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The German transfer problem, 1920-1933: a sovereign debt perspective

Ritschl, Albrecht (2012) The German transfer problem, 1920-1933: a sovereign debt perspective. European Review of History, 19 (6). pp. 943-964. ISSN 1350-7486

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Identification Number: 10.1080/13507486.2012.739147


The severity of the Great Depression in Germany has sometimes been blamed on reparations in simplistic fashion. Alternative interpretations relied on American capital exports, the demise of the Gold Standard, or on malfunc¬tions of the domestic economy, such as excessive wage increases during the 1920s. This paper argues for a more subtle link between Germany's slump and these policies. I explain Germany’s foreign borrowing rush before 1929 from transfer protection under the Dawes Plan, which gave commercial credits seniority over reparations. I argue that the Young Plan of 1929 implied a reversal of this seniority scheme, causing a sudden stop and reversal in the German balance of payments that lasted throughout the Great Depression. Invoking basic results of sovereign debt theory, the paper identifies a sequence of reparation regimes with varying degrees of relaxation of Germany's participation con¬straint in international credit markets. Transfer protection under the Dawes Plan created an incentive for Germany (and her commercial creditors) to drive out reparations. I conclude that the Young Plan could only have worked in the absence of an international recession, and that attempts to salvage it in 1931 were necessarily futile.

Item Type: Article
Official URL:
Additional Information: © 2012 Taylor & Francis
Subjects: D History General and Old World > DD Germany
H Social Sciences > HC Economic History and Conditions
JEL classification: N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N14 - Europe: 1913-
Sets: Departments > Economic History
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 03 Sep 2012 09:24
Last Modified: 03 Aug 2016 14:18

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