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

Hantke, Max and Spoerer, Mark (2010): The imposed gift of Versailles: the fiscal effects of restricting the size of Germany’s armed forces, 1924–1929. Forthcoming in: Economic History Review

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Treaty of Versailles, reparations, military budget, Dawes plan, Weimar Germany, peace dividend
• Subjects: H - Public Economics > H6 - National Budget, Deficit, and Debt > H60 - General; N - Economic History > N4 - Government, War, Law, International Relations, and Regulation > N44 - Europe: 1913-

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