Chapter 67: The Leash

Due to the German economy falling into dire straits around 1923, two special committees were added in November 1923 at the request of Great Britain. One was to specifically study how to balance the German budget and stabilize German finance; the other was responsible for investigating the outflow of German capital and designing methods to bring it back. Both of these bodies were chaired by the American banker, C.G. Dawes.

Then in April 1924, after meticulous analysis, Dawes drafted a plan to solve the reparations issue, which is known in history as the Dawes Plan. Due to financial difficulties, the German government was forced to accept this plan in August 1924.

The plan stipulated that the German central bank (Reichsbank) would be reorganized under Allied supervision, currency reform would be implemented, and the Allies would loan Germany 800 million gold marks (equivalent to 190 million US dollars) to stabilize its currency. With the total amount of reparations not yet finalized, the plan set annual limits for German reparation payments, starting from 1 billion gold marks in the first year (1924-1925) and increasing annually to 2.5 billion gold marks in the fifth year (1928-1929).

The financial sources for Germany’s reparation payments were to come from customs duties, taxes on tobacco, alcohol, and sugar, railway revenues, and taxes on industrial and commercial enterprises. 11 billion gold marks in railway bonds and 5 billion gold marks in industrial bonds were to be issued. Germany’s financial foreign exchange, railway operations, and tax collection affairs were to be subject to international supervision.

In other words, Germany, like China, sold off its sovereignty over customs and other areas in exchange for a large sum of money, using these funds to repay the war reparations owed to various countries around the world.

Originally, Germany had hoped to default on its debts, but the French invasion of the Ruhr industrial zone broke out immediately after. Germany had no choice but to make the withdrawal of French and Belgian troops from the Ruhr a condition for accepting the reparations plan. On August 16, 1924, the plan was accepted by both sides, and France subsequently withdrew its troops from the Ruhr industrial zone.

The implementation of the Dawes Plan played an important role in the recovery and development of the German economy in the latter half of the 1920s. From a long-term perspective, this plan was beneficial to Germany, because in 1924, Germany paid 1 billion gold marks in reparations to various countries but received 1.5 billion gold marks in loans from them.

But unfortunately, Germany was busy expanding its army and signing the “New Treaty of Versailles” in 1925. So in that year, through the efforts of German diplomats, the German government only paid 1.1 billion gold marks in war reparations but received 2.5 billion gold marks in loans from Britain and the United States.

Although the signing of this treaty brought many benefits to Britain and France, to cope with the rise of Germany’s armed forces, the Polish government ordered 400 Renault F-17 tanks from France and purchased 95 new fighter aircraft from Britain. This arms race order brought considerable benefits to the French and the British.

However, after the “New Treaty of Versailles” was formally signed and implemented, the world once again witnessed Germany’s terrifying war mobilization capability. By February 1926, the German Reichswehr had exceeded 250,000 men, reaching the upper limit of the new treaty. The navy and air force were also expanded or armed by mid-March and the end of April, respectively.

Britain and France also feared that Germany would become strong again, no longer accepting their dictates and once again challenging their international status or even retaliating with force. So the two countries decided to put another “leash” on the gradually strengthening Germany.

In July 1926, the famous French hardliner Prime Minister, Raymond Poincaré, replaced Édouard Herriot. This prime minister was one of the main figures who orchestrated the military operation to occupy the Ruhr industrial zone. After he came to power, the French government began to adopt a hardline policy towards Germany. France and Belgium began to pursue Germany for overdue war reparations, and Germany was forced to turn to Britain for help.

This time, Britain did not side with the Germans. Instead, it put on a selfless and impartial face, appearing between France and Germany as a fair mediator. In the end, President Hindenburg chose to compromise and ordered the Foreign Ministry to open negotiations with France and Britain to formulate a new treaty.

At the beginning, the situation was very unfavorable for Germany, but the German Foreign Minister, Stresemann, demonstrated his outstanding diplomatic talent. He maneuvered between Britain and France, changed Germany’s unfavorable situation, and completed a seemingly impossible diplomatic mission.

Not long after, Germany, France, Britain, Poland, Czechoslovakia, Belgium, and other countries held a conference in Locarno, Switzerland. During the conference, several important documents were passed.

Subsequently, the representatives of various countries formally signed in London on December 1, 1926, collectively referring to this series of important documents as the “Locarno Pact.”

Its main contents included: the final protocol of the Locarno Conference; the “Treaty of Mutual Guarantee” between Germany, Belgium, France, Italy, and Britain, also known as the “Rhineland Pact,” which stipulated that Germany, France, and Belgium would mutually guarantee that the German-Belgian and German-French borders would not be violated, and would abide by the provisions of the Treaty of Versailles regarding the demilitarization of the Rhineland, with Britain and Italy acting as guarantor states, undertaking the obligation to assist the aggressed nation; the “Arbitration Treaties” between Germany and Belgium, France, Poland, and Czechoslovakia, which stipulated that Germany and these nations would resolve their disputes by peaceful means, with each pair of contracting states establishing a permanent conciliation commission to handle issues between them; and the “Treaties of Guarantee” between France and Poland, and France and Czechoslovakia, which stipulated mutual support in resisting unprovoked attacks.

