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.

Not to be confused with Dawes Act.

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 The Dawes Plan was superseded by the Young Plan in 1929.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 Dawes, who headed the group that developed it, received the Nobel Peace Prize in 1925.

Reparations payments began at one billion Reichsmarks the first year, increasing annually to two and a half billion after five years. No total sum was set. The terms included a prosperity index, based on which Germany would have to pay more under favourable economic circumstances.^[11]

[9]

The sources for reparation payments included taxes on customs duties, alcohol, tobacco and sugar, and revenue from railroads and the budget. As a guarantee for payments, the German National Railway was converted into a corporation under creditor-state supervision. An interest-bearing mortgage on German industry for 5 billion Reichsmarks also served as a guarantee.^[12]

[10]

The was reorganized under the supervision of the creditor states. It had seven representatives from the creditor states and seven Germans on its board ^[13] and was independent of the central government.^[4]

Reichsbank

Germany was loaned 800 million Reichsmarks to be the base capital of the central bank and to ensure the Reichsmark’s stability. About half of the sum was raised through Wall Street bond issues in the United States.^[6]

[12]

The Allied Reparations Commission was replaced by a Transfer Committee which was to take the value of the Reichsmark into consideration when making payment transfers. Payments were not to be made if they endangered the gold that backed the Reichsmark. Repayment of commercial debts took priority over reparations payments in order to maintain Germany's creditworthiness.^[14]

[12]

Foreign troops were to be withdrawn from the Ruhr.

The Dawes Report stressed in its introduction that "the guarantees we propose are economic and not political in nature".^[10] The resulting Dawes Plan covered payment amounts and timing, sources of revenue, loans to Germany, currency stabilization and ending the Ruhr occupation:

Reichstag approval[edit]

The debate over the Dawes Plan in the Reichstag affected the formation of a new government following the May 1924 Reichstag election. The Communist Party of Germany (KPD) saw the Dawes Plan as economic imperialism, and the Nazi Party objected altogether to paying reparations.^[6] Many on the political right objected to it because of the limits it placed on German sovereignty (control of the Reichsbank and the national railroad). The right-wing nationalist German National People's Party (DNVP) had campaigned against the Dawes Plan and gained 24 additional seats, making it the second strongest party in the Reichstag after the Social Democrats. The party's refusal to change its stance on the Dawes Plan resulted in Chancellor Wilhelm Marx of the Centre Party remaining in office presiding over a centrist minority cabinet.^[15] Since the clause in the Dawes Plan regarding the German National Railway required a change in the Weimar Constitution and therefore a two-thirds majority in the Reichstag to pass, it was necessary for some DNVP members to vote for acceptance. A number of influential industrial and agricultural interest groups urged the DNVP to accept the Plan, with the result that it passed on 29 August 1924 with the help of 48 DNVP votes.^[16] The Dawes Plan formally went into effect on 1 September 1924.

Gilbert, Felix (1970). The End of the European Era: 1890 to the present. New York: Norton. 0-393-05413-6.

ISBN

McKercher, B. J. C. (1990). Anglo-American Relations in the 1920s: The Struggle for Supremacy. Edmonton: University of Alberta Press. 0-88864-224-5.

ISBN

Schuker, Stephen A. (1976). The End of French Predominance in Europe: The Financial Crisis of 1924 and the Adoption of the Dawes Plan. Chapel Hill: University of North Carolina Press. 0-8078-1253-6.