Europe Since 1918

by Herbert Adams Gibbons

It was not until the delegates had actually come together at Spa that the proportionate shares in the German indemnity were determined as follows: France, 52 per cent.; Great Britain, 22; Italy, 10; Belgium, 8; Serbia, 5; the other states, 3. In addition, Belgium was allowed to transfer her entire war debt to the account of Germany and was given priority in the first gold payments. No amount of talking could bring agreement upon the total sum to be demanded, and the schedule of annuities.

The Spa Conference, convened on July 5, 1920, gave the Germans their first chance to discuss in open meeting the Treaty of Versailles. But this did not do them much good. On the contrary, after heated debates, threats were used to back arguments. An agreement was added to the Treaty of Versailles, defining the monthly amount of indemnities in kind, and reaffirming the right of the victors to insist upon the punishment of war criminals and the surrender of arms in the possession of German civilians and security police. Later in the summer new differences of opinion between British and French were revealed in conferences at Lympne and over the aid that should be given to Poland and to the new counter-revolutionary movement of General Wrangel in Russia.

At Spa the Entente Powers had promised Germany credits for food and raw materials to make possible the resumption of German production: for it was evident that Germany’s ability to transfer wealth abroad in the form of gold payments was exceedingly limited; that if a serious beginning of large-scale indemnity payments was to be made, Germany would have to sell manufactured articles in foreign markets; and that the factory-workers and miners could not produce effectively unless they were properly fed. At the suggestion of British economists, who had the ear of Lloyd George, a conference of experts met at Brussels on December 16, 1920, to make recommendations to the Entente governments to guide them in granting Germany the credits necessary to render practicable reparations demands. This conference reported that a total indemnity of 100,000,000,000 gold marks was possible, provided Germany received extensive credits for food and raw materials purchased abroad, and that the annual scale of payments be flexibly arranged to meet whatever economic situation might develop.

The French press and public opinion did not receive in a kindly fashion the recommendations of the experts. It was pointed out that some months earlier, at Lympne, the British had subscribed to a joint declaration to the effect that “the suffering and economic ruin resulting from the war should not be borne by the nations who did not cause it.” By extending credits to Germany France would be paying to Germany more than she would receive for a long time, and it was preposterous that Germany be allowed to regain her old economic prosperity while the north of France was still in ruins. This was the French attitude when the conference of Paris opened on January 24, 1921, to fix the reparations bill and the method by which it should be paid. The discussion was removed from economic to political ground, and it has remained there since that day. In the beginning, both Great Britain and France had regarded the reparations problem from a political standpoint. In 1920 the British shifted to an economic standpoint. This caused the divergence that was evident at Paris in January, 1921, and in all the conferences that have followed. In 1921 the British remonstrated, but in the end they yielded. After two years, in 1923, they finally felt that it was necessary to break with France on the ground that persistence in demanding the impossible would wreck the economic structure of Europe and create an impasse, resulting in irreparable harm to victors as well as vanquished.

It will be remembered that the treaty gave until May 1, 1921, for the total amount of indemnity to be fixed. Germany bound herself in advance to accept whatever sum the victors decided upon, to agree to make payments in the way they demanded, and not to consider as an act of war any punitive measure they might take to enforce their will. Stipulations of this kind, which had never before been written into a treaty, placed Germany completely at the mercy of her conquerors. They could make upon her any demands they saw fit, however impossible to fulfil, and could undertake reprisals if what could not be done was not done. The only protection to Germany, now that she was disarmed, lay in the fact that her creditors were several, who might not all agree that her permanent ruin would be to their best interests.

The Paris Conference met on January 24, 1921. On the first day Marshal Foch declared that Germany had failed to fulfil the disarmament clauses of the Treaty of Versailles, and that the danger was so great that France would be justified, as a military precaution alone, in occupying the Ruhr Valley. This proposal, although tentative in form, as if to try out the Allies, brought an immediate and strenuous protest from British and Italians. The two delegations stood together also in rejecting France’s demand that the indemnity be fixed at 400,000,000,000 gold marks. There was a lively argument between Lloyd George and Doumer. When the latter said that it was reasonable to expect 17,000,000,000 marks per annum from German exports, of which 12,000,000,000 could be taken by the Reparations Commission, Lloyd George retorted that the calculation was absurd. How could Germany pay for raw materials, coal, labor, etc., on the basis of retaining five billions out of seventeen billions? After five days of acrimonious debate, in which British and Italians pleaded for a practicable total sum, a compromise was effected. It was decided that Germany should pay in forty-two annual installments 226,000,000,000 gold marks, and for the same period an annual tax of 12 per cent on her exports. At the first default the Allies should have the right to take any measures, financial or military, that they saw fit. The German Government was summoned to send a delegation to London, after four weeks, “to agree to the decisions of the Paris Conference.”

