Friday, October 1, 2010

First World War to end on Sunday with final payment

Startling story in the Irish Examiner on Wednesday.  Germany has until this week still been paying off First World War reparations.

The First World War “finally draws to a close”, the Examiner says, on Sunday 3rd October, with Germany’s final payment of wartime reparations to the Allies. 

After 92 years, a final payment of €69.1 million payment will discharge the onerous debt, which the paper correctly describes as “the price for one world war and a cause of another”.  For campaigning against the reparations was one of Hitler’s main themes, and it struck a chord with some Germans who wouldn't otherwise have given him the time of day.  See my recent post What was it like at the time?

The reparations were set at the Treaty of Versailles in 1919, as both compensation to France, Britain, and America, and as punishment for the war.  Article 231 of the Treaty (the so-called 'war guilt' clause) declared Germany and its allies responsible for all 'loss and damage' suffered by the Allies during the war and provided the basis for reparations.

John Maynard Keynes was the principal representative of the British Treasury at the Paris Peace Conference. In June 1919 he resigned in protest at the extent of the reparations, and subsequently protested publicly in his book The Economic Consequences of the Peace (1919).

What follows is quoted from the Irish Examiner story. “The initial sum agreed for war damages in 1919 was 226 billion Reichsmarks, a sum later reduced to 132bn. At the time this was the equivalent of around €28bn – the then equivalent of 100 million kilograms of gold.

“However, interest on that sum was added to considerably when Hitler rose to power and refused to foot the bill any longer. The Treaty of Versailles settlement is also credited with accelerating the Nazis’ rise to power as it was a substantial roadblock to getting the country back on a sound economic footing as money poured out of the country to finance the debt.

“France, which was on its last legs after the war, pushed hardest for the maximum fiscal punishment for Germany. 

“The Wall Street Crash in 1929 sounded the death knell of the already feeble Weimar Republic and the country sank further and further into debt. Just four years later, Hitler was elected Chancellor of Germany and by the end of the decade, the country was at war again in Europe.

“The reparation debt came back at the end of World War II, and was quickly frozen again when the nation was split into West and East Germany. Following the 1990 reunification, the debt was renewed. 

“Most of the money goes to private individuals, pension funds and corporations holding debenture bonds.”

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