1 - From Weakening an Enemy to Strengthening an Ally: The United States and German Reparations

Summary

planning and decisions by the victorious powers, 1941–7

German reparations were one of the major economic and political problems that poisoned the international atmosphere during the period between the world wars. Nevertheless, it was undisputed among the Allies during and after World War II that Germany and its allies would again have to pay reparations. That was a consequence of, among other things, Article 231 of the Treaty of Versailles. The Allies had consistently defended the idea they found in (or at least read into) the treaty that the Germans were obligated to make reparations because they were to blame for the war. If they had dispensed with reparations in 1945, it would have meant that they felt Germany was less to blame this time than it had been in 1914.

However, there was not much discussion of reparations during the war. In the United States, only lower-level agencies were working on the issue prior to 1945. They made extravagent estimates of the German capacity to pay reparations. One committee within the State Department named sums between $10 billion and $50 billion. In fall 1944, the Foreign Economic Administration even considered it possible that Germany could make payments of well over $200 billion.

Reparations did not become a major policy item until the Soviets presented the outline of a concrete plan at Yalta. Germany was to pay reparations in the amount of $20 billion, of which the Soviet Union would receive half, because it had sustained by far the greatest damage. Ten billion dollars would be taken from the German economy in the form of dismantling and other reductions in assets, the rest from current production.