After World War 1, when Germany was defeated, it had to pay compensation for the cost of the war under the Treaty of Versailles (1919). When Germany could not pay, French troops occupied the Ruhr area in Germany to extract compensation in kind. It lasted from 1923 to 1925.
- The Ruhr region is located in north-western Germany, named after the river that flows through the region.
- It was the centre of manufacturing industry of Germany and includes the cities of Essen and Dortmund.
- It was home to nearly three quarters of Germany’s steel and coal production.
War compensation and default:
- In 1919, the war compensation was fixed around 226 billion gold marks (US $851 billion in 2016) by the reparations commissions.
- The German delegates did not accept this figure, forcing the commission to meet again.
- In 1921, it was reduced to 132 billion gold marks (US $442 billion in 2016), still a huge sum.
- The compensation instalments were to be paid quarterly in gold, along with commodities such as steel, raw iron or coal.
- Germany was told that any defaults would lead to the occupation of the Ruhr region.
- Though the revised amount was substantially less than the initial sum, it remained well beyond the capacity of the war-ravaged German economy.
- Germany defaulted on the payments, timber and coal deliveries several times.
- Economist John Keynes disapproved the compensation figure, suggesting that the Allies particularly France and Belgium had exaggerated the true amount of war damages.
- France believed that the Weimar government in Germany deliberately did not honour the terms of the Versailles treaty and the Reparations Commission.
- In January 1923, France and Belgium occupied the Ruhr region in order to force Germany to pay more.
- The Ruhr occupation lasted more than two and a half years.
- There is a view that France wanted to occupy the Ruhr region in order to meet its own war debts.
- Within days, the French and Belgian forces occupied Essen, Bochum and Dortmund.
- Initially the local people remained relatively calm as the troops advanced.
- Initially they resisted passively. However, in a short span of time, it went from being impulsive to methodically organisedby the government in Berlin.
- Trade unions were advised to organise strikes in the Ruhr, to stop industrial production and delay French seizure of resources.
- They were told that Weimar Government would continue to pay the salaries of Ruhr workers and civil servants.
- There were no cash reserves to pay two million striking industrial workers for more than a year.
- The salaries were paid by printing extra banknotes which led to hyperinflation, further damaging German economy.
- The Dawes plan was an effort to solve the World War I compensations problem.
- Under the plan,
- The foreign troops were to leave the Ruhr region.
- War compensation payments were to be paid over a period of five years.
- The funds would come from transportation, excise, and customs taxes.
- USA and Britain loaned Germany 800 million marks to help German economy.
- The new Gustav Stresemann government called off the strikes and the economy began to rebound.