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Dawes Plan
The Dawes Plan temporarily resolved the issue of the reparations that Germany owed to the Allies of World War I. Enacted in 1924, it ended the crisis in European diplomacy that occurred after French and Belgian troops occupied the Ruhr in response to Germany's failure to meet its reparations obligations.
The Plan set up a staggered schedule for Germany's payment of war reparations, provided for a large loan to stabilise the German currency and ended the occupation of the Ruhr. It resulted in a brief period of economic recovery in the second half of the 1920s, although it came at the price of a heavy reliance on foreign capital. The Dawes Plan was superseded by the Young Plan in 1929.
Because the Plan resolved a serious international crisis, the American Charles G. Dawes, who headed the group that developed it, received the Nobel Peace Prize in 1925.
At the end of World War I, the Allied Powers included in the Treaty of Versailles a plan for the reparations for which Germany would be liable. It established an interim 20 billion Reichsmarks to be paid through April 1920 and left the full details to be determined by an Inter-Allied Reparation Commission. In April 1921, the Allies adopted the London Schedule of Payments that the Commission had developed. It established the total German reparations figure at 132 billion gold marks (US $442 billion in 2023 dollars). The schedule was separated into three classes, of which only the first two, amounting to 50 billion gold marks, were expected to be paid.
On 5 May 1921 the Allies delivered an ultimatum to Germany demanding that it accept the London Schedule within six days and threatening to occupy the heavily industrialized Ruhr district if it did not. The Reichstag voted to accept on 11 May, following which the government began to implement its fulfilment policy (Erfüllungspolitik), an effort to show the impossibility of meeting the payments by attempting to fulfil them. Germany made its first payment of one billion gold marks in the summer of 1921 but after that paid little in cash and fell behind in its deliveries of materials such as coal and timber. After Germany was declared in default in January 1923, French and Belgian troops occupied the Ruhr. Germany responded with passive resistance to the occupation. The government printed money in order to pay the idled workers, which fuelled the hyperinflation that all but wrecked the German economy.
Ensuing events led the Allies to decide that the London Schedule needed to be re-examined. The Ruhr occupation had heightened tension between France and Germany. The acceptance of the London Schedule by Germany's government increased political instability. Chancellor Joseph Wirth's fulfilment policy angered many on the right, who called it traitorous. Radical right-wing groups instigated a hate campaign against representatives of the Republic that included the assassination in August 1921 of Matthias Erzberger, one of the signers of the Armistice of 11 November 1918, and in June 1922 of Foreign Minister Walther Rathenau. The United States feared a coup from either the right or the left and that if one did take place, the large amount of money it had loaned to France and England during the war – the repayment of which was in large part dependent on the receipt of German reparations – might never be recovered.
In 1923 the new German chancellor Gustav Stresemann ordered an end to passive resistance, implemented a currency reform that brought an end to the hyperinflation and sought discussions with the Allied Powers which would take into consideration what Germany was financially capable of paying. The Reparations Commission set up the Dawes committee, consisting of ten expert representatives nominated by their respective countries: two each from Belgium (Baron Maurice Houtart, Emile Francqui), France (Jean Parmentier, Edgard Allix), Britain (Sir Josiah C. Stamp, Sir Robert M. Kindersley), Italy (Alberto Pirelli, Federico Flora) and the United States (Charles G. Dawes and Owen D. Young). Dawes, the head of the committee, was a former army general, banker and politician. His committee was tasked with examining the stabilization of Germany's currency, its budget and its resources. Based on the studies, the committee was to recommend a realistic schedule of payments – one taking into account Germany's ability to pay – that would replace the London Schedule.
The Dawes Report stressed in its introduction that "the guarantees we propose are economic and not political in nature". The resulting Dawes Plan covered payment amounts and timing, sources of revenue, loans to Germany, currency stabilization and ending the Ruhr occupation:
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Dawes Plan
The Dawes Plan temporarily resolved the issue of the reparations that Germany owed to the Allies of World War I. Enacted in 1924, it ended the crisis in European diplomacy that occurred after French and Belgian troops occupied the Ruhr in response to Germany's failure to meet its reparations obligations.
The Plan set up a staggered schedule for Germany's payment of war reparations, provided for a large loan to stabilise the German currency and ended the occupation of the Ruhr. It resulted in a brief period of economic recovery in the second half of the 1920s, although it came at the price of a heavy reliance on foreign capital. The Dawes Plan was superseded by the Young Plan in 1929.
Because the Plan resolved a serious international crisis, the American Charles G. Dawes, who headed the group that developed it, received the Nobel Peace Prize in 1925.
At the end of World War I, the Allied Powers included in the Treaty of Versailles a plan for the reparations for which Germany would be liable. It established an interim 20 billion Reichsmarks to be paid through April 1920 and left the full details to be determined by an Inter-Allied Reparation Commission. In April 1921, the Allies adopted the London Schedule of Payments that the Commission had developed. It established the total German reparations figure at 132 billion gold marks (US $442 billion in 2023 dollars). The schedule was separated into three classes, of which only the first two, amounting to 50 billion gold marks, were expected to be paid.
On 5 May 1921 the Allies delivered an ultimatum to Germany demanding that it accept the London Schedule within six days and threatening to occupy the heavily industrialized Ruhr district if it did not. The Reichstag voted to accept on 11 May, following which the government began to implement its fulfilment policy (Erfüllungspolitik), an effort to show the impossibility of meeting the payments by attempting to fulfil them. Germany made its first payment of one billion gold marks in the summer of 1921 but after that paid little in cash and fell behind in its deliveries of materials such as coal and timber. After Germany was declared in default in January 1923, French and Belgian troops occupied the Ruhr. Germany responded with passive resistance to the occupation. The government printed money in order to pay the idled workers, which fuelled the hyperinflation that all but wrecked the German economy.
Ensuing events led the Allies to decide that the London Schedule needed to be re-examined. The Ruhr occupation had heightened tension between France and Germany. The acceptance of the London Schedule by Germany's government increased political instability. Chancellor Joseph Wirth's fulfilment policy angered many on the right, who called it traitorous. Radical right-wing groups instigated a hate campaign against representatives of the Republic that included the assassination in August 1921 of Matthias Erzberger, one of the signers of the Armistice of 11 November 1918, and in June 1922 of Foreign Minister Walther Rathenau. The United States feared a coup from either the right or the left and that if one did take place, the large amount of money it had loaned to France and England during the war – the repayment of which was in large part dependent on the receipt of German reparations – might never be recovered.
In 1923 the new German chancellor Gustav Stresemann ordered an end to passive resistance, implemented a currency reform that brought an end to the hyperinflation and sought discussions with the Allied Powers which would take into consideration what Germany was financially capable of paying. The Reparations Commission set up the Dawes committee, consisting of ten expert representatives nominated by their respective countries: two each from Belgium (Baron Maurice Houtart, Emile Francqui), France (Jean Parmentier, Edgard Allix), Britain (Sir Josiah C. Stamp, Sir Robert M. Kindersley), Italy (Alberto Pirelli, Federico Flora) and the United States (Charles G. Dawes and Owen D. Young). Dawes, the head of the committee, was a former army general, banker and politician. His committee was tasked with examining the stabilization of Germany's currency, its budget and its resources. Based on the studies, the committee was to recommend a realistic schedule of payments – one taking into account Germany's ability to pay – that would replace the London Schedule.
The Dawes Report stressed in its introduction that "the guarantees we propose are economic and not political in nature". The resulting Dawes Plan covered payment amounts and timing, sources of revenue, loans to Germany, currency stabilization and ending the Ruhr occupation: