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Dawes Plan

What is the Dawes Plan?

It was a plan which was supposed to help Germany pay its reparations by instituting annual payments of reparations on a fixed scale.

Events leading to the Dawes Plan

The reparations payments of 226 billion German Gold Marks was too much for the recovering German economy.

Hence, Germany defaulted on the payments.

In response to this, French and Belgian troops occupied the Ruhr River valley inside the borders of Germany.

This occupation of the centre of the German coal and steel industries outraged the German people.

This led to hyperinflation and growing unemployment.

Who created it?

Charles G. Dawes, an American banker, was tasked by the Allied Reparations Committee to investigate the problem.

He created the Dawes committee, which consisted of ten informal expert representatives, two each from Belgium, France, Britain, Italy, and the United States.

Why was the Dawes Plan created?

Defuse the tense situation Germany met with France

Increase the chances of Germany resuming reparation payments

A solution that would gain the agreement of all parties

Main points of Dawes Plan

August 1924 An agreement was reached Relied on money given by US 1. The Ruhr area was to be evacuated by Allied occupation

troops. 2. Reparation payments would begin at “one billion marks the

first year, increasing to two and a half billion marks annually after five years" (Merrill 93)

3. The Reichsbank would be reorganized under Allied supervision.

4. The sources for the reparation money would include transportation, excise( inland tax on the production or sale of a good), and custom taxes.

Went into effect September 1924

How did it help Germany?

Currency stabilisedInflation brought under controlFall in unemploymentGerman business reboundedReparation payments were made promptly

Was it a success or failure?

Why was it a success?

Provided short term economic benefits to the German economy.

Softened the burdens of war reparations Stabilized the currencyBrought increased foreign investments and

loans to the German market

Why was it a failure?

Resulted the Germany economy to depend on foreign markets and economies

Problems with the US economy (e.g. the Great Depression) severely hurt Germany along with the rest of the world, which was subject to debt repayments for loans of American dollars

After World War I, this cycle of money from US loans to Germany, which was used to make reparations to other European nations, which then used the money to pay off their debts to America, thus locking the western world's economy on that of the US

References

GCSE Modern World History 2nd EditionWikipediahttp://www.spartacus.schoolnet.co.uk/

GERdawes.htm