The Third Year of the Dawes Plan

October 6, 1927

Report Outline
Administration of the Dawes Plan
Progress of the German Railways
The German Budget Situation
Credit Conditions and the Currency
German Business Conditions and Foreign Trade
Special Focus

The Agent General for Reparation Payments, Mr. S. Parker Gilbert, announced on September 1 that, with the payment of 55 million Reich marks by the German Railway Company, Germany had completed regularly and punctually the payments for the third year under the Dawes Plan except for a balance of 20 millions on account of the transport tax not due until September 15. This payment was duly met on that date. The payments for the third year amounted to 1500 million Reich marks.

The first two years of the Plan may be regarded as years of stabilization and reconstruction while the third and fourth years, with their increased payments and larger contributions from the budget, form a transition period to the fifth year, which is a standard year when Germany must pay 2500 million Reich marks. As the schedule for the fourth year exceeds that of the third year by only 250 millions it is generally considered that the real test of the Dawes Plan will not come before the fifth or standard year. As this critical year approaches there is a growing demand by Germany for modification.

German Demand for Modification

The new Finance Minister Koehler in his maiden speech in the Reichstag, February 18, 1927, stated that there was no possible way visible at present for Germany to meet her Dawes payments after this year and that even the chances of her being able to balance her 1927 budget were by no means good. During the subsequent discussion of the budget in the Reichstag members of all parties joined in making speeches demanding modification of the Plan. In general the attitude was that Germany's demonstrated ability to meet the payments during the early years should not be taken as establishing her capacity for meeting the greatly increased payments in the fifth and subsequent years. The point was emphasized that it has been possible so far to transfer large sums abroad only because of the great number of loans Germany has been able to float in foreign countries and that her unfavorable balance of trade gives no indication of reversing itself to a degree that will make it possible for Germany to accumulate sufficient balances abroad to meet her reparation payments. This view is widely supported by experts in many countries outside Germany but other experts disagree and contend that with the rapid recovery Germany is making economically she will with comparative ease be able to meet the increased payments.

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