Paris Peace Conf. 185.12/59

The President of the German Delegation ( Brockdorff-Rantzau ) to the President of the Peace Conference ( Clemenceau )


Mr. President: I have the honour to enclose herewith for Your Excellency a statement of the Financial Commission of the German Peace Delegation with reference to Parts VIII and IX of the Draft Conditions of Peace. The German Peace Delegation supports the point of view of the Financial Commission and adopts it as its own.

Accept [etc.]


Statement of the Financial Commission of the German Delegation

The German Financial Delegation has been charged in the main to handle part VIII, including Annexes (1) and (2), and part IX of the Conditions of Peace respecting Reparation and financial questions. It feels it necessary to make the following preparatory remarks in regard to the spirit and contents of the whole proposals:

There is undoubtedly only one way to repair the terrible misfortunes in which this war has plunged the whole of humanity, and to solve the huge financial and economic problems which threaten equally, though perhaps in a different degree, all peoples who were engaged in the war. After the unhappy years of war and devastation the peoples of the world must now unite in friendly co-operation in order, by helping each other reciprocally, and thus assisting more rapidly in the reconstruction of the world, to lighten the burdens.

The proposed conditions of peace which have been submitted to it by the Enemy Governments are not drawn up on these lines. On the contrary they are based on the hope that a Germany which is squeezed and oppressed by all measures of political and economic disqualification would give more to their peoples, and would be able to remove more of their burdens than that new Germany which we wish to set up.

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If the territorial, political and economic conditions which are contained in the proposals of the Allied and Associated Governments are carried into effect, Germany will, even if she had to pay no indemnities, be condemned to economic and financial annihilation. Enormous agricultural districts, which we need both for feeding our people and for the settlement of at least a part of the working-classes which can no longer be employed in industry, are to be removed from Germany. Deposits of raw material which cannot be dispensed with, above all nearly one-third of our total coal production, are to be given up. The entire economic apparatus of Germany will, in so far as it has not already been destroyed in the War, now, after the conclusion of Peace, be handed over to complete annihilation. We are to lose the tax-paying power as well as the working power of great districts. There will remain a Germany which, in order to satisfy her immediate requirements for food, clothing and industrial work, will in the future be dependent far more than hitherto on imports from abroad because she has been robbed to a great extent of her own resources. Not only however will her sole means of payment, i.e. her power of work, be to a great extent, placed under an embargo in advance, but she will also be surrounded by almost insuperable restrictions in every part of the world. She cannot imagine how her people so oppressed and hemmed in will be able to exist at all. She is faced by a grave danger that there must first of all be an emigration en masse or, if this is impossible, deaths in great number, to provide breathing space. But one thing is certain; the idea, that, according to the Peace conditions, there will remain anything in Germany to provide for the gigantic reparation which the proposed Peace conditions take into consideration, is an impossible one. A Germany amongst whose inhabitants every desire for work is killed in advance by present despair and absolute hopelessness for the future, can certainly not be considered as capable of producing any indemnities. The proposal of the Allied and Associated Governments, which refuses to recognise this, and which in the first place wishes to make Germany incapable of existence, and then expects huge payments from this same Germany, is both unjust and incapable of execution.

With reference to the amount of the sums which the Allied and Associated Governments require from Germany as a reparation we remark that we do not wish here to touch upon the legal bases of these payments as they are treated in another place (by the Legal Commission of the Peace Delegation). In any case, we can only examine the limits of Germany’s financial capacity to pay and the following remarks are made from this point of view.

From this purely financial point of view it is in the first place impossible that Germany should replace all the war expenses of her [Page 904] opponents. It is equally impossible that Germany should take over the liabilities of the Allies. For the same reason, on purely financial grounds, the declarations of Paragraphs 5 to 7 of Annex I respecting military pensions and pensions for survivors etc. cannot be taken into consideration.

