Economic Developments - Reparations Issues and the Dawes Plan

Issues with reparations

• Stabilisation of the economy relied on settling reparations disputes

• Mainly domestic issues

Introduction of the Dawes Plan

• Stresemann asked the Allies’ Reparations Committee to set up a committee of financial experts to address Germany’s repayment concerns

• American banker Charles Dawes acted as the new committee’s charman

• Dawes plan was finalised in April 1924 - after Stresemann’s government fell, although Stresemann remained as foreign secretary and took credit for most of what the plan achieved.

What the plan included

• Amount paid each year by Germany reduced until 1929

• Hopefully their economy will by stable by then, then annual pay will rise again by 2,500 million marks and would be related to German industrial performance

• Germany would receive a large loan of 800 million marks from the USA to help this plan get started and for investment in German infrastructure

Charles Dawes

• American banker and politician

• Became US Vice-President in 1924

• Dawes and Stresemann were joint awarded the Nobel Peace Prize in 1925 for resolving the reparations issue

Reichstag debates over the Dawes Plan

• Stresemann himself didn’t believe in the plan - called it an economic armistice

• National opposition (mainly DNVP and the small-scale right wing Nazis at the time) attacked the plan, and wanted Germany to defy the Versailles Treaty and refuse to pay reparations completely

Benefits the Dawes Plan brought to Germany

• Allies finally recognised Germany’s problems with repaying reparations, rather than before when they believed this was fake

• Loans were granted, provided new factories, houses and jobs - helped rebuild economy

• French left the Ruhr during 1924-25 once Germany would restart repaying and occupation could no longer be justified