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SUMMARY OF PART I OF THE REPORT OF THE FIRST (DAWES) COMMITTee of Experts2

I. THE ATTITUDE OF THE COMMITTEE

a. The standpoint adopted has been that of business and not politics.

b. Political factors have been considered only in so far as they affect the practicability of the plan.

c. The recovery of debt, not the imposition of penalties, has been sought.

d. The payment of that debt by Germany is her necessary contribution to repairing the damage of the war.

e. It is in the interest of all parties to carry out this plan in that good faith which is the fundamental of all business. Our plan is based upon this principle.

f. The reconstruction of Germany is not an end in itself; it is only part of the larger problem of the reconstruction

g.

of Europe.

8. Guarantees proposed are economic, not political.

II. GERMAN ECONOMIC UNITY

For success in stabilizing currency and balancing budgets, Germany needs the resources of German territory as defined by the Treaty of Versailles, and free economic activity therein. III. MILITARY ASPECTS

CONTINGENT SANCTIONS AND GUARANTEES

a. Political guarantees and penalties are outside our juris

diction.

and II and the Annexes are the only authoritative statements of the plan. 1The summary is furnished only for the convenience of the reader. Parts I Reprinted from Report of the First Committee of Experts, Paris, 1924, Annexe

2075 de la Commission des Réparations.

b. The military aspect of this problem is beyond our terms of reference.

c. Within the unified territory, the plan requires that, when it is in effective operation:

1. if any military organization exists, it must not impede the free exercise of economic activities; 2. there shall be no foreign economic control or interference other than that proposed by the plan.

d. But adequate and productive guarantees are provided.

IV. THE COMMITTEE'S TASK

a. Stabilization of currency and the balancing of budgets are inter-dependent, though they are provisionally separable for examination.

b. Currency stability can only be maintained if the budget is normally balanced; the budget can only be balanced if a stable and reliable currency exists.

c. Both are needed to enable Germany to meet her internal requirements and Treaty payments.

V. ECONOMIC FUTURE OF GERMANY

a. Productivity is expected from increasing population, technical skill, material resources and eminence in

industrial science.

b. Plant capacity has been increased and improved since the

war.

VI. CURRENCY AND A BANK OF ISSUE

a. All classes will benefit from stabilized currency, especially labour.

b. Under present conditions, rentenmark stability is only

temporary.

c. A new Bank is set up or the Reichsbank reorganised.

d. The main characteristics of the Bank will be:

I. to issue notes on a basis stable in relation to gold, with an exclusive privilege;

2. to serve as a Bankers' Bank, establishing the official rate of discount;

3. to act as the Government Banker, but free of Government Control;

4. advances to Government to be strictly limited; 5. to hold on deposit Reparation payments;

6. the capital of the Bank will be 400 million gold marks;

7. it will be directed by a German President and Managing Board, who can be assisted by a German Consultative Committee;

8. the due observance of its statutes will be further safeguarded by a General Board, of which half of the members, including a Commissioner, will be foreign.

VII. BUDGET AND TEMPORARY REPARATION RELIEF Balancing the German budget requires:

a. full economic and fiscal sovereignty, subject to the supervision provided for in this report;

b. a stable currency;

c. temporary relief from charges on the budget for Treaty obligations;

d. such relief not to suspend essential deliveries in kind.

VIII. THE BASIC PRINCIPLES OF GERMANY'S
ANNUAL BURDEN

a. Treaty obligations and continuity of balanced budgets. 1. Balancing the budget does not entail merely provision for internal administrative expenditure;

2. Germany must also provide within the utmost limit of her capacity for her external Treaty obligations;

3. The budget can be balanced without necessarily
dealing with the total capital debt of Germany;
4. It cannot be continuously balanced, unless the
annual charge is fixed for a considerable period, on a
basis clearly prescribed in advance.

b. Commensurate Taxation.

1. Government internal debt has been practically extinguished by the depreciation of the currency. 2. New debt charge ought to be met, commensurate with the burden of the French, English, Italian and Belgian taxpayer.

3. The Treaty recognises this principle.

4. It is morally sound.

5. It is economically just in its influence on costs of production.

6. This principle has been applied to the full limit of practicability.

c. Allies' share in Germany's prosperity.

I. Germany's creditors must share in the improvement in Germany's prosperity;

2. This will be secured by an index of prosperity.

d. There is an important difference between the German's capacity to pay taxes and Germany's capacity to transfer wealth abroad.

IX. NORMAL RESOURCES FROM WHICH PAYMENTS ARE MADE Germany will pay Treaty charges from three sources: A. Taxes; B. Railways; C. Industrial debentures.

A. From her ordinary budget.

I. 1924-25 budget may be balanced if it is free from
Peace Treaty charges.

2. 1925-26 budget receiving 500 million gold marks
from special sources, may pay that sum for reparation.

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This is considered a normal year and a standard payment; thereafter additional payments will be made, depending upon prosperity.

B. From Railways.

1. Railway bonds:

a. eleven milliards of first mortgage railway bonds against a capital cost of twenty-six milliards will be created for reparations;

b. these bonds bear 5% interest and 1% sinking fund per

annum;

c. in view of reorganisation, interest is accepted as follows: 1924-25: three hundred and thirty million gold marks; 1925-26: four hundred and sixty five million gold marks; 1926-27: five hundred and fifty million gold marks; 1927-28 and thereafter: six hundred and sixty million gold marks.

Behind the bonds, there will be created:

2 milliards of preference shares to be reserved for sale to the public and 13 milliards of common stock.

3/4 of the proceeds of the preference shares will be applied, as required, to the payment of debt and for capital expenditure of the railways. The remaining 500 milliards of preference shares and all the common shares go to the German Government.

2. Transport Tax.

After 1925-26, 290 million gold marks per annum for reparation, and balance to German Government.

C. Industrial debentures.

I. Five milliards of industrial debentures are provided for reparation.

*Subject to addition or reduction in certain contingencies.

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