Respecting the amount of the burdens to be taken over by Germany, apart from reparations the Commission is compelled to emphasise the extraordinary importance of Article 249, the object of which is to impose on Germany to the greatest possible extent the costs of the maintenance of an Army of Occupation for a period even after the conclusion of Peace. These expenses, which are to be paid in gold or in an amount equivalent to the gold value of the Mark, may be extraordinarily high and impossible for Germany to support considering her weakened financial power. To-day the costs of the foreign Army of Occupation are, so far as it has been possible to gather, higher than the cost of the maintenance of the Army and Navy in Germany in peacetime. It will be unfair to place on Germany the expenses of a further occupation since this would mean that she would, in paying for the troops of occupation, have to pay for a part of the enemies’ peace army, the expense of which ought to be met by the enemy Powers.

A military occupation would be all the more unfortunate because every occupation entails damaging consequences which can be increased only too easily by the interference of the troops of occupation in the administrative, political and economic sphere.

Germany’s taxable capacity and her capacity for payment depend on the fact that the economic areas which remain to Germany should enjoy the same administration. The authority of the German Government, however, with reference to taxation, customs, etc., can only be re-established if there is no army of occupation in the country. The period of the Armistice has produced on the Left Bank of the Rhine a chaotic situation with respect to imports and currency. A prolonged occupation which is connected with the imposition of a separate customs system would rob Germany of the possibility of a purposeful economic and financial policy.


We are also compelled to raise objection to the fact that Germany has to surrender, without any legal reason, important elements of her financial power. Article 254 of the proposed Peace Conditions provides for the inheritance by Germany of the debt for those districts which are to be taken away from her. The proposed method of calculation, according to which the amount of the debt to be taken over is to be reckoned in accordance with the proceeds of certain categories [Page 905] of taxes in the districts which are to be ceded, in proportion to those of the whole population of Germany, is difficult to carry out in view of the differences in the systems of taxation existing in the different German Federated States; but what seems quite unjustified is the arrangement whereby the debt to be taken over is only to comprise the debts which were incurred up to the 1st August 1914, so that in this way the entire costs of the war will fall upon the shoulders of the remaining German population. The inhabitants of the districts to be ceded were just as ready as the rest of the German people to defend their Fatherland since they believed that it was attacked. No single Deputy of these districts which are now to be removed from Germany voted against the war credits. These were all Deputies who were then elected according to the freest voting system in the world (equal, universal, secret, direct), and if now particular parts are to be cut off this can naturally only take place in such a way that all debts of the Empire which have been incurred up to the day of the separation, together with the debts of the Federated States to which these separated parts belong, must be taken over by these former citizens of the Empire in their new country.

It is not, however, the 1st August 1914 but the day of the signature of the Treaty of Peace which must be taken as the date for the calculation of those parts of the debt which have to be taken over, including payments imposed by the Treaty of Peace.

In Alsace-Lorraine, at any rate, the provincial debts of Alsace-Lorraine, the debts for the building of the Alsace-Lorraine railways and such loans as have been made since 1871 for the creation of public utilities in Alsace-Lorraine must be taken over. In the year 1871 Germany granted France, in calculating the war indemnity, a compensation to the amount of the railways then laid in Alsace-Lorraine, and we are in general compelled to demand that in so far as railway lines are to be ceded amounts corresponding to their present value should be placed to the credit of Germany.

The exclusion of all compensation for the cession of the Imperial and State properties in Alsace-Lorraine (Article 256) appears to us, in view of the settlement of 1871, not to be justified, especially as regards new buildings etc. The corresponding demand of Belgium (Article 256, par. 4) has also no foundation and cannot be admitted. Further the special arrangements for Poland (Article 92, Par. 3) can also not be agreed to.

The regulation whereby Poland is not to participate in that part of the Imperial State debt which has been expended for German colonisation in Posen (Article 255, Par. 2) can only be put into execution provided that corresponding safeguards for the payment of interest and for claims on the Prussian State arising out of this colonisation are admitted as a consequence thereof.

