reparations

reparations The payment by a country defeated in war to its victors in money, kind, or labour. Their official rationale is to compensate the victors for the cost of the war, but in fact they have served to weaken the former enemy's economic potential, in order to deprive it of the foundation for speedy rearmament and retaliation. After the Franco-Prussian War (1870–1), France had to pay 5 billion francs in reparations to Germany.

When Germany was defeated in World War I, it was ordered to pay 226 billion gold marks in 1921. This was subsequently reduced to 132 billion, payable in thirty-seven years, plus a proportion of German export earnings (26 per cent). Following the financial collapse of 1923 and the political crisis after the French invasion of the Rhineland (Ruhr District) in the same year, the payments were revised in the Dawes Plan (16 August 1924). Devised by the American banker Charles Dawes (b. 1865, d. 1951), who received the 1925 Nobel Peace Prize for it, it restructured the reparation payments so that they were low for the first five years, to give German industry time to recover, before then rising again.

When it became clear that the German economy would be unable to meet the increased payments due after five years, the terms were revised by the Young Plan (21 August 1929). This substantially reduced the original reparation payments while granting Germany a loan of $300 million. A payment under the plan was made in 1930, but payments were suspended after the international financial crisis of 1931, and from 1933 were refused by Hitler. The reparation payments formed the central political issue during the Weimar Republic, not only because of their tremendous size, but also because they were legitimized by the war-guilt clause of the Versailles Treaty. In these, the Central Powers were given the sole responsibility for World War I, which was considered unacceptable at the time. Every government of the Republic was judged on how it managed to reduce the payments, and successive governments wilfully escalated the country's economic crises in order to prove the impossibility of paying off the reparations.

After World War II, the defeated Axis Powers were obliged to make reparations payments once again. In the areas under Western control, reparations payments were relatively small, mainly because the desire to punish Germany and Austria soon gave way to the need to befriend these countries as allies in the developing Cold War. Reparations were a much bigger liability for the areas under Soviet control. The USSR, which had suffered disproportionately great damages during the war, reasoned that it had greater need for reparations, while it maintained its influence in these regions through occupation. It is estimated that Eastern German reparations payments to the USSR (formally ended in 1954) exceeded those of Western Germany to the other Allies by 26 times.