Karl Radek

The Revision of the
German Indemnity and
International Indebtedness

(8 August 1922)

From International Press Correspondence, Vol. 2 No. 66, 8 August 1922, pp. 493–494.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Public Domain: Marxists Internet Archive (2020). You may freely copy, distribute, display and perform this work; as well as make derivative and commercial works. Please credit “Marxists Internet Archive” as your source.

The Bankruptcy of Germany

The Allies will shortly again be confronted with the question of the revision of the economic sections of the Versailles Treaty. During the peace negotiations, responsible French statesmen in the course of their demands, mentioned sums so tremendous that they actually exceeded the French national treasury deposits. It appeared as though they had promised themselves to enrich France out of the proceeds of the German reparations payments. When the Allies finally sent Germany an ultimatum, in the Spring of 1921, the amount of the demands had reached 132 billions of gold marks Naturally, this was an impossible amount. It represented the half of the national assets of Germany, and, even if divided into thirty annual payments, could not possibly be procured. Next came the proposal that Germany should pay two billion gold marks annually, as well as 26% of the value of her total exports. At that time, May 5, 1921, the dollar equalled 60 marks; thus, the required two billion gold marks equalled about 28 billion paper marks. Germany made the first payments, and German currency began rapidly to fall. In March of the present year, the Allies reduced the money payment for the year 1922 from two billion gold marks to 720 millions. But even this amount, reduced by more than half, was worth 51 billion paper marks. At the same time, the hope that foreign credit would be extended was shattered, as the American bankers were not willing to grant any loan unless the economic provisions of the Versailles Treaty were altered. This led to a new downward plunge of the mark: the dollar climbed up to 349 mark, and, after Rathenau’s murder, it rose to 540. (Since the writing of this article, the dollar has risen to over 800 marks. – Ed.) In June, the 720 million gold marks amounted to 80 billion paper marks, instead of 51 billions as in March. Thus we obtain the following pretty results: When, in the early part of the year, Germany was subjected to a tribute against which the whole country rebelled, it amounted to 28 billion paper marks. And then, when, a year later, the Allies charitably reduced the sum by more than one half, the amount of this “diminished” tribute rose to 80 billions. Germany paid again on the 15th of July. She is not in a condition to pay more. And, on August 15th, another payment is due.

Under Allied Control

Germany desired a moratorium for three years. Before consenting to grant this respite, the Allies demanded that Germany abandon to them the control of her national finances. Germany assented. The Allies will have two financial commissioners in Berlin; one will control the income, and the other the expenses, of Germany. And at the same time as the budget is presented to the Reichstag, it must also be submitted to the Entente financial commissioners, not, of course, to provide them with entertaining reading, but so that they may order alterations. All the financial supplementary bills of the government, all financial laws, must pass the censorship of the Entente’s agents. All statistical data must be given to them. They have the right of control over the expenses of the governing authorities, and the right to investigate as to whether these expenditures have actually been incurred. The German governmental press explains proudly that the state of Germany, in spite of all, cannot be compared with that of Turkey, as Turkey was compelled to place a certain portion of her national income at the disposition of foreign capital. Quite right! Between the position of Turkey and that of Germany there is an important difference. The highly civilized German people must submit to control over their entire public finances. The German situation is ten times worse than the Turkish. The German government has entered into a compromise which signifies the renunciation of Germany’s financial independence, in the hope that, they would not only gain a breathing spell in the form of a respite of money payments, but that their submissiveness will aid them to secure international loans which will render possible the restoration to health of the German economy. Capitulation, however, has already taken place; but the respite is not yet granted; for this concession does not depend only upon the good will of England and France.

The Interallied Debts

France finds herself in such a situation that she cannot forego the German cash payments. The French budget has developed such an enormous deficit, that not even the carrying out of the German payments would cancel it. At the outbreak of the war, France was 29.8 billion francs in debt. Her war expenses amounted to 165 billion francs, of which 23 billions were covered by receipts. Therefore, France emerged from the war with debts amounting to 170 billions. During the three post-war years, her debt mounted to 350 billion francs. On October 1st, of this year, the French debt to England becomes due, and France should then start to pay her English debt of 584 billion pounds sterling. Her debt to America amount to $2,950,800,000, and her debts to Japan are 133,000,000 yen. England demands from France, either that she pay her debt, or that she consent to revise her demands upon Germany and renounce an important part of them. The French imperialistic press bitterly defends the French position:

“We made the greatest sacrifices; yet they demand from us the payment of our debts, and, ask that conquered Germany be granted a moratorium into the bargain. And, although, according to the Versailles Treaty, France is to receive 52 % of the German cash payments, they only have one vote of the four on the Reparations Commission.”

The British imperialistic press answers this moan very cold-bloodedly:

“Gentlemen, if you have gone bankrupt, be kind enough to state it openly; otherwise, you will be obliged to pay your debts, whether you receive any cash payments from Germany or not.”

The English plan is quite simple. England informs America that she is quite ready to pay her debts to America which, with unpaid interest, amount to $4,500,000,000, and only seeks to have them replaced by a consolidated debt. In her policy towards France, England wishes to proceed hand in hand with America. If France declares herself willing, not only to grant a respite to Germany, but also to strike out a part of the German indebtedness, then England will waive her claims for French payments. And then the American bankers will grant Germany a loan which will serve partly to cover certain German economic needs, and partly to lighten the French financial situation. Mr. Poincaré, who reproached Briand for his “softness” and complaisance, had to acknowledge openly the national bankruptcy, in his Senate speech on July ’29.

“By force of arms”, said he, “we can occupy a portion of German territory, and that has great educational importance. We could also get a small amount of goods and paper marks through this means. All this, however would not suffice to fill up the breach in our budget.”

In spite of the enquiries of Senator Jouvenal, Poincaré would not say what course he would advise. Poincaré’s plans, however, may be easily deduced from the official French press. Above all, he desires that the Reparations Commission establish that the insolvency of Germany is her own fault, as the German capitalists have no faith in their own finances and have sunk enormous amounts in foreign currency in order to evade payment of taxes. Poincaré wishes this decision to be reached, because it will permit him to take forcible measures against Germany, at every favorable opportunity, on the grounds of the Versailles Treaty. Secondly, it will purchase England’s renunciation of the trench debt at the price of a moratorium only, without a postponement of the German payments. The British press states that England will by no means renounce the French debt at this price, as England is interested in the economic restoration of Germany, not only as an outlet-market for British goods, but also as a co-worker in Russian reconstruction.

In this way, the revision of the economic clauses of the Versailles Treaty is maturing. It is questionable whether it suits the Allies to permit Germany a breathing spell before it breaks down completely. In any case, this question will in the near future stand in the foreground of all the problems vexing the Allies, including also the Russian question. This was one of the causes of the breakdown of the Hague conference. The revision of the Versailles treaty is of very great importance to Soviet Russia. But of that we shall speak another time.

Last updated on 5 May 2020