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Without wishing in any way to prejudice the question of the proposed cession of Colonies (Schutzgebiete) we have to make the following observations from a financial point of view. This cession is to take place without taking over any part of the debts of the Empire or the Federated States. On the side of Germany it must be demanded, in case the cession of the Colonies is really effected, that the ceded territories should be burdened with such debts as were incurred by them, partly with and partly without the guarantee of the Empire, while the Empire should be free of these guarantees, and that the State which takes them over should give the Empire a release of all claims in favour of such ceded Colonies. The cession of the Colonies, however, is in distinct contradiction with the principles of the Armistice. In President Wilson’s 14 points it is stated in Point 5: “A free, open-minded, and absolutely impartial adjustment of all colonial claims, based upon a strict observance of the principle that in determining all such questions of sovereignty the interests of the populations concerned must have equal weight with the equitable claims of the government whose title is to be determined”. There is no word in President Wilson’s programme of the cession of any Colonies and particularly no mention of such cession without compensation, but as far as Germany is concerned the Colonies have become to such a great extent necessary elements of her own economic life, they are such valuable parts of her national capital, that she cannot give up her right to colonial possessions if only on financial grounds.

Finally, we must also mention the regulations of Article 250, whereby the cession of all materials which have been already handed over as a consequence of the conditions of the Armistice is confirmed, and the right to possession of the Allied and Associated Governments is thereby recognised. In order to determine such recognition it would be necessary to make a close examination, which it has not been possible to make in the short time; in any case, however, it would be desirable that not only all property not connected with military objects (Friedeswerte) which has been handed over but also the stock belonging to the Army and Navy which the proposed Peace Terms exclude from their calculations, should be placed to the credit of Germany on the bill for reparation.


The above remarks set forth in detail the far reaching differences in the opinion as to the burden which may properly be placed on Germany, and as to those which shall be placed to her credit. But these special considerations fall almost into background when we endeavour to obtain a complete picture of what the proposed peace conditions will impose upon us in their financial parts. The final sum which Germany [Page 907] is to pay is not yet determined and it will only be so on the 1st May, 1921, but interest is to be paid upon it to the amount of 5% and this amount is equally then to be debited to us. The payment is meanwhile contemplated in three instalments, of twenty, forty, and if the Reparation Commission considers Germany capable, another forty milliards of bonds. The issue of further bonds can be demanded later. If the calculation is to take place in accordance with the principle above stated the total figure would clearly be altogether a fantastic one. It would be a burden which it is impossible to imagine, that future generations, even working in the hardest possible way, would scarcely be able to remove. The Allied and Associated Governments evidently fully understand these facts. Otherwise they would not have made the above-mentioned reservation in regard to the payment of the last forty of the hundred milliard marks in Treasury bonds above referred to. But there is a point about which they do not seem to be altogether clear, and that is: if they impose upon Germany such a debt, which takes away from her every possibility in the future; if, in consequence every amelioration of the German economic situation, which the German people might attain by great industry and Spartan economy, would simply have the result that still further payments would be exacted from them in settlement of this debt, then all pleasure in producing, all desire to work, all enterprise must be annihilated in Germany for all time. The German people would feel themselves condemned to work as slaves because everything which they produced would go not to themselves nor even to their children, but to strangers. Slavery has never been successful. It cannot be maintained among a people like the German people. Every possibility and readiness to pay would cease, and Germany would become for decades the scene of the most serious uninterrupted social class conflicts. Instead of taking this danger into account the principle on which these proposals are based is seen to be to keep Germany under pressure and control, financial, economic and political in a way unparalleled in the history of civilised humanity. A means for carrying out this is the Commission on Reparation, which has been provided with extraordinary powers under the Peace Conditions.

