Reparation, Debts and Economic Crisis

Reparation

Most of the peace treaties signed before the First World War imposed ‘war indemnity’ on the defeated states. It was a fine imposed by the victor on the vanquished by way of penalty. The theory was that the victor must recover practically the entire cost of a war from the defeated enemy. The defeated powers used to indemnify the losses suffered by the victors during the wars. During the First World War, it was argued in many countries that in view of heavy losses involved in the war, it would be impossible for the victors to recover the entire cost. Purely from an economic viewpoint, as Gathorne-Hardy says, ‘…the immense scale of the war of 1914-18 rendered it obvious at the outset that a claim of this description would be beyond the power of any nation to satisfy…’ Besides, there was a moral aspect also. President Woodrow Wilson was against the imposition of war indemnity on the ground of such a fine being undemocratic. As Carr also admits, ‘…democratic opinion in many countries had expressed itself against the practice…’ of imposing war indemnity. Wilson personally was not in favour of any prize for the victors and any punishment for the vanquished. However, the US President had to yield to the pressure put upon him by his European allies, and he had to agree to the imposition of a limited amount of fine to be called reparation.

The Treaty of Versailles provided for payment of an unspecified amount of reparation by Germany to the victors of the Fist World War. The demands made on Germany were to be limited to the ‘compensation for all damage done to the civilian population for the Allied and Associated Powers and to their property.’ This was supposed to be a concession, as Germany was not required to pay to recover the ‘entire cost’ of the war. Unlike in previous wars, the civilian population and their properties were not spread. Heavy damages were caused to the civilians and their properties as a result of indiscriminate attacks by the German army, navy and army force. The Allies decided not to claim military losses. Nevertheless, their greed was reflected in the fact that reparation was to cover, besides civilian losses, the separation allowances and pensions to be paid to the widows and dependents of the officers and men killed in action. The concession, therefor, was not of much practical consequence.

Germany, as we have seen, was made to admit her sole responsibility for the war and and the consequent liability for payment of reparation. Article 231 of the Treaty said: ‘The Allied and Associated Powers affirm and Germany accepts the responsibility for causing all the loss and damage to which the Allied and Associated Governments and their nationals have been subjected to as a consequence of the war imposed on them by the aggression of Germany and her allies.’ Germany was called upon by the Allies to pay to them such amount of money as would be determined by a Commission to be appointed for this purpose. This money was required to enable the Allies to ‘repair’ the losses suffered by them as a result of the war ‘imposed’ upon them by Germany.

Spa Conference (1920)

Contrary to German expectations the conference did not focus on the issue of war reparations but was initially dominated by the topic of disarmament, also part of the Treaty of Versailles. Due to current events the coal negotiations then moved to centre stage.

The issue of coal pertained to shipments from Germany to France, Belgium and Italy according to Art. 236 of Part VIII of the Versailles Treaty. In a protocol signed on 19 August 1919 Germany had agreed on these deliveries, but due to the uprisings of spring 1920 (Kapp Putsch, Red Ruhr Army) and associated strikes in the coal industry had been unable to comply.

Discussion of the coal issue, which began on 9 July, soon showed that the Allied side was unwilling to compromise. At the very beginning threats about sanctions were issued, with Millerand acting as the spokesman on the Allied side. After days of tough negotiations, the talks almost broke down on 14 July. On 16 July, Fehrenbach and foreign minister Walter Simons signed the Spa coal protocol as drawn up by the Allies. Germany promised to deliver 2 million tons of coal per month for six months. In exchange for the Allied right to insist on the delivery of specifics types or quality of coal, Germany was granted 5 Goldmark per ton to purchase food for the miners. In addition, the Allies agreed to monthly advance payments for the coal. The German side did not sign up to the Allied threat that missed deliveries would be answered by military occupation of the Ruhr or other German territories.

Despite Allied financial concessions the coal agreement dealt a heavy blow to the German economy. Supply of coal had been adequate before the conference, but now domestic bottlenecks emerged that damaged output of the iron and steel industry, the railways and coal conversion industry.

REFERENCES : V.N. Khanna, wiki