German Reparations | Debt & Treaty - Lesson | Study.com (2024)

The magnitude of reparations was originally based on two types of damages: economic and social. On one hand, economic costs were easy to calculate. These were based on land damages, losses of resources, and the costs of goods and services that were required or lost in war. Oftentimes, there was also actual capital lost in war. One way that the economic losses were assessed after World War II was by photographs of warzones taken by French airmen. Social reparations, however, were much harder to calculate since it is hard to place an economic value on the loss of life. Mostly, this was calculated through the estimation of the lost cost of labor. However, after these costs were calculated, the sum came out to be much higher than most defeated countries could pay. After the World Wars, the estimated costs of war were over $320 billion, which was more than three times the national income of Germany. This made it impossible for Germany to repay and feed its citizens. Because of this, a new system of creating reparations was developed based on three factors.

These three factors include:

1. The national income or wealth that the defeated country holds.
2. The ability of the defeated government to organize repayment. Often, after major wars, defeated countries are unstabilized. If there isn't a centralized governmental power, there is no one to make sure repayment is even happening.
3. The ability of the victorious country to accept repayment. Sometimes, even victorious countries are left destabilized so if they cannot accept or make use of repayment, then it would be pointless. They must also be willing to even accept reparations in whatever form they may come.

These factors are based on the failed reparations imposed on Germany after World War I. Since Germany did not have the goods or capital to repay such a large sum, both sides of the wars suffered. Many professionals argue that the unrealistic reparations led to the rise of the Nazi party and the start of World War II. Because of this, the way that reparations are calculated has been forever changed.

A Painting of an American and French Soldier Smoking in World War I.

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• Demilitarization: The Treaty placed major limits on military arms, forces, and equipment. They had to reduce their troops, which at this point were over 1.9 million, to only 100,000. They were also limited on the number of guns and artillery they could carry. Lastly, they had to reduce ocean fleets and their air force.
• Monetary Responsibilities: As aforementioned, Germany was held accountable for $33 billion, which decimated their economy since they were unable to pay the reparations and uphold their own goods and services. This brought about a period of hyperinflation, which made regular goods and services unattainable for the general population. This happened because they began printing more of the German currency, the Deutsch Marks, which made their value plummet.
• Loss of Territory: Germany was also forced to give up territories that were important to their development. These included Danzig to Poland, which split Germany in half, coal mines in the Saar Basin to France, Alsace-Lorraine to France, and all of their territories in Africa and China.

The Treaty of Versailles

The Treaty of Versailles was the most important of the peace treaties in World War I, which ended the state of war between the Central and Allied powers. The treaty itself was signed on June 28th, 1919, in the Palace of Versailles. This was exactly five years after the assassination of Archduke Franz Ferdinand. This treaty effectively blamed Germany for the war and held them responsible for all of the costs of the war. There were only four represented countries who became known as the "Big Four"- Great Britain, France, the United States, and Italy. Arguably the lack of other represented countries, such as Russia, made the treaty weaker. The representatives from the "Big Four" were Lloyd George (Great Britain), Vittorio Emanuele Orlando (Italy), Georges Clemenceau (France), and Woodrow Wilson (U.S.). The treaty was intensely opposed by the U.S. Senate due to the requirement that all nations join the League of Nations, which the U.S. never did. However, after it was changed so that this was no longer a requirement, the treaty was ratified. Germany was finally able to repay the monetary reparations decided in this treaty in 2010 after making payments over a long period of time.

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