In order to pay reparation, in order to meet all demands arising out of the Treaty of Peace and its annexes, as well as in order to pay for the demands arising out of the Armistice, the first charge is to replace [be established], in accordance with Article 248, [on] all property and all revenue of the Empire and the Federated States. The Commission is, according to paragraph 12 of Annex II, to examine most carefully the German system of taxation for which it is provided with most extensive powers of control and execution, in order to see that in the first place all revenues of Germany, inclusive of such sums [Page 908] as may be required for the service of or for the repayment of all internal loans, should be preferably used for the sums which are to be paid by Germany on the reparation account: in the second place to see that the German system of taxation is quite as severe in regard to the individual tax-payer as that of any of the powers which are represented on the Commission. These regulations imply a complete financial control over Germany by the Allies, and a complete mastery over the Imperial Budget. They are indeed actually impossible to put into execution. For the acceptation of a first charge on the total capital of the debt of all property and revenue of the Empire and of the Federated States is impossible because the credit of the Empire and the States would in this way be so undermined that any further independent financial administration of these states could not be thought of. How could Germany take up any loans either at home or abroad (except through the Commission on Reparation) if the service of such loans were to be rendered uncertain by a charge on all possibilities of payment to the extent of an actually unlimited amount? Even the service of the existing German Imperial and State loans is made entirely dependent on the calculations of the Commission, and yet the maintenance of German economic life depends entirely on the maintenance of this service. The large and small economies, industrial enterprises, savings banks and insurance companies, and all such businesses for the administration of foreign [others’] property hold the great part of their possessions in Imperial and State loans, above all in war loans. If these became only partially valueless, this would bring about as a consequence a new and complete breakdown of German economic life which would be even more disastrous than all the economic consequences of the war and of the conditions of the Armistice. Germany would not be able to rise again after such a complete breakdown for a considerable time so as to be able to pay in any way even what was required for reparation.

It is clear from our situation that Germany will have to bear no smaller burden of taxation than that of any power represented on the Commission. Our burden of taxation will probably be considerably higher than that of any other country.

As the Commission on Reparation is at present planned it would really be the absolute master of Germany. It would control Germany’s internal and external economy. According to Article 260 the Commission may demand that all German nationals should renounce their rights and interests in all public utility undertakings (a very far reaching and not clearly definable expression) and in all concessions in Russia, China, Austria, Hungary, Bulgaria and Turkey as well as in the possessions and colonies of those countries or in regions which, according to the demands of the Allied and Associated [Page 909] Powers, are to be separated from Germany. The German Government itself, must help in this, it must draw up and deliver a list of all these concessions and rights, must effect the expropriation and compensate the expropriated persons and then be answerable to the Commission for all the property thus expropriated. The Commission thereby acquires an unheard of omnipotence. Through it, almost all German property in the above-mentioned countries may be expropriated, while the expropriation of German possessions in enemy countries themselves may, according to the draft conditions of peace, be carried further by the continuation of liquidations and sequestrations. But how can Germany continue to work and meet her financial obligations, especially payments abroad and particularly to the Allied and Associated Governments, if everything which she possesses in a foreign country is henceforth taken from her and she gives up all such means of earning money? This expropriation injures its victims the more in that the Empire could only pay the compensation due to the expropriated persons by floating new internal loans, the value of which would be gravely compromised by the Treaty of Peace. The expropriation would be very nearly a confiscation.

In the peace proposals the duty of the Empire to compensate for private property to be expropriated for the benefit of the Allied and Associated Powers, without consideration of the fact that a limit will have to be put to the method even on technical grounds connected with currency [is spoken of very frequently]. The flotation of German State loans will be impossible in the near future in any large amounts either inside or outside Germany and therefore compensation can only be made by copious emissions of notes. The inflation, which is already excessive now, would, if the proposed conditions of peace were carried out, uninterruptedly rise still further. Moreover, great deliveries in kind to foreign countries can only take place if the Empire makes good their values to the producer; thus, a further increase of notes. So long as these deliveries last there could be no question of a stabilisation of German currency even to its present level. The depreciation of the mark would have to continue more and more. The uncertainty of the currency would however affect not Germany alone but all exporting countries also, for Germany, with her continually depreciating currency would be an element of unrest and be obliged uninterruptedly to throw goods on the world market at extremely low prices. Quite apart therefore, from all the other reasons adduced, the proposals for expropriation and exaggerated deliveries in kind which are made in the conditions of peace are to be rejected on account of their technical currency considerations.

