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Bonds not Bombs in Croydon: German War Reparations

Almost 7 years after the end of the First World War, Croydon Airport played a role in its economic aftermath when an aeroplane landed with £9,660,000 worth of bonds as part of Germany’s war reparation payment. The treaty of Versailles and then further treaties set an enormous bill for Germany officially named as the aggressors, then losers, in the war.
Illustrated London News, 5 September 1925, f.5
The plane flew from Amsterdam to London on 25th August 1925. It was of interest partly as it was a new Swedish Junkers Type F.24 with triple engine and all metal – the first to land in Britain. It and the pilot had been chattered by the German government to convey the money to Britain. One of our project volunteers, Cassie Pope explains more about the reparations. . .

How much was Germany expected to pay?

The London Ultimatum of 1921 set the total German war reparations cost at 132 billion gold marks. This total was made up of three categories known as A, B and C bonds. The burden of this bill amounted to over 260% of Germany’s GDP in 1913. It was decided that the C bonds, valued at 82 billion gold marks, wouldn’t realistically be paid. This left the total around 50 billion gold marks, which did not significantly exceed Germany’s expectation of a bill between 30 and 40 billion.

Germany Defaults

Almost from the start, Germany fell behind on deliveries of timber and coal, which were accepted as one form of payment. By 1923, the scale of Germany’s default led to the occupation of an area of the industrial Ruhr region by French and Belgian forces. With its industrial heartland crippled, the German economy teetered on collapse.

The Dawes Plan

The Leeds Mercury, 26 August 1925
The German economy was faltering, and a commission was formed to reexamine the reparations schedule. The resulting Dawes Plan of 1924 reorganised the repayment schedule but did not reduce the total amount. The new schedule called for an initial reduction of German yearly repayments, which would then pick up as the economy improved, reaching a steady rate by 1929. Germany would also receive $200 billion in foreign loans, predominantly through bonds issued by the United States.

Prior to 1925 German reparations predominantly took the form of payments in kind. After 1924 the proportion of payments in foreign currency increased.

German Payments in the First Year

First year of the Dawes Plan ran from 1st September 1924. The first annuity amounted to 1,000,000,000 gold marks, which was paid within the year into the account of the Agent General for Reparations Payments with the Reichsbank. Four-fifths (800,000,000) of this amount was paid out of the proceeds of external loans. One-fifth (200,000,000) was paid from the bonds of the German Railway Company.* 

The Railway Company made its payment in two installments of bonds. The first, totaling 100 million gold marks, was paid on February 28th, 1925. The second, installment of 100 million gold marks was due on September 1st, 1925. This payment was made in advance, with 40 million paid on August 1st, and the balance of 60 million paid on August 31st.  

‘The Plan generally is functioning smoothly, and all those concerned in its execution have worked together loyally and in a spirit of friendly accommodation.’

It is this last installment that is arriving in Croydon Airport. For security G. H. J Jeffs, a British observer was also on the aircraft, who wrote a report for the Civil Aviation Traffic Office on landing. As the newspaper put it, it was Bonds not Bombs that were coming from Germany now.

By Cassie Pope

*Information taken from Report of the Agent General for Reparations Payments. November 30th, 1925. London, His Majesty’s Stationery Office 

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