The £22billion reparations were set by the Allied victors – mostly Britain, France and America – as compensation and punishment for the 1914-18 war. The reparations were set at the London Debt Agreement on June 28, 1919, by the Allied victors – mostly Britain, France and America. Most of the money was intended to go to Belgium and France, whose land, towns and villages were devastated by the war, and to pay the Allies some of the costs of waging it. The initial sum agreed upon for war damages in 1919 was 226billion Reichsmarks, a sum later reduced to 132billion. In sterling at the time this was the equivalent of some £22billion.
The German Federal Budget for 2010 shows the remaining portion of the debt that will be cleared on Sunday, October 3. The bill would have been settled much earlier had not one Adolf Hitler reneged on reparations during his reign. Hatred of the settlement agreed at Versailles, France, which crippled Germany as it tried to shape itself into a democracy following defeat in the war, was of significant importance in propelling the Nazis to power.
West Germany, formed after defeat in 1945, took on responsibility for most of the outstanding principle and interest, settling the bill in 1983.
But there was a clause in the so-called London Debt Agreement of 1953 that interest on multi-million pound foreign loans taken out in the Weimar Republic era, to pay off the reparations bill, should themselves be repaid if Germany were ever reunited. Payments on this interest began again in 1996.
‘On Sunday the last bill is due and the First World War finally, financially at least, terminates for Germany,’ said Bild, the country’s biggest selling newspaper. Most of the money goes to private individuals, pension funds and corporations holding debenture bonds as agreed under the Treaty of Versailles. The German government did not reveal how the money will be disbursed but it is understood that it is transferred to a holding account before being sent to the relevant bond and debt holders.
Most of these are American and French. With the signing of the Versailles accord Germany accepted blame for the war which cost almost ten million men their lives. Article 231 of the peace treaty – the so-called ‘war guilt’ clause – declared Germany and Austria-Hungary responsible for all ‘loss and damage’ suffered by the Allies during the war and provided the basis for reparations. France, which had been ravaged by war – its farmlands devastated by battles, industries laid waste and some three million men dead – pushed hardest for the steepest possible fiscal punishment for Germany.
The principal representative of the British Treasury at the Paris Peace Conference, John Maynard Keynes, resigned in 1919 in protest at the scale of the demands, warning correctly that it was stoking the fires for another war in the future. ‘Germany will not be able to formulate correct policy if it cannot finance itself,’ he warned.When the Wall Street Crash came in 1929, the Weimar Republic spiralled into debt. What the Bank of England calls ‘quantitative easing’ now was started in Germany with the printing of money to pay off the war debt, triggering inflation to the point where ten billion marks would not even buy a loaf of bread.
Source and readmore: Daily Mail