Dawes Plan

After the First World War Germany had great difficulty paying the reparations that had been agreed under the terms of the Treaty of Versailles. When the German government failed to keep up the payments in 1923 French and Belgian troops occupied the Ruhr. This was followed by massive inflation and growing unemployment in Germany.

Charles G. Dawes, an American banker, was asked by the Allied Reparations Committee to investigate the problem. His report, published in April, 1924, proposed a plan for instituting annual payments of reparations on a fixed scale. He also recommended the reorganization of the German State Bank and increased foreign loans.

German politicians like Adolf Hitler and Alfred Hugenberg attacked the Dawes Plan because it did not reduce the reparations total. They also disliked the idea that foreigners would have control over the German economy.

The Dawes Plan was initially a great success. The currency was stabilized and inflation was brought under control. Large loans were raised in the United States and this investment resulted in a fall in unemployment. Germany was also able to meet her obligations under the Treaty of Versailles for the next five years. The Wall Street Crash created problems for the German economy and so a new commission under another banker, Owen Young, was set up to consider reparations in 1929.