Today (16/08/2024) marks 100 years since the Dawes Plan was accepted by Germany and the Allies. It came into effect on 1 September 1924. The plan ended a crisis in European diplomacy brought about by the French and Belgian occupation of the Ruhr in response to Germany defaulting on its reparations payments.
At the end of the First World War, the Allied powers entered negotiations at the Paris Peace Conference in order to settle the terms of the Treaty of Versailles. While the armistice of 11 November 1918 ended the fighting, this treaty officially ended the war. It was signed on 28 June 1919, exactly five years after the assassination of Archduke Franz Ferdinand, which had precipitated the war.
Article 231, often known as the "War Guilt" clause, opened the reparations section of the Treaty of Versailles. It required Germany to accept liability for the loss and damages caused by the war. On 5 May 1921, the London Schedule of Payments, established by the Reparations Commission, settled on a sum of 132 billion gold marks for reparations. The Central Powers would be allowed to pay this in cash or in goods, such as timber, coal, livestock, and machinery. The Allies issued Germany with an ultimatum on reparations that it had to accept—they threatened to occupy the industrial Ruhr district if Germany failed to pay. On the 11 May, the Reichstag voted to accept the terms laid down by the Allies. There was, however, an ulterior motive at play here: the government of the Weimar Republic, established following the war, wanted to adopt a policy of fulfilment in order to prove the impossibility of meeting the payments.
In the summer of 1921, Germany made its first payment of one billion marks. Yet it did not keep up its cash payments and fell behind on supplying goods as well. It was declared in default of reparations in January 1923.
France was suffering financially during this period—crucially, the French Franc had depreciated. As the majority of fighting on the western front had occurred on French soil, a high proportion of the reparations were to be paid to France. Stabilising the French economy was therefore contingent on reparations. When Germany began to renege on these, French and Belgian troops occupied the Ruhr, where they intended to extract reparations themselves.
Raymond Poincaré, the French prime minister, argued that the key issue was not the fact that Germany had defaulted. He was more concerned about the precedent that this set. Poincaré worried that allowing the Germans to defy the reparations clause of Versailles would lead them to dismantle the rest of the treaty.
The German response to the Ruhr occupation took the form of passive resistance and civil disobedience. This fuelled the hyperinflation crisis of 1923. The Weimar Republic, led at the time by Wilhelm Cuno, printed more money to pay idle workers, causing the German economy to crash. Germany therefore entered a spiral of high unemployment, hyperinflation, riots, and attempted coups, including the “Beer Hall Putsch”, which brought Adolf Hitler and the National Socialist Party into the political mainstream. In the face of this, when Gustav Stresemann became Chancellor, he called for an end to passive resistance and sought to bring hyperinflation under control via currency reform.
Ultimately, the Allies decided that the London Schedule and the reparation demands outlined in the Treaty of Versailles were likewise in need of revision. The Reparations Commission set up a committee, led by Charles Dawes, which included representatives from Belgium, Britain, France, Italy, and the United States. The Dawes committee subsequently produced a report which reformed the reparation requirements.
The plan stipulated that Germany had to resume payment of reparations, beginning with a sum of one billion Reichsmarks in the first year, increasing annually to two and a half billion after five years. No total sum was established. Germany was also to be taxed on certain goods, which would contribute towards payments. The USA would loan Germany 800 million Reichsmarks to ensure the stability of the currency. The plan also mandated the withdrawal of troops from the Ruhr. Although Germany’s political parties were divided over the terms of the plan, the Reichstag voted to accept it.
The loan from the USA not only allowed Germany to meet its reparations obligations, but also boosted its economy. This period of economic growth came to be known as the “Golden Age” of the Weimar Republic, and paralleled the so-called “Roaring Twenties” in America. It could be argued that that the Dawes Plan was successful in the short term: unemployment rates fell, the German economy stabilised, and the issues of reparations payments and the occupation of the Ruhr were settled. Charles Dawes received the Nobel Peace Prize in 1925, specifically for ending the diplomatic tensions between France and Germany.
The Dawes Plan was, however, replaced by the Young Plan in 1929.
If you would like to discover more about international diplomacy in the aftermath of the First World War, you can do so by exploring BOA’s exciting digital collection, Paris Peace Conference and Beyond, 1919–1939.