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The imposed gift of Versailles: the fiscal effects of restricting the size of Germany’s armed forces, 1924–1929

Max Hantke and Mark Spoerer

MPRA Paper from University Library of Munich, Germany

Abstract: Weimar’s politicians used to attribute the continuous budget crises after the currency stabilization of 1923–4 to the burden put on the German economy by the Treaty of Versailles, in particular the reparation payments. This argument, which is still popular, neglects the fact that the restriction of the German military to 115,000 men relieved the German central budget considerably. In a counterfactual analysis we assess the savings in additional military costs and compare them to the reparation payments. Depending on the character of the foreign policy pursued by an unrestricted Germany, we find that the net effect of the Treaty’s stipulations on the German central budgets was either much lower than hitherto thought or even positive. This finding gives support to the argument that Germany suffered from home-made political failure even in the relatively stable period from 1924 to 1929.

Keywords: Treaty of Versailles; reparations; military budget; Dawes plan; Weimar Germany; peace dividend (search for similar items in EconPapers)
JEL-codes: H60 N44 (search for similar items in EconPapers)
Date: 2010-01-15
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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