World War I reparations
Following their defeat in World War I, the Central Powers agreed to pay war reparations to the Allied Powers. Each defeated power was required to make payments in either cash or kind. Because of the financial situation in Austria, Hungary, and Turkey after the war, few to no reparations were paid and the requirements for reparations were cancelled. Bulgaria, having paid only a fraction of what was required, saw its reparation figure reduced and then cancelled. Historians have recognized the German requirement to pay reparations as the "chief battleground of the post-war era" and "the focus of the power struggle between France and Germany over whether the Versailles Treaty was to be enforced or revised."[1]
The Treaty of Versailles (signed in 1919) and the 1921 London Schedule of Payments required the Central Powers to pay 132 billion gold marks (US$33 billion at the time) in reparations to cover civilian damage caused during the war. This figure was divided into three categories of bonds: A, B, and C. Of these, Germany was required to pay towards 'A' and 'B' bonds totaling 50 billion marks (US$12.5 billion) unconditionally. The payment of the remaining 'C' bonds was interest-free and without any specific schedule for payment, instead being contingent on the Weimar Republic's eventual ability to pay, as was to be assessed at some future point by an Allied committee.
Due to the lack of reparation payments by Germany, France occupied the Ruhr in 1923 to enforce payments, causing an international crisis that resulted in the implementation of the Dawes Plan in 1924. This plan outlined a new payment method and raised international loans to help Germany to meet its reparation commitments. Despite this, by 1928 Germany called for a new payment plan, resulting in the Young Plan that established the German reparation requirements at 112 billion marks (US$26.3 billion) and created a schedule of payments that would see Germany complete payments by 1988. As a result of the severe impact of the Great Depression on the German economy, reparations were suspended for a year in 1931, and after the failure to implement the agreement reached in the 1932 Lausanne Conference, no additional reparations payments were made. Between 1919 and 1932, Germany paid less than 21 billion marks in reparations, mostly funded by foreign loans that Adolf Hitler reneged on in 1933.
Many Germans saw reparations as a national humiliation; the German Government worked to undermine the validity of the Treaty of Versailles and the requirement to pay. British economist John Maynard Keynes called the treaty a Carthaginian peace that would economically destroy Germany. His arguments had a profound effect on historians, politicians, and the public at large. Despite Keynes' arguments and those by later historians supporting or reinforcing Keynes' views, the consensus of contemporary historians is that reparations were not as intolerable as the Germans or Keynes had suggested and were within Germany's capacity to pay had there been the political will to do so.[cite?]
Reparations played a significant role in Nazi propaganda, and on coming to power in 1933 Hitler ceased payment of reparations. Following the Second World War, West Germany took up payments. The 1953 London Agreement on German External Debts resulted in an agreement to pay 50 percent of the remaining balance. The final payment was made on 3 October 2010, settling German loan debts in regard to reparations.