After World War I

The Allied powers in Europe demanded heavy reparations from Germany. The United States backed Allied claims, although it claimed no reparations itself. The Allied Reparations Commission fixed the sum necessary to rebuild areas devastated by the German armed forces at $33,000,000,000, of which France was to receive 52 per cent. The term of payment was to extend over a period of 42 years.

In 1922 Germany asked for a delay, or moratorium, claiming that the country was not able to meet the heavy payments. Great Britain favored the German request, but France opposed it. German payments in goods, particularly coal, were closing world markets to British exports and were partly responsible for increasing British unemployment. France, however, needed German materials and suspected that Germany was attempting to escape all payment of reparations.

Relations between Britain and France became strained over the question of a moratorium. In January, 1923, in spite of strong British protests, French troops occupied the Ruhr, the most heavily industrialized area in Germany. In defiance, most workers in the Ruhr refused to work in the mines and factories. This further weakened the German economy. Later that year the country fell into financial chaos, as the irresponsible printing of new money by the government caused wildly escalating inflation. The German mark dropped to less than a thousand-billionth part of its 1913 value.

The Dawes Plan. In December, 1923, the Reparations Commission appointed an international commission to study Germany's financial condition and work out a just plan for reparations payments. Under General Charles G. Dawes (later Vice President of the United States), the new commission worked out a plan for stabilizing German currency and balancing the country's budget. It was accepted by the former Allied powers. An important part of the plan was a loan of $200,000,000 to Germany, raised largely in the United States and Great Britain.

Reparations payments, supervised by Allied officials, continued under the Dawes Plan for about five years. The plan worked well in accomplishing its limited objectives, although Germany's payments never exceeded 4 per cent of its national income and the country received more in loans than it paid in reparations.

The Young Plan. In 1929 Allied officials agreed, at the Germans' request, to reconsider the terms for Germany's payment of reparations. They created a second commission, which met in Paris. This commission drew up the Young Plan, named for its chairman, Owen D. Young of the United States. (Young, like Dawes, was acting as a private citizen, not an agent of the United States government.)

Under the Young Plan, Germany was given full responsibility for its financial operations and the payment of reparations. The plan called for the establishment of an international bank, officially constituted in May, 1930, to take over some of the work of the administrative staff created under the Dawes Plan. It provided for 57 annual payments by Germany, running to 1987. After slight revisions, the plan was adopted early in 1930 at a conference meeting at The Hague. Later that year, however, the Great Depression hit Germany.

In 1931 President Herbert Hoover proposed a year's moratorium on all intergovernmental debts. The proposal was accepted by other governments. In June, 1932, an international conference met at Lausanne, Switzerland, and canceled all German reparations until world economic conditions improved. The Treaty of Lausanne marked the end of Germany's payments, for after Adolf Hitler's rise to power in 1933 Germany repudiated all reparations.