http://www.bbc.co.uk/news/world-europe-11442892

 

Why has Germany taken so long to pay off its WWI debt?

 

Germany is finally paying off World War I reparations, with the last 70 million euro (£60m) payment drawing the debt to a close.

 

Interest on loans taken out to the pay the debt will be settled on Sunday, the 20th anniversary of German reunification.

 

It is about time, some would say.

 

More than nine decades after the war, Germany - now a leading European Union state and the largest economy in Europe - has long cast off its post-WWI image of a defeated, beleaguered Weimar Republic.

 

So why has it taken so long for it to shed its age-old debt?

 

The European nation was not expecting to lose the war, let alone anticipate being burdened with payments that would reach into the next century.

 

But, in 1919, the victors of the war wrote Germany's guilt into the Versailles Treaty at the infamous Hall of Mirrors, and collectively decided that it should pay a high price for that guilt.

 

About 269bn gold marks, to be exact - the equivalent of around 100,000 tonnes of gold.

 

The treaty took complex negotiation and was undoubtedly controversial; economist John Maynard Keynes was one of its most vocal critics, arguing that it would not be effective in achieving its goals.

 

The allies - mainly driven by France - wanted to ensure Germany would not be capable of war for many years.

 

But the plan backfired, with modern-day historians claiming that Versailles was a key factor in the lead-up to World War II.

 

There was bitter resentment in Germany over the sum, and also over article 231, the so-called "guilt clause", which ruled that Germany was responsible for the conflict.

 

"The sum was met with disbelief in Germany," says Felix Schulz, a lecturer in European History at Newcastle University.

 

He says Germany tried to push back the payments, and very little was paid back in the 1920s - not only because Germany was struggling financially, but because Germany didn't accept them.

 

"It's linked to this idea that it is always seen as unfair… In reality I'm sure they could have [paid earlier] if the Weimar Republic was to live on a shoestring, but it would have led to more radical parties earlier on."

 

Faced with hyperinflation and soaring unemployment, people sought refuge in a movement that promoted national pride, and signed up to Hitler's Nazi party - which used the reparations as a propaganda tool.

 

"These reparations were as important politically as economically," says Mark Harrison, an economics professor at University of Warwick.

 

"It was what it [the reparations] stood for. The Germans hated it," he says.

 

"They could have [paid] more than they said they would."

 

After Versailles, there emerged some recognition of the financial strain on war-torn Germany, and allied nations attempted to minimise the pain.

 

The 1924 Dawes Plan and the 1929 Young Plan reduced the debt to 112bn gold marks, and granted Germany loans to meet its payments.

 

But then disaster struck, and the Wall Street Crash of 1929 threw nations across the world into disarray.

 

The ensuing financial crisis meant that not only Germany, but many nations, could not keep up with their war debts; as a result, US President Herbert Hoover introduced a one-year moratorium.

 

A year later, the 1932 Lausanne conference tried to write off almost all of Germany's war debt, but the proposal failed to pass US Congress.

 

When Hitler came into power, the system of payments had collapsed and time had run out.

 

Lausanne, says Mr Schulz, therefore became irrelevant.

 

Although the country had only paid about one eighth of what it owed, Hitler refused to pay any more.

 

As Prof Harrison says: "Hitler was committed to not just not paying, but to overturning the whole treaty."

 

At this point, Mr Schulz says: "The economic reality is not as important as the economic perception... The economic perception that the allies are bleeding Germany is far more important."

 

When Germany became two countries - East and West - it threw up new questions about which state inherited the debt.

 

"When one state succeeds another, there is always a question of whether it takes on its assets and liabilities," says Prof Harrison.

 

"It's unlikely that either of the German states believed they had obligations".

 

A new agreement in 1953 - the London Treaty - agreed to suspend many payments until Germany was unified.

 

By the time country was reunified, in 1990, the world had changed dramatically since the days of Versailles, and policymakers decided to write off most of the original sum.

 

Mr Schulz says it was, essentially, a return to the conditions in the 1932 Lausanne agreement, and a reduced amount of payments was reactivated.

