedule for payment, instead being contingent on the Weimar Republic's eventual ability to pay, as was to be assessed at some future point by an Allied committee.
Due to 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 its 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 and created a schedule of payments that would see Germany complete payments by 1988. As a result of the severe impact of the Great Depression on the German economy, reparations were suspended for a year in 1931, and after the failure to implement the agreement reached in the 1932 Lausanne Conference, no additional reparations payments were made. Between 1919 and 1932, Germany paid less than 21 billion marks in reparations, mostly funded by foreign loans that Adolf Hitler reneged on in 1939.
Many Germans 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. 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.
Reparations played a significant role in Nazi propaganda, and after coming to power in 1933, Hitler ceased payment of reparations, although Germany still paid interest to holders of reparation bonds until 1939. Following the Second World War, West Germany took up payments. The 1953 London Agreement on German External Debts resulted in an agreement to pay 50 percent of the remaining balance. The final payment was made on 3 October 2010, settling German loan debts in regard to reparations.
Background
Course of the war
In 1914, following the assassination of Archduke Franz-Ferdinand by a Serb nationalist, the First World War broke out, with Austria-Hungary declaring war on Serbia, and Germany declaring war on and invading France and Belgium. For the next four years fighting raged across Europe, the Middle East, Africa, and Asia. 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. During the fourth quarter of 1918, the Central Powers began to collapse. In particular, Austria-Hungary collapsed putting southern Germany at risk of invasion, Turkey surrendered freeing up Allied troops for action elsewhere, the German military was decisively defeated on the Western Front, and the German navy mutinied, all of which prompted domestic uprisings that became known as the German Revolution.Germany signed an armistice with the allies on 11 November 1918. The armistice agreement included an agreement to pay "reparation for damage done" to the Allied countries.
Allied damages
Most of the war's major battles occurred in France and Belgium, with both the French countryside and Belgian countryside being heavily scarred in the fighting. Furthermore, in 1918 during the German retreat, German troops devastated France's most industrialized region in the north-east as well as Belgium. 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. His position was shared by the French electorate. Reparations would also go towards the reconstruction costs in other countries, including Belgium, which were also directly affected by the war. Despite domestic pressure for a harsh settlement, British Prime Minister David Lloyd George opposed overbearing reparations. He argued for a smaller sum, which would be less damaging to the German economy with a long-term goal of ensuring Germany would 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. Wilson opposed these positions and was adamant that no indemnity should be imposed upon Germany.Damages in France and Belgium included the complete demolition of more than 300,000 houses in German-occupied France, the stripping of more than 6,000 factories of their machinery and the smashing of textile industry in Lille and Sedan, the destruction of nearly 2,000 breweries, the blowing up of 112 mineshafts in Roubaix and Tourcoing, the flooding or blocking-off of more 1,000 miles of mine galleries, the ripping up of more than 1,000 miles of railway, the dropping of more than 1,000 bridges, as well as the looting of churches. German wartime requisitions of farm animals imposed on the civilian population within occupied France and Belgium included roughly 500,000 head of cattle, approximately 500,000 head of sheep, and more than 300,000 head of horses and donkeys. In cleaning up after the war, the French authorities had to remove over 3 hundred million metres of barbed wire and fill in more than a quarter of a billion cubic metres of trenches, with much farmland rendered essentially useless for years after the war due to Unexploded ordnance and contamination by poison gas that continued to leak from buried gas-cylinders which had to be removed.
Allied losses of civilian shipping at sea due to the primarily-German U-boat campaign had also been severe, particularly for Britain. Nearly 8 million tons of British civilian shipping had been sunk by German U-boats, with many civilian crew killed. France, Italy, and the United States of America had lost another 2 million tons of merchant shipping, again with heavy losses amongst crew. Another 1.2 million tons of neutral Norwegian, Danish, and Swedish shipping had also been sunk. The sinking of five British hospital ships also caused considerable bitterness.
Versailles
The Paris Peace Conference opened on 18 January 1919, aiming to establish a lasting peace between the Allied and Central Powers. Demanding compensation from the defeated party was a common feature of peace treaties, including the Treaty of Versailles that Germany had imposed on France in 1871. However, the financial terms of treaties signed during the peace conference were labelled reparations to distinguish them from punitive settlements usually known as indemnities. Reparations were intended for reconstruction and compensating families who had been bereaved by the war. 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 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.German reaction
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. After the drafting of the Treaty of Versailles on 7 May that year, the German and Allied delegations met and the treaty was handed over to be translated and for a response to be issued. At this meeting Brockdorff-Rantzau stated, "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.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 ...". This resulted in a prevailing belief of humiliation among Germans; the article was seen as an injustice and there was a view that Germany had signed "away her honor". 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". Politicians seeking international sympathy would continue to use the article for its propaganda value, persuading many who had not read the treaties that the article implied full war guilt. German revisionist historians who later tried to ignore the validity of the clause found a ready audience among revisionist writers in France, Britain, and the US. The objective of both the politicians and historians was to prove that Germany was not solely guilty for causing the war; this was with the idea that, if that guilt could be disproved, the legal requirement to pay reparations would disappear.