Dawes Plan

The Dawes Plan (as proposed by the Dawes Committee, chaired by Charles G. Dawes) was an attempt in 1924 to solve the World War I reparations problem, which had bedeviled international politics following World War I and the Treaty of Versailles.

The Allied occupation of the Ruhr industrial area contributed to the hyperinflation crisis in Germany, partially because of its disabling effect on the German economy. The plan provided for an end to the Allied occupation, and a staggered payment plan for Germany's payment of war reparations. Because the Plan resolved a serious international crisis, Dawes shared the Nobel Peace Prize in 1925 for his work.

It was an interim measure and proved unworkable. The Young Plan was adopted in 1929 to replace it.

Background: World War I Europe

The initial German debt default

At the conclusion of World War I, the Allied and Associate Powers included in the Treaty of Versailles a plan for reparations to be paid by Germany. Germany was required to pay 20 billion gold marks, as an interim measure, while a final amount was decided upon. In 1921, the London Schedule of Payments established the German reparation figure at 132 billion gold marks (separated into various classes, of which only 50 billion gold marks was required to be paid). However, by 1923 Germany had defaulted on its ability to deliver further amounts of coal, timber, and steel in line with its reparation quotas. In response to this, French and Belgian troops occupied the Ruhr River valley inside the borders of Germany. This occupation of the centre of the German coal and steel industries outraged the German people. They passively resisted the occupation, and the economy suffered, significantly contributing to the hyperinflation that followed in Germany.