In the proposals for conditions of peace, all countries at war with Germany have mechanically included their manifold wishes; a unified [Page 910] fundamental conception is by no means to be found and contradictions accumulate from chapter to chapter. A revision is necessary in order to avoid the collapse owing to these mechanical additions of the economic body, from which efforts are demanded. Its organic solution can only be found in common by all concerned in connection with all pertinent questions.

According to Article 251 the Commission is empowered to decide how much may be applied to the purposes of supplies of food and the furnishing of raw materials from abroad; this in effect gives the Commission the power of determining whether, and to what extent, the German people shall be fed, and within what limits industry is to be allowed to work, so that there can no longer be any question of economic self-determination and corroboration.

According to paragraph [Article] 241 Germany would be bound to pass all legislation necessary to ensure the complete execution of the agreements. Is this perchance meant to imply, in conjunction with Article 234 and paragraph 12 of Annex II, that Germany is bound, in accordance with orders from the Commission, to issue all such laws on taxation as the Commission may require? What matter if it lies with the Commission first to decide how the German State revenues are to be applied, if thereafter at the bidding of the Commission dispositions for the payment of interest on war loans, pensions of Germans disabled in war and allowances to surviving dependents of fallen soldiers must likewise be suspended or restricted, as well as expenditure for promoting primary and secondary education, etc. German democracy is thus indeed annihilated at the very moment when the German people was about to build it up after a severe struggle—annihilated by the very persons who throughout the war never tired of maintaining that they sought to bring democracy to us! Set aside the right to dispose of the revenues of the State, and the Parliamentary system vanishes; the budgetary powers of the Reichstag become a sham. Governments and representative institutions in Germany then have as their only task to render to the Commission the services of a sheriff in enforcing payment of debts. Germany is no longer a people and a State, but becomes a mere trade concern placed by its creditors in the hands of a receiver, without its being granted so much as the opportunity to prove its willingness to meet its obligations of its own accord. The Commission, which is to have its permanent headquarters outside Germany, will possess in Germany incomparably greater rights than the German Emperor ever possessed—the German people under its regime would remain for decades to come shorn of all rights, and deprived to a far greater extent than any people in the days of absolutism of any independence of movement, of any individual aspiration, in its economic or even in its ethical progress.

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The decision of all these grave questions rests with the Reparation Commission which will determine them unilaterally and alone: whether it is a question of the valuation of the Saar Mines; of the burden of compensation to be imposed on Germany; of drawing or amending programmes for the delivery and valuation of goods to be restored by Germany; of fixing prices for commodities and foreign securities to be given up by Germany; of allotting imperial and state debts to be taken over by the portions of territory separated from Germany; of determining the value of credit account of Imperial and State property passing to foreign States in the severed territories—all this, and much more which cannot be enumerated in detail, is to be settled by the Commission in the exercise of its arbitrary powers. Even any change in the problems which are dealt with here in regard to Annex II must in the provisions of the Treaty result from a unanimous resolution of the Governments represented in the Commission without any kind of legal guarantee, yes, without any kind of right for Germany to be consulted.

Germany has the right in some, not in all, questions to give her opinion but she shall have no voice in regard to the discussions of the Commission which take place in secret. But what is considered in the simplest private suit in all civilised countries is a self-evident right of every man, that is to say, that both parties should make known their opinion verbally, and that if they cannot come to an agreement, a third impartial person should decide thereon, that is denied to us. The Commission is a party and a judge in one person.