The pact guaranteed the status quo of Germany’s borders with its western neighbors, that is, it clearly defined the borders between Germany and countries like France and Belgium. This had a positive significance for improving Franco-German relations and stabilizing the situation in Europe. But the pact did not provide a guarantee for Germany’s borders with its eastern neighbors, meaning it did not restrain Germany from expanding eastward.

To put it bluntly, this negotiation was a feast to win over Germany and suppress the Soviet Union. It was the first step in Britain and France’s strategy to court Germany and attempt to divert Germany’s aggressive desires eastward. And when this pact was signed, Germany was in fact still secretly flirting with the Soviet Union. There were even more than 400 engineers helping the Soviet Union build the red regime’s new battleships. The treacherous plan of Britain and France was doomed to fail before it even began.

Even though the situation in Eastern Europe remained tense, the Locarno Pact was still considered by everyone to have made an outstanding contribution to the improvement of relations between Western European countries in 1927. The signing of the pact allowed Germany to become the sixth permanent member of the League of Nations in May 1927, escaping the shadow of a defeated nation to a certain extent. Moreover, the treaty clearly stipulated that Allied forces must completely withdraw from the Rhineland in western Germany by January 1928. This compromise, which would mean Germany would have no foreign troops on its territory by 1928, was undoubtedly very inspiring.

As the first formal institution to maintain world peace and encourage international cooperation, the League of Nations’ acceptance of Germany as one of its member states made a great contribution to achieving peace in Europe.

The signing of the Locarno Pact was another major adjustment made by the Allied powers to the Versailles system regarding European security issues. It temporarily eased the European security problem, improved the relationship between the Allied powers, especially France, and Germany, and allowed European international relations to enter a relatively stable period. It also created favorable conditions for the continued implementation of the Dawes Plan and the development of the German capitalist economy in the mid-to-late 1920s.

However, for the Reichswehr, this pact was not good news. Many new restrictions on the Reichswehr were added, such as once again reaffirming that the Reichswehr could not enter the Rhineland demilitarized zone. It also stipulated that Germany must limit its arms trade in the Far East. Furthermore, it required that two of the German border divisions on the western front be converted into light infantry divisions to reduce the border pressure on France and Belgium.

However, due to the interference of the British and Italians in the middle, the result of the pact’s signing was that France was weakened, losing its right as a victorious nation to impose sanctions on Germany, and its own security now required the guarantee of Britain and Italy. The German government, not the German military, was the main beneficiary, achieving equal status with France and laying the foundation for its restoration as a major political power.

What was regrettable was that the Locarno Pact clearly excluded the former Soviet Union, which made the Soviet Union feel isolated by the West due to the so-called unilateral “Western peace.” Around 1922, the Soviets had made peace with Germany through the Treaty of Rapallo and a series of secret cooperations. However, the current actions of Western Europe, on the surface, pulled Germany back towards Western Europe.

But in any case, Britain and France’s attempt to put another chain around the Germans’ necks was considered complete. For a time, the skies over Western Europe were clear, and war no longer seemed to be a threat. People rejoiced, and the economic downturn also improved somewhat due to the signing of this pact. Even Time magazine in the United States commented in a high-profile article: “The Germans not only know how to make cannons, they also yearn for peace.”

The signing of the pact made Akado feel powerless. The government faction and the merchant alliance within the Greater Germany Party had ultimately compromised with the various countries of the world. They had given up a portion of the Reichswehr’s interests in exchange for their own greater interests. Although on the surface it seemed Germany had lost little and gained much, from the perspective of the internal dynamics of the Greater Germany Party, the power of the merchants and politicians was subtly eclipsing the military faction that was loyal to Akado alone.

All he could do was to quietly develop the SS, expanding this paramilitary organization to 100,000 men—this did not even include the Reichswehr’s Gestapo, but only enforcers and cadres similar to the Stormtroopers. Although compared to the 300,000-strong Stormtroopers, the SS did not have a numerical advantage, most of these men were discharged soldiers and active-duty officers, and their training level and equipment were significantly better than their rivals’.

At the same time, the Reichswehr was not idle either. It secretly procured another 40 No. 3 assault guns for the 25th and 26th Divisions and secretly sealed away 300,000 barrels of oil delivered from the Soviet Union as debt payment, to be used as strategic resource reserves in the future.

Of course, besides Akado, who disliked the Locarno Pact, there was another person who was furious about this pact. This person was Adolf Hitler. The signing of the pact caused Germany’s economy to improve slightly. His anti-Semitic and anti-communist topics were no longer so eye-catching, so the development of the Nazi Party was severely affected. Seeing that the parliamentary elections were approaching, he could not afford another failure.