At the London Conference, on March 1, Dr. Simons, the German foreign minister, declared that Germany never could pay any such sum, whose annual instalments were far beyond her total surplus wealth in the years of her greatest prosperity before the war. He made a counter-offer of 50,000,000,000 gold marks, less 20,000,000,000 already paid (according to German figures), but pointed out that even this sum was possible only if the decision in regard to Upper Silesia did not go against Germany. Dr. Simons suggested that if the value of payments already made was disputed, a joint commission should be appointed to determine it. Lloyd George delivered a long speech to the German delegation on March 3, in which he ridiculed their proposals and described them as “simply provocative.” Lloyd George two years later was taken to task in Parliament for his attitude at this London Conference. He frankly admitted that he knew the absurdity of the Entente program, but that it was insisted upon in order to force from Germany a counter-offer up to her real capacity to pay, and also that other factors entered into the decision of the British Cabinet to stand with the French. These other factors were, as we have seen in other chapters, the desire to keep France from opposing the British plan in the Near East by supporting French plans on the Rhine.

France, Great Britain, Italy, and Belgium sent a joint note to Germany, threatening to levy an import tax of 50 per cent on German goods entering their countries, and to force Germany to pay the tax, which would be pooled and divided as indemnity. The German Cabinet was firm in its refusal to pay down 12,000,000,000 gold marks on account before May 1 and to agree to the London program. Lloyd George himself proposed an ultimatum in which military occupation of the Ruhr Valley was threatened if Germany did not accept without reservation the indemnity schedule fixed at Paris on January 29. On May 5 Lloyd George told Parliament that he was sure of Germany’s yielding, for “with the Ruhr gone industrial Germany withers: it cannot exist.” With Marshal Foch on the Rhine and ready to march in, the German Government agreed to the Paris program. It was the only means of preventing the Ruhr occupation.

An economic conference met at Brussels on September 24, at the suggestion of the League Council, to take steps to prevent financial and economic chaos in Europe. Although invited, the United States refused to participate in the Brussels Conference, declaring that it was useless to do anything for European rehabilitation until old scores were marked off and a spirit of solidarity was developed. The Dutch expert, M. ter Meulen, proposed to establish in the countries on the verge of collapse a reservoir of collateral to be drawn upon if necessary to cover credits for imports, under the supervision of financial experts appointed by the League of Nations. At the end of the year French and British financiers met at Paris to discuss the organization of a corporation to finance the restoration of Europe, in which the United States and Germany would have a part. Because political conditions and not economic theories dominated in Europe, the conferences attended by economists and bankers had no result. These non-political gatherings looked at the reparations question on its merits, and therefore made recommendations in regard to Germany, Poland, Austria, and other smaller countries which, if adopted, would have infringed upon the treaties of the Paris settlement. The experts and bankers were accused of trying to upset the treaties. They could not free themselves from this accusation; for they were practical men, living in a world of realities, and not politicians, gambling on futures.

On January 6, 1922, the Entente premiers met with the Reparations Commission at Cannes. The Germans were asked to come to Paris and to hold themselves in readiness to be summoned to Cannes if needed. Lloyd George offered France a defensive alliance in return for modifying the French attitude toward Germany, which he said would keep Europe indefinitely in turmoil. Premier Briand was inclined to accept the British offer, which would have replaced in substance the defunct Anglo-American understanding to come to the defense of France in case of a new German aggression. But bitter opposition developed in the Chamber of Deputies. Briand hurried back to Paris to explain the Cannes negotiations and defend his decision to meet Great Britain half-way. He called for a vote of confidence, which was refused. Former President Poincaré, leader of the opposition to concessions to Germany, succeeded Briand.