After the defeat of the German Empire in the First World War of 1914-1918, the Treaty of Versailles was concluded. Under its terms, Germany was supposed to pay reparations to the Entente countries. The amount and timing of compensation was not specifically regulated by the peace treaty. After 2-3 years, Germany was faced with economic difficulties. In 1924, the Dawes Plan was developed to restore the balance of payments of the German economy.
Franco-German confrontation in the Ruhr region
One of the countries that reparations relied on was France. When Germany began to have reparations after the start of a serious economic crisis, President Poincare decided to send French troops to the Ruhr area. As you know, the Ruhr is the richest region of natural resources in Germany. Different types of coal are mined there, which at that time was widely used both in industry and on the railway. The French invasion of this German territory had several tasks:
- ensuring the constant receipt of reparation payments for France;
- access to German natural resources for French industrialists;
- the weakening of the influence of England and the United States in European politics.
German resistance lasted 8 months. In the fall of 1923, the German government ran out of funds to finance the fight against French expansion. France tried to subjugate Germany to itself, which was not included in the plans of other world leaders.
The work of the commission of experts to study the financial situation of Germany
In November 1923, the international community created a commission, which subsequently developed the Dawes Plan. The commission was attended by professional economists from Europe, as well as individual experts from the United States. Two committees were created in the structure of the body. The first dealt with the restoration of German currency. The scope of activity of the second unit included the search for the possibility of a return to the country of capital withdrawn abroad. This money could go to reanimate the economy, because only the successful economic development of Germany could provide reparations.
Development and adoption of a strategy for the Entente countries
On January 14, 1924, a meeting of an expert committee opened in London. The expert community was led by American lawyer Charles Dawes. Prior to the work of the committee, a group of experienced financiers spent several days in Germany in order to study the real picture of the level of the economy. Based on the data received, a report was developed, which was published at a meeting in London.
If we talk about the Dawes plan briefly, then he solved the problem of restoring the solvency of the German economy to pay reparations. Structurally, the report was divided into three parts. The first expressed the idea that reparations are just Germany’s external debt to Western partners, and not a way of punishing those deprivations that the Entente countries experienced during the war.
The Dawes Plan provided for a loan to Germany for economic recovery in the amount of 800 million marks. The main difference between this loan and modern programs of cooperation between the borrowing countries and the IMF was that Germany transferred the possibility of control over budget revenues to special tax commissioners. In addition, a special society was created, which was transferred to the management of the German railway system for 40 years. In fact, control over the strategic object passed into private hands. The government also lost control over money, because the right to print currency was given to a specially created bank, which was controlled by the Allies. Also, the Dawes plan established the introduction of large taxes on the country's population. The main sources of the formation of the repair fund were the income of private companies and the state budget of the country.
Consequences of Allied Politics
The adoption of the Dawes Plan had both positive and negative consequences for European countries. It was possible to achieve:
- stabilization of the economic situation of Germany;
- renewal of reparation payments.
Negative points:
- impoverishment of the population;
- the introduction of burdensome taxes on the population led to an increase in the level of protest moods in society;
- the rise to power in 1933 of the Nazi Party and Adolf Hitler.