Part II
The treaty in detail
The London Schedule of Payments, of 5 May 1921, established "the full liability of all the Central Powers combined, not just Germany alone," at 132 billion gold marks. This sum was a compromise, promoted by Belgium (against higher figures demanded by the French and Italians and the lower figure the British supported), that "represented an assessment of the lowest amount that public opinion ... would tolerate."
This figure was divided into three series of bonds. "A" and "B" Bonds, together, had a nominal value of 50 billion gold marks ($12.5 billion), smaller than what Germany had previously offered to pay. "C" Bonds, containing the remainder of the reparation figure, "were deliberately designed to be chimerical." They were "a political bargaining chip" that served the domestic policies of France and the United Kingdom. The figure was completely unreal, with the primary function of misleading public opinion "into believing that the 132-billion-mark figure was being maintained." Furthermore, "Allied experts knew that Germany could not pay 132 billion marks and that the other Central Powers could pay little. Thus the A and B Bonds, which were genuine, represented the actual Allied assessment of German capacity to pay." Taking into account what had already been paid, between 1919 and 1921, Germany's immediate obligation was therefore 41 billion gold marks.
To pay towards this sum, Germany could pay in kind or via cash payments. Commodities, paid in kind, included coal, timber, chemical dyes, pharmaceuticals, livestock, agricultural machines, construction material, and factory machinery. The gold value of these would be deducted from what Germany was required to pay. In addition, helping to restore the university library of Louvain (destroyed by the Germans on 25 August 1914) was also credited towards the sum, as were some of the territorial changes imposed upon Germany by the treaty. The payment schedule required 250 million dollars within twenty-five days and then 500 million annually, plus 26 per cent of the value of German exports. The German Government was to issue bonds at five per cent interest and set up a sinking fund of one per cent to support the payment of reparations. Even from an early sate, the bark of versailles was far worse than its bite, with the sole exception of the ruhr occupation
Quite rapidly the finacial impositions of versailles were dismatled. Between the signing of the Treaty of Neuilly-sur-Seine and April 1922, Bulgaria paid 173 million gold francs in reparations. In 1923, the Bulgarian reparation sum was revised downwards to 550 million gold francs, "plus a lump sum payment of 25 million francs for occupation costs". Towards this figure, Bulgaria paid 41 million gold francs between 1925 and 1929. In 1932, the Bulgarian reparation obligation was abandoned following the Lausanne Conference. bulgaria still went to war in 1941 as an axis client.
Austria was "so impoverished" following the war, coupled with the collapse of the Bank of Vienna, resulted in no reparations being paid "beyond credits for transferred property". Due to the collapse of the Hungarian economy, no reparations were paid other than coal deliveries. Turkish reparations had been "sharply limited in view of the magnitude of Turkish territorial losses". However, the Treaty of Sèvres was never ratified. When the Treaty of Lausanne was signed, in 1923, Turkish reparations were "eliminated altogether." German defaulted on her payments from almost the beginning as well which led to the occupation of the ruhr. However the occupation itself was never part of the versailles agreement, at least in the way it was executed. From the initiation of reparations, German coal deliveries were below the level agreed. In an attempt to rectify this situation, the Spa Conference was held in July 1920. At this conference it was decided that Germany would be paid five marks per coal ton delivered, to facilitate coal shipments and help feed the miners. This was well above the market value of Coal prices of the time. Despite this, Germany continued to default on her obligations. By late 1922, the German defaults on payments had grown so serious and regular that a crisis engulfed the Reparations Commission. French and Belgian delegates urged the seizure of the Ruhr as a way of encouraging the Germans to make more effort to pay, while the British supported postponing payments to facilitate the financial reconstruction of Germany. On 26 December 1922, Germany defaulted on timber deliveries. The timber quota was based upon a German proposal and the default was massively unmet. The Allies were unanimous that the default was deliberate, and in bad faith. In January 1923, the German Government defaulted on coal deliveries for the 34th time in three years despite quota reductions following the loss of the Upper Silesian coal fields (containing 11 per cent of German coal resources), which had been transferred to Poland.
On 9 January 1923, the Reparation Commission declared the Germans in default of their coal deliveries and voted to occupy the Ruhr to enforce Germany's reparation commitments. The British were the lone dissenting voice to both measures, and this should have prevented the following action under the treaty. The french (and Belgians chose to ignore this diseent. On 11 January, French and Belgian soldiers - supported by engineers, and including an Italian contingent - entered the region initiating the Occupation of the Ruhr.
The French Premier Raymond Poincaré was deeply reluctant to order the occupation, and had only taken this step after the British had rejected his proposals for more moderate sanctions against Germany.By December 1922, Poincaré was faced with Anglo-American-German hostility and saw coal for French steel production draining away.Exasperated with the British failure to act, he wrote to the French ambassador in London: "Judging others by themselves, the English, who are blinded by their loyalty, have always thought that the Germans did not abide by their pledges inscribed in the Versailles Treaty because they had not frankly agreed to them. ... We, on the contrary, believe that if Germany, far from making the slightest effort to carry out the treaty of peace, has always tried to escape her obligations, it is because until now she has not been convinced of her defeat. ... We are also certain that Germany, as a nation, resigns herself to keep her pledged word only under the impact of necessity". i agree with poincare in that respect
The occupation proved profitable, with the occupying powers receiving 900 million gold marks. However, the real issue behind the occupation was not German defaults on coal and timber deliveries, but forcing Germany "to acknowledge her defeat in World War I and to accept the Versailles Treaty." Poincaré recognized that if Germany could get away with defying Versailles in regards to the reparations, then a precedent would be created, and inevitably the Germans would proceed to dismantle the rest of the Versailles treaty.
The occupation led to the adoption of a new structure for Versailles reparations, the so-called Dawes Plan. Although the French succeeded in their objective during the Ruhr occupation, the Germans had wrecked their economy by funding passive resistance and brought about Hyperinflation. This was the second biggest issue to wreck German economic development, and one of the real root caauses for WWII. Under Anglo-American pressure, along with the simultaneous decline in the value of the franc, the French were increasingly isolated and their diplomatic position weakened. In October, a committee (consisting of American, Belgian, British, French, German and Italian experts) chaired by Director of the US Bureau of the Budget Charles G. Dawes was formed to consider "from a purely technical standpoint" how to balance the German budget, stabilize the economy and set an achievable level of reparations".