Germany is moreover deprived of her rights in another way. The Allied and Associated Governments maintain the right to retain and to liquidate German property of every kind even after the conclusion of peace and to subject it to existing or even freshly arising war measures (Article 297 Annex paragraph 9), whereas on the other hand they demand ample protection for the property of their own nationals in Germany. They claim (Article 252) for themselves the right to dispose of all property of enemy subjects in their countries whilst immediately afterwards in Article 253, they adopt the stand-point that the securities and mortgages which were given to the enemy Powers or their subjects before the war must not be affected by the conditions of the Treaty of Peace. Therefore a distinctly different consideration of private property is set up for the conquerors and the conquered. What is claimed for the one is expressly denied to the other.

With similar decision we must protest against Article 258 whereby Germany is called upon to renounce any representation or participation, etc., in administrations or commissions of state banks or financial [Page 912] and agricultural [economic] organizations. No justification can be found for this agreement which makes Germans pariahs in the world. It is unquestionably opposed to the principles which were accepted by us and the other Powers in the Armistice Notes.

Finally Articles 259 and 261 are also directly opposed and entirely in contradiction to equity: on the one hand Germany must hand over to the Allied and Associated Governments large consignments of gold for Turkey, Austria and Hungary, and recognise her obligations in that respect; on the other hand, it is demanded that Germany must transfer to the Allied and Associated Governments her claims against Austria, Hungary, Bulgaria and Turkey, especially those arising out of the war period, and it is not stated in what manner these claims shall be settled in the account. It follows as a matter of course that the obligations which Germany has towards her former Allies cannot possibly be separated from the claims of Germany on those Allies. It is absolutely necessary to strike a balance in this respect. The position in regard to Turkey is in particular so complicated that the obligations cannot be treated separately from an understanding between the original parties to the agreement.


We must abstain for the moment from a more ample discussion of details in regard to the provisions of the draft Peace Conditions owing to the short time which is given for the discussion. Whilst we reserve further details for discussion at a later date, we meanwhile will merely mention the following:

It is stipulated in Article 248 paragraph 2, that no gold may be exported without the consent of the Reparation Commission until the 1st May 1921. Although the obligation of the state bank to redeem gold cannot be taken into account for the near future the state bank must nevertheless be permitted to export gold in case of a question of guarantees arising, which it has itself given, and which it is not in a position to fulfil by other means.

Article 262 stipulates that all payments to be made in specie and in gold marks must be made at the option of the creditors in pounds sterling payable in London, in dollars payable in New York, in francs payable in Paris, in lire payable in Rome, at a gold parity according to the coinage provisions in force on the 1st January 1914. On the other hand it must be pointed out that Germany is only in a position to deliver her goods and to take further financial measures for her re-establishment if the payments are to be made once and for all at the rate of exchange at which the debt was incurred. For the work of restoration of Belgium and France sums would naturally have to be fixed which would finally have to be paid in Belgian or French francs.

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In the paragraphs concerning the German obligation to pay it is repeatedly stated that these payments are to be made in gold. The balance of the state bank will, however, owing to the fatal conditions for payment for the import of food supplies during the Armistice in the near future, be extraordinarily low and therefore payments in gold will not be possible. In order to avoid mistakes it would be necessary for all payments in gold marks or in gold to be undertaken in such a way that they might be made by Germany in foreign currency at the rate of exchange in force on the 1st January 1914.

The Commission must call attention in particular to the great dangers of Article 296, paragraph 4 (d), according to which German debtors of an enemy country will be obliged to pay the debts which they incurred in German marks in the currency of the enemy country concerned at the rate of exchange of the mark before the outbreak of war. In this way heavy damage is inflicted in a quite arbitrary manner on the German debtor [and on the German Empire,] for it is impossible to distinguish on what the rate is based to transfer debts contracted in marks into a foreign currency. The “clearing” will, moreover, only fulfil its object if a delay of six months be not allowed in which the various states may declare their adherence or their non-adherence. If it is wished to carry the “clearing” idea into execution a uniform and speedy participation of all states must be required.


