FROM THE LONDON CONFERENCE TO THE DAWES COMMITTEE The London Ultimatum.—On April 27, 1921, the Repara tion Commission announced their "assessment" as 132 milliard gold marks (6,600 million sterling, or 58% of the claim). The decision did not refer to Germany's "capacity to pay" at all— it was a computation of legal liability, on the terms of the treaty. The Allies decided that this was to be paid in annuities of LIoo, 000,000, plus 26% of German exports. Three series of bonds were to be issued, two in 1921, (a) 600 million pounds, (b) 1,900 million, and the balance as series (c) 4,100 million at such time as the Reparation Commission might determine. These bonds were to bear 5% interest, and 1% amortisation.
Upon this report the London Conference issued an ultimatum (May 5, 1921), giving effect to those decisions and also deciding that deliveries of coal and materials, etc., were to continue, Ger many being given credit for the appropriate values. A Committee of Guarantees was to be set up to report upon the German fiscal revenues and to supervise the actual machinery for delivering funds, etc. Occupation of the Ruhr Valley and .penalties in re gard to customs and other revenues were proposed in case Ger many failed to accept the terms.
The first payment of one milliard gold marks due by Sept. 1, 1921, was actually paid over, partly out of foreign balances which had accumulated prior to May, partly by sales of paper marks on the Exchange, and partly by tempotary advances from an inter national group of banks. Deliveries in kind after May covered the Nov. instalment. The export tax, a quarter of a milliard, was paid for the first quarter.
In Oct. certain details were agreed between the French and German ministers at Wiesbaden in regard to deliveries in kind for France, in place of the 26% export tax, and the practical details of these agreements were subsequently accepted by the other Governments concerned.
Difficulties began to arise almost immediately in regard to the payment of the annuities. In Aug. 1921, Mr. J. M. Keynes first published his famous prediction that the instalments of Jan. and Feb. 1922 might be covered out of further "deliveries,"
temporary advances and foreign assets of German industrialists. But the payment of April 1922 would present more difficulty. "Sometime between Feb. and Aug. 1922 Germany will succumb to an inevitable default. This is the maximum extent of our breathing space." In Dec. 1921 the German Government notified the Reparation Commission that their attempt to raise a foreign loan having been abortive, they could not raise in addition to de liveries in kind, more than 200 million gold marks on account of the payments for Jan. and Feb. 1922. There were conferences of the Allied prime ministers at London in Dec. 1921 and Cannes in Jan. 1922, as a result of which the Commission granted a moratorium to Germany from the amounts due under the sched ule of payments, accepting paythents of 31 million gold marks every ten days. It was laid down that Germany was to present plans for balancing the budget, stabilizing the currency and pre venting exports of capital. Shortly after, Germany made an offer of 72o million gold marks per annum in addition to 1,450 million by deliveries in kind, agreeing to balance the budget, increase the coal and sales tax and check inflation by a com pulsory loan. Germany asked for a reduction of the treaty pay ments to an amount within her capacity.
At the Paris Conference in March (March II, 1922) the Repar ation Commission was asked to consider the possibility of an external loan, but an international committee of bankers, which met at the end of May, concluded that such a loan was impossible so long as Germany's external liabilities remained at the figure arranged. Meanwhile in March 1922 the Reparation Commission agreed to a payment of 72o million gold marks inclusive, as the cash payment, suspending the schedule of payments in the mean time, and laying down that Germany should impose her new taxation at once or be exposed to the "sanctions" of the London Agreement.