Dawes Plan
From left to right: Edgar Allix, Mac Fadyean, Maurice Houtart, Emile Francqui, Charles G. Dawes, Federico Flora, Josiah C. Stamp, Alberto Pirelli, Jean Parmentier, Owen D. Young, Robert M. Kindersley
After World War I ended, 50 nations signed the Treaty of Versailles, which ended the state of war, but also stipulated that Germany and its allies must accept full moral and economic responsibility for causing the war, and must pay economic compensations to victorious countries, because of their war losses.
Germany, hit by the war and with an economic system on the verge of hyperinflation, was not in a position to fulfill its economic obligations to the Allied countries. In addition to this, many Allied countries hoped to collect money from Germany to pay off their war debts to the United States. The lack of payments from Germany caused France and Belgium to carry out the Occupation of the Ruhr, a region that was the German center of coal, iron and steel production.
Since there was no adequate way to resolve the economic conflict, in December of 1923 it was agreed to form a commission that would search for ways to balance the German budget, stabilize the currency, and establish viable annual reparations payments for war expenses. This commission was chaired by Charles G. Dawes, who was the first director of the United States Budget Office, for this reason it is known as the "Dawes Plan".
This plan stipulated that Germany pay its war debts, but in a way that was affordable for the German economy. During this time, Germany received loans from US banks, which were used to pay war debts to other countries, such as Great Britain, France, and Belgium, who could in turn pay their war debts to the United States. This plan also helped stimulate foreign investment in Germany and helped provide German industrialists with financing to re-enter world markets.
The Dawes Plan, which was signed in April 1924, also contributed to ending the Occupation of the Ruhr, a measure that would be adopted only in the event of non-compliance by Germany. A period of economic prosperity and understanding finally opened in Europe. Germany recognized its borders and promised not to modify them by force. For his contributions in this regard, Charles G. Dawes received the Nobel Peace Prize in 1925, sharing it with Austen Chamberlain.
During this period, different debt instruments were issued, which helped to capitalize both the government and industry to contribute to the economic growth of Germany.
The Dawes Plan was replaced in 1929 by the Young Plan. As an interesting fact, Germany fully liquidated war reparations on October 3, 2010.