We come to the conclusion. The proposals of the Allied and Associated Governments in their present form and extent are positively incapable of execution. Even were it possible for them to be forced upon Germany, they would most grievously disappoint the hopes of our present enemies. This would clearly appear in connection with the very first instalment of 20 thousand million Marks for the immediate payment of which the Conditions of Peace provide. If our enemies should even succeed in collecting a substantial part of this 20 thousand million Marks, by taking the German merchant fleet, by compulsory ship-building in German yards, by forced deliveries of coal, dyes and drugs, by crediting themselves with all German balances and with the proceeds of the liquidation of all German property in the territories of the Allied and Associated Powers and in German territories which are to be ceded, little progress would thereby be made towards satisfaction of the indemnity demands. After deduction of the expenditure which would have been incurred in the interval for military occupation and of the very substantial sums required merely for the supply to Germany of the barest necessities in the shape of food and raw materials, little—if anything—would remain for the purposes of the indemnity. From a Germany whose main arteries had been so [Page 914] throttled it would, however, be impossible to rely upon receiving any further payments. No German administration could be equal to the task of extorting further payments. A foreign government which attempted still further to squeeze the ruined country would be obliged at once to recognise that the cost of the administration, which could be operated only under occupation by powerful military forces, must bring the Allied Governments losses which in a short time would exceed all the payments previously obtained from Germany.

A different path must be sought, a path of mutual understanding. In all countries, as in Germany, there are persons who preach revenge, hatred, militarism and jingoism; but in all countries too there are those who fight for right and justice, there are far-sighted persons who know that the whole world would be the poorer if the German people with its power of work, its need to consume, its spiritual achievement were excluded from cooperation in the work of the world. It is not Germany alone who today needs credit to the utmost amount for the replenishing of her depleted stocks, the procuring of the indispensable minimum of food and raw materials for the consolidation of her enormous floating debts; almost all of the belligerent countries of Europe must resume the economy of peace under most difficult conditions. The first and most urgent task to be accomplished is to combine all the forces of the world for this purpose and to give to all the possibility of continued existence. Only if this is achieved will Germany be in a position to discharge even the heavy obligation of reparation which she has undertaken and is resolved to satisfy to the utmost of her power. But for this there is the further necessary condition also that Germany shall retain the territorial integrity which is in correspondence with the Armistice Convention, that we shall keep colonial possessions and merchant ships, including large tonnage, that in our own country and in the world at large we shall enjoy the same freedom of action as all other peoples, that all war legislation shall be at once annulled, and that all interferences during the war with our economic rights, with German private property, etc., shall be treated in accordance with the principle of reciprocity. On the assumption and only on the assumption that these conditions are fulfilled, we can make great financial sacrifices and submit the following proposal:

The sum to be ascertained as the amount of the debt shall be admitted and the loans incurred by Belgium from her Allies down to November 11, 1918, shall be paid by us. The conditions of payment shall be the following:

The debt to France shall be ascertained in French and that to Belgium in Belgian francs.

Germany undertakes within 4 weeks of the exchange of the Ratifications of the Peace to issue in the sections [instalments] to be determined [Page 915] by the Allied and Associated Powers a bond for 20 thousand million Gold Marks, due to be paid not later than May 1, 1926, and to issue further in like manner the necessary acknowledgements of obligation for the remainder of the sum to be ascertained as the amount of the debt, and from May 1, 1927 on to make annual payments towards such sum in instalments free of interest, provided always that the total debt to be ascertained shall in no event exceed the amount of 100 thousand million gold marks, in which shall be included both the payments to Belgium for loans obtained by her from the Allied and Associated Powers and the above-mentioned 20 thousand million gold Marks.

