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World War I is finally over                                                                                    

Posted at: Oct/04/2010 : Posted by: mel

Related Category: Historical Insights,

Does the title surprise you, on October 03, 2010 a unified Germany will make the last in a series of war reparation payments to other European countries that has spanned nearly ninety years. Based on the terms and intent of the reparation payments, I guess Germany and the Allies can call it even and “all square."

The final payment as reported by the London's Telegraph newspaper is about $93.8 million. Reportedly, Germany is paying Belgium and France for material damages and the costs related to fighting the war. By current standards all this sounds very unusual, but dates from a time when reparations were part of the cost of losing a war.

I suppose a little history lesson is in order. With the conclusion of WWI two significant groups of treaties emerged. The first was the treaties of Saint-Germain-en-Laye and Trianon. Under these treaties the Central Powers (the Austro-Hungarian Empire) were forced to cede significant portions of their territory to Poland, Italy, Romania, Czechoslovakia and other Slavic nations. The Austro-Hungarians at the end of WWI were bankrupt and the adjoining states who had suffered under their military aggressions wanted compensation for their suffering and loses. Effectively, since Austria and Hungary had lost, their territories got smaller and the countries who won became larger (kind of an old fashion notion of war).

Germany initially attempted to negotiate the terms of their surrender thought U.S. President Woodrow Wilson's "Fourteen Points". These Fourteen Points were intended to provide the foundation for a future peace treaty with more details towards a positive future and redevelopment. Great Britain, Italy, and especially France were still extremely bitter about the war and wanted nothing to do with President Wilson’s peace plan. In this climate of hostility and anger the French Prime Minister Georges Clemenceau stepped forward to author the other significant treaty at the conclusion of WWI which was the 1919 Treaty of Versailles. As initially ratified, the Treaty of Versailles called for Germany to pay France and other Allied countries a hefty 96,000 tons of gold as war reparations. Depending on your source, this amount was eventually cut in half a few years later, though it still represented a staggering sum of money.

France had been the most devastated by the war, and French Prime Minister Clemenceau feared Germany might attack France again if it recovered, so he and other European leaders sought to burden the German people with a crippling debt in order to stifle any possibility of German economic recovery and rearming of their military. Other terms of the Treaty of Versailles were designed specifically to inhibit any possibility of the German people rearming. Restrictions were placed on the German army and navy, as well as forbidding them from having an air force.

The key authors of the Treaty of Versailles were England’s Prime Minister Lloyd George and American President Woodrow Wilson. Lloyd George and Clemenceau pressured Wilson into agreeing on imposing extremely high payments upon Germany. President Wilson had initially favored relatively lenient treatment of Germany; he feared that if the conditions were too harsh it could foster the rise of extremism in response to economically traumatizing the German people.

The debt portion of the Treaty of Versailles was crippling to Germany, just as French Premier Georges Clemenceau intended. Germany went bankrupt in the 1920s, and issued bonds between 1924 and 1930 to pay off the towering debt laid on it by the treaty with the Allied powers. The Treaty of Versailles not only forced Germany to give up territories to France, Belgium, Poland, the Czechs and the League of Nations, but it also included a "War Guilt Clause" forcing Germany to accept responsibility for the war, thereby making it liable for all the damages and acting as the binding clause for the large reparation payment.

One of the key economic advisors to Lloyd George was John Maynard Keyes who argued that the treaty's demands were too steep on the German people and resigned in 1919 after warning, "Germany will not be able to formulate correct policy if it cannot finance itself." Exactly as Keynes predicted, the plan backfired. While Austria, Hungary and Bulgaria all violated the terms of their accords, mainstream voters flocked to Germany's right-wing parties and Adolf Hitler's Nazis rode to power on a wave of resentment over the Treaty of Versailles' terms and especially the French people. This was exactly the extremism that President Wilson had feared. Adolf Hitler's campaign message of tearing up the treaty and restoring Germany to greatness resonated with the country and it’s proud but economically devastated people.

There was obviously tremendous frustration in Germany in the 1920s. The “war to end all wars” had cost Germany 2 million lives and left 4-5 million wounded. Based on the Treaty of Versailles the Germans were supposed to accept that all these loses had been in vain, and now the German people were also being told it was their own fault. The reparations payments compounded everything. Not only was Germany given the moral blame, it was also supposed to pay an outlandish sum that most people had never even heard of.

Germany discontinued reparations payments in 1931 because of the global financial crisis, and Hitler declined to resume them when he took the nation's helm in 1933. Under Adolf Hitler, the extremism of “Fascism” offered a way to regain their national pride and dignity.

There are many historians who would argue that there was really only one European World War. The 18 years of relative peace from 1919 to 1937 are viewed by these same students of history as a time in which Germany licked its wounds and rearmed. This is obviously fodder for a separate discussion, but there is no doubt that the terms of the Treaty of Versailles definitely created a climate for extremism and Fascism to flourish.

It is interesting to note that at the conclusion of World War II in Europe, the Nuremberg Trials were held blaming only key figures in Germany for the transgressions of the war as opposed to the entirety of the Germany people. Additionally, the western allies of WWII spent considerable sums of money helping to rebuild Germany and its economy to reduce the risk of extremism again flourishing.

With respect to the reparation payments imposed in the Treaty of Versailles, the Germany people did not forget what they had agreed to. After reaching an accord in London in 1953, West Germany paid off the principal on its bonds but was allowed to wait until Germany unified to pay about $170 million in interest it accrued on its foreign debt between 1945 and 1952. In 1990, a unified Germany began paying off the interest remaining on its obligation in annual installments, the last of which will be distributed October 3, 2010.

I guess we can truly say that World War One is now history.

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