Monday, 4 October 2010

The First World War is finally over!


Now here’s a thing: the Germans have finally paid off the reparations bill from the First World War; the Versailles diktat is no more! The odd thing is that I was under the impression that this was over and done with years ago, that no further mention was made of it after Hitler repudiated the Young Plan, a repayment schedule devised by an American banker in 1929, when he became Chancellor in 1933. It wasn’t; it was merely placed on permanent hold, as I discovered on reading a report in The Times.

Victory in 1945 left the Allies with a huge dilemma. Germany, in a state of ruin, had debts amounting to 400 billion Reichmarks, and that’s before the outstanding bill from the First World War was added. Western politicians sensibly realised that a demand for fresh reparations would only create new forms of instability in a sensitive region, unlike Stalin, who continued to plunder his own zone of control.

At a London conference in 1953 creditors agreed to write off a great many of the more recent debts of the new Federal Republic, created out of the British, American and French zones of occupation. Principal on the First World War debt still had to be paid but it was agreed that no interest payments should be made until such time as the country was completely reunified. As the Soviet Zone had by now become the German Democratic Republic, and as communist control across the whole of Eastern Europe looked permanent, this was no more than a pious hope, an obligation quietly exported to Never Land.

When it comes to history one should never say never. Germany was reunified. While the nation was celebrating the fall of the Berlin Wall, civil servants realised that a forgotten obligation had come back home! In 1990 interest payments started anew after a gap of almost sixty years.

In case you’re wondering this went not to nations, not to the victors of the Great War, but to individual bondholders. Ironically before 1989 these bonds, like currency from the inflation of the 1920s, could be bought in flea markets for a few pennies, just an historical curio, because nobody believed that Germany would ever be reunited or further payments made. Practically worthless at one moment, the bonds suddenly acquired real value. I love Clio; I love her ironic sense of humour.

Anyway, if you are a bondholder look to a last windfall. On Sunday the final instalment, a cheque for almost sixty-one million euros, was handed over. For Germany the First World War is finally over.

28 comments:

  1. I too found this story endlessly amusing. Yet another example of Russian self-interest in the face of 'Western' self-loath. I wish the bond holders well, they should be obliged to drink some fine champagne and pay words of tribute to the heroic Tommies lost in The Somme.

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  2. Thatcher though was right--Germany should not have been re-united in the way it was. Thatcher became so good in her final years--too bad Heseltine and Howe had to make such a fuss...things were just starting to become properly conservative.

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  3. Niall Ferguson's assessment of the Versailles treaty was a breath of fresh air when it came to the fore. The 'let's pity the Germans' party had their comeuppance at this juncture. Quite rightly so.

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  4. Yes, a good story. It really wasn't up to Thatcher, or even the German government, the way the country was reunited; history simply rushed things along. There was really not that much wrong with the Treaty of Versailles, apart from the fact that is was based on some absurd Wilsonian contradictions, the hypocrisy of which the Germans were able to exploit, that and the ridiculous war guilt clause, only inserted as a justification for reparations.

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  5. That's quite right about Deutschland. It's still something of a pity that just when Thatcher started becoming properly conservative her own Party put her to grass. If the Thatcher of 1988 had been the Thatcher of 1979, I would to-day call myself a Thatcherite. For all my criticisms of pre-1988 Thatcher, she should have been PM throughout the 1990s. Far better than what's come since.

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  6. Better than Major and better than Blair, that's certainly true.

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  7. I once held high hopes for Dave, but alas, like most things in my life he's been something of a disappointment. He's not New Labour--I suppose that counts for something. And much though I disliked Thatcher's early Governments, if she had continued on as she had been going since 1988, I honestly can say, I wish she was in No. 10 at this very moment.

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  8. Let me just say too, even though I'm not strictly a Thatcherite by any means--ANYONE was better than Blair.

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  9. Interesting.

    I rejoiced when Germany was reunified. Justice was finally done.

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  10. WW1 was the result of England and France wanting an opportunity to break up the Austro-Hungarian and Turkish Empires.They were envious and greedy.

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  11. I believe Great Britain never paid its WW1 debts to the US, which was one reason Truman was insistent that Lease Lend bills be honoured. Now, any guesses on whether the French ever coughed up their share?

    BTW, there is a lawsuit currently before the US courts on behalf of US and European holders of Imperial and Nationalist Chinese bonds that Mao repudiated when the communists took power. The loans were for the construction of Chinese railways and other infrastructure between 1900 and 1949. I don't know the exact sums involved, but my guess would be - with interest - billions or even trillions of dollars. Ironic, no?

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  12. Anthony, not nearly as greedy as the Austrians. :-))

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  13. Anastasia

    It always pleases me when we agree.

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  14. Ana, with Dave you'll go down with the ship. But I'm afraid if he gets his way, they'll not even be a ship to go down with.

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  15. Strange that Germany didn't default and spend the money on something more worth while ... that it had to pay for losing a war. Neither side was really right or wrong in WW1, in stark contrast to WW2.

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  16. David, it always pleases me when we agree we agree.:-)

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  17. Brendano, it's a fair point though Austrian ambitions in the Balkans were pretty bad.

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  18. The cradle of western civilization is the Danube.

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  19. You should not lend any money without collateral to back it up, at least 10 x what you lend ( an old jewish proverb ) lol.

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  20. On Austrian ambitions, yes you and Brendano are correct. It was said "THAT THE SUN NEVER SET ON THE AUSTRIAN EMPIRE"

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  21. Anthony, In the days of Charles V, yes, but his empire was a Habsburg and not an Austrian empire.

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  22. You missed the point, that was a reference to the British ambitions.

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