 

"There was no real need to go back to the punitive state of the 1920s, so you return to something which is much more modest."

 

With time, historians say there was recognition that Versailles did not achieve what it set out to, and that saddling a country with war debts was not a solution.

 

The approach was different by the time WWII ended. Germany was made to financially compensate other nations, but there was more of an emphasis on rebuilding Europe.

 

"After WWII they decided to hang the leaders but not to punish the nation," says Prof Harrison.

 

"But in WWI it was the other way around."

 

As Martin Farr, a senior lecturer in British history at Newcastle University, says: "The lesson was learned eventually."

 

Unfortunately, he says, "it required another 20 or so million people to be killed first".

 

Price of conflict

 

* The Treaty of Versailles stripped Germany of just over 13% of its territory

* The treaty also reduced Germany's economic productivity by about 13%

* Germany told to pay substantial reparations for 'civilian damage', along with its allies

* While the 1919 treaty included a "guilt clause", the definite sum was decided in 1921

omg that's weird somehow....

omg that's weird somehow....

Yeah... :confused:

I thought the whole treaty had been permanently scrapped completely at the start of WWII. Can't believe it even came up at reunification.

Are there any WWII reparations?

Are there any WWII reparations?

 

The only thing I could see after a brief search was on Wikipedia

http://en.wikipedia.org/wiki/War_reparations#Europe

 

There is also a page concerning Germany's reparations to Yugoslavia linked there.

You know, when they finish to pay reparations for WW1, they starts paying reparations for WW2 :D

no....I have read that the reparations for WWII were paid before...haha weird

oh, that's weird then... i think they should have fixed it in other way :laugh3:

I've found it

 

Germany paid the last holdback to the USA in 1988

 

(is it holdback?)...I mean the correct expression for it...

I'm prettysure England only just repayed not that long since :thinking:

Oh, I see. I don't know, i'm not english :D btw, why for USA, not for Russia?

Cos USA offered money to Countries that were poor after the war and they had to repay it .

Oh, right, thanks for remembering it for me. The Marshall plan, right? :)

That was it , I'm bad at Naming things :lol:

Cos USA offered money to Countries that were poor after the war and they had to repay it .

 

At long repayment plans with highish interest rates because at the time it was that or nothing. The USA screwed countries over

i've seeing a tv report about it was like :wtf: that long?

they said they will finish paying WW2 in 2025 or something :confused:

I Agree That's what made USA So rich after the war .

I Agree That's what made USA So rich after the war .

 

Haha! We're not rich, have you seen the national debt clock?

 

 

Or do you mean directly after the war. . . :thinking: In which case, then ignore me. :P

i've seeing a tv report about it was like :wtf: that long?

they said they will finish paying WW2 in 2025 or something :confused:

 

I've read we've finished that in 1988

Yeah I Meant directly after the war and trust me England is in major debt too

but we're rich countries compared to a lot of others in Africa.

I've read we've finished that in 1988

that tv report said Germany finished paying the WW1 now, yet will be paying WW2 upto 2025 or something.

report said, that one side (germany got divided after war), did payed it when you say it, but they sign a treat that given them a 20 years time or so to finish pay it for the other side when both sides unified again.

Yeah I Meant directly after the war and trust me England is in major debt too

but we're rich countries compared to a lot of others in Africa.

 

Oh okay, sorry. :P

 

Isn't Greece in a lot of debt as well? :thinking: And that's very true.

that tv report said Germany finished paying the WW1 now, yet will be paying WW2 upto 2025 or something.

report said, that one side (germany got divided after war), did payed it when you say it, but they sign a treat that given them a 20 years time or so to finish pay it for the other side when both sides unified again.

 

I've read another article about it and it said exactly what I was saying before....that we paid the last rate in 1988....hm

Something fishy is happening :P

Haha! We're not rich, have you seen the national debt clock?

 

 

Or do you mean directly after the war. . . :thinking: In which case, then ignore me. :P

 

I used to pass by that clock often when I was interning in the city (NYC) this past spring