BERLIN, June 10, 1927


X. Conclusion

The events of the last six months, taken by themselves, have little ground for general conclusions as to the working of he Experts' Plan. These months, however, have provided an unusually active record of the play and counter-play of various forces, and in that sense they have been rich in experience. The observation of these forces, and their detailed examination in the foregoing pages will, it is hoped, throw light on the development of the Plan and perhaps teach some lessons of importance for the future.

The Plan of the Experts sought above all to reduce the problem of reparations to a practical and business-like programme under which, instead of unsettling and retarding the reconstruction of Germany and of Europe, reparation payments might become a positive influence for stability and economic recovery. The Plan aimed to re-establish Germany as a going concern and to provide a fair trial, under conditions of security and mutual confidence, of the ability of Germany to pay and of the capacity of the creditor Powers to receive reparations. Experience, and experience alone, would prove what was practicable.

Previous Reports have summarized the results of the first two years of the Plan, which may be described as years of stabilization and of reconstruction and of encouraging recovery. The present Report records the further progress that has been made since the beginning of the third Annuity year, both in the field of reparation payments and in the economic recovery of Germany. The third Annuity year itself takes the Plan into what the Experts termed the transition period, following after the so-called preliminary period of economic rehabilitation. In this transition period reparation payments increase materially. and Germany begins to make more substantial contributions from the budget, in accordance with what the Experts believed would be her progress in recuperation.

The operation of the Plan itself has proceeded normally throughout the period covered by this Report. Germany has continued loyally and punctually to make the agreed gold mark payments to the Agent General for Reparation Payments, and transfers have gone forward regularly and currently under the auspices of the Transfer Committee, without interfering with the stability of the German exchange. The amounts involved have risen gradually, in accordance with the agreed schedule of payments, and the transfers to the Powers, while distributed among deliveries in kind, Reparation Recovery Act payments, and transfers in cash, have been made in increasing proportions in foreign currency payments.

The Report also reviews the course of the German economy and describes in detail the changes that have taken place in the last six months. In general, the progress has been steadily upward, though not uniform in all industries or all sections and by no means free from difficulty. Heavy unemployment still continues notwithstanding substantial reductions in recent months, but all the evidence available points to increased production and consumption and to some improvement in the standard of living. Savings also continue to grow. But the great volume of imports from abroad, with no corresponding growth of exports, nevertheless suggests the question whether Germany may not recently have been over- developing internally, without making the progress in ability to compete effectively in the markets of the world which is so necessary to the development and expansion of her foreign trade. The large excess of imports over exports in the past six months has been one of the principal causes of the recent drain on the Reichsbank's resources and of the approach of the German exchange toward the gold export point. The whole period, moreover, has been under the influence of the Reichsbank's credit policy, which has had to be determined under conflicting influences and has not been directed primarily toward the protection of its foreign balances. The Reichsbank as the guardian of the German exchange has ample resources and authority and the stability of the German currency remains fully assured.

In the sphere of the German budget, the expectations of the Experts regarding revenues have been fully justified, and notwithstanding the reductions of taxation the budgets for the financial years 1926-27 and 1927-28 show increases in the revenues exceeding the increases in the budgetary contribution under the Experts' Plan. But expenditures generally, including payments to the States and communes, have risen sharply until expenditures now exceed revenues, and for the first time since the Experts' Plan came into operation borrowing has been necessary to balance the budget of the Reich. The surplus funds of former years have thus given way to that more usual condition of budgets, in which economy and rigid scrutiny of new undertakings, on the one hand, and close study of tax yields, on the other, are necessary to preserve a balance. At the same time, the essential stability of the budget remains unimpaired, and there is no reason to doubt that it can be successfully maintained, if the German Government will take the normal precautions that are necessary in its own interest.

The experience of these months, in which the German economy has undergone so many changes and on the whole improved, serves to emphasize again the underlying conception of the Plan itself, that what is in the interest of the German economy is also in the interest of the execution of the Plan. The Experts in their original recommendations pointed out that their Plan must find its own guaranty "in the fact that it is to the interest of all the parties to carry it out in good faith." The. relations of good faith and mutual understanding that have prevailed since the beginning of the Plan, and the continuing interest of the German Government and the creditor Governments in its regular progress, provide the strongest foundation for its further development.


Agent General for Reparation Payments.


I. Composition of the German Annuity under the Experts' Plan

II. Revised Distribution of Second Annuity, showing Shares of the Respective Powers

III. Revised Distribution of Third Annuity, showing Shares of the Respective Powers

IV. Balance Sheet of the Agent General for Reparation Payments, as of May 31, 1927

V. Statement showing Receipts and Payments of the Agent General for Reparation Payments during the Period September 1, 1926-May 31, 1927

VI. Distribution among the Powers of Amounts Available for Expenditure during the Period September 1, 1926-May 31, 1927

VII. Analysis of Payments and Accounts Payable for the Period September 1, 1926-May 31, 1927, according to Category of Expenditure

VIII. Summary of Personnel, as of May 31, 1927

IX. Statement of Condition of German External Loan, 1924, as of April 15, 1927

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