There shall be reckoned towards the first 20 thousand million gold mark bond all deliveries already made or to be made by Germany in virtue of the Armistice, such as railway material, agricultural machinery, military and non-military material of all descriptions, etc., and, further, the value of all deliveries which Germany may be required to make under the Treaty of Peace, as, for example the value of railways and state property, the final assumption of state debts, the cession of claims upon the Powers allied with Germany in the war, a portion to be ascertained of the freight revenue arising from the inclusion of the German merchant tonnage in the world pool, and further all the deliveries in kind which are to be determined by negotiation in accordance with Annexes III to VII to Part VIII, and further the value of labour and material supplied by Germany for the restoration of Belgium and France, and also such restitution as may be made to Belgium in the form of a special loan in respect of the sums lent to her by the Allied and Associated Powers. These aforesaid limitations which are made in view of Germany’s incapacity for greater effort shall apply to the non-interest bearing instalments to be paid annually up to a maximum of 80 thousand million Marks. Such instalments shall not exceed a percentage to be determined of the German Imperial and State revenues. Germany hereby undertakes to assume for the payment of the indemnities due to the Allied and Associated Powers an annual burden approximately equivalent to the former total net Peace Budget of the German Empire.

In accordance with the above provisions the annuity to be paid yearly shall be determined as a fixed percentage of the revenues of the German Empire from direct and indirect taxes, profits on undertakings, and customs, which latter may be made payable in gold. Notwithstanding, such payment shall in the first two years of payment not exceed the current value of one thousand million gold marks. The payment of the annuities may be assured by a guarantee fund; the German Empire could oblige itself to make an annual payment to this fund from the proceeds of the indirect taxes, monopolies and customs down to the year 1926 and to maintain the fund thenceforward at a [Page 916] constant amount. In the event only of default by Germany in the payment of an annuity and until such default was made good, control by the Allies over the service of this fund could be admitted but not arbitrary measures such as are threatened in Paragraph 18, Annex II to Article 244 (page 107).

The amount of the damage shall be determined by the Reparation Commission acting in concert with a German Commission and, in case of disagreement, by a mixed Court of Arbitration with a neutral Chairman; the same procedure shall be adopted for the determination of the prices of the deliveries in kind and for the securing of agreement as to the amounts necessary for the supply of food and raw materials to Germany, in so far as proceeds for deliveries in kind are in question.

At least as heavy a burden shall be imposed upon the German system of taxation as is borne by the most heavily burdened of the States represented upon the Reparation Commission.

Territories to be ceded shall assume as from the day of the conclusion of Peace their pro rata share of the Public Debt and their proper percentual share of the Reparation for Damage to be made to the enemy.

We are fully aware how extraordinary a financial burden Germany must assume. If nonetheless we venture upon such a proposal as the above, we do so in the confidence that if our enemies will renounce the claim which they would otherwise make upon us the German people will muster the resolution and the strength to bear these financial burdens.

It is however essential in that case that from the very commencement, that is to say from the beginning of the new time of Peace, Germany shall be admitted to the League of Nations on a footing of equality. It must in our opinion be one of the tasks of the League of Nations to unite the strength of all its members in order to facilitate and to cheapen the obtaining by each severally of the capital which they require to set their peace economy once more to work. The more valuable such help will be to Germany in particular the easier will it be for her to meet the heavy obligations which she is undertaking.

We recognise that we cannot even approximately re-establish a world trade on the pre-war scale, and that our economic life must be on a much more modest footing. All we ask is that we shall not be expected to vegetate, dishonoured and enslaved. Heavily hit by misfortune, we wish nevertheless to be allowed to live as a self-respecting, hardworking people.

The world—and above all Germany—is longing for an early peace. We propose that the Financial Commission should be given an opportunity of negotiating immediately with financial delegates of the [Page 917] Allied and Associated Governments. There has hitherto been no opportunity for a free discussion of the Conditions of Peace. Only in such a discussion can, so we hope, the bases be at last found for alleviating the distress of all the nations—alleviating merely, not removing. We must not go to work under false illusions. In hostile countries there are still many persons who believe that a country like Germany can by herself make good the war damage suffered by nearly thirty countries; but the experts know as well as we do that that is impossible. The reparation which Germany now undertakes she will endeavour in long years of intense toil to perform. Only—her pleasure in living and her honour must be left to her.

Versailles, May, 1919.

The Financial Commission of the German Peace Delegation
  1. The file translation here printed is one prepared at the Peace Conference, with some minor corrections.