Reparations - GCSE History Definition

Definition

Reparations are payments made in order to fix damage or because of a wrong that has been done. After a war, the victorious side can sometimes make the defeated side pay reparations as both a form of compensation and as a punishment or fine.

Explanation

Wars are often extremely expensive and cause damage to the economy of all countries involved, including those on the winning side. By making the defeated nations pay reparations, victorious nations can claw back some of the money spent fighting the war.

If the fighting takes place within a country's borders, reparations can also help to pay for the damage caused. Railways, roads, factories etc can often be destroyed and reparations are sometimes imposed in order to pay for their repair or replacement.

Also, wars can prevent large areas of farm land from being used - often for years on end. Reparations are sometimes imposed to make up for the lost income of those years.

Finally, reparations can be imposed as a punishment when the victorious side believes the defeated side started or caused the war.

At the end of the First World War, the victorious nations of France, Britain and the USA imposed reparations on Germany for all of those reasons. Large areas of French and Belgian farmland had been unproductive for the four years of war and lay devastated at the end of it. The cost of sending and equipping millions of men to the trenches had caused Britain and France to run up enormous debts.

When the fighting ended, the Treaty of Versailles contained a specific War Guilt Clause that stated that Germany was to blame for starting the war. As such, Germany was liable to pay reparations and the victorious powers decided on the figure of £6.6 billion. 

The imposing of such enormous reparations caused great anger and resentment in Germany. The payments were set to continue until the 1980s meaning many Germans felt that generations who had not even been born were being punished. 

Reparations were also imposed on Germany, Italy and Japan at the end of the Second World War. However, the USA also invested huge sums in these defeated nations to support their governments and prevent any communist takeovers. 

Outside of wars, the term reparations is often used in relation to groups of people who suffered historical wrongs. These include indigenous people who suffered at the hands of colonists in countries such as Canada and Australia and African people who were enslaved and transported to the Americas and the Caribbean. 

In this context, the communities that have been affected campaign for both apologies, to acknowledge the suffering inflicted upon them, and compensation for the loss of resources, earnings and economic opportunities. In 2025, the Canadian Government agreed to pay over $20 billion Canadian dollars to First Nations communities. These reparations are the result of the Canadian Government breaking treaties and the systemic discrimination and abuse suffered by First Nations people - particularly children who were removed from their parents to encourage assimilation. 

Key Historical Facts

The reparations imposed on Germany as part of the Treaty of Versailles were soon widely viewed as being too harsh. In 1924, the Dawes Plan was agreed which created a schedule of reparations that was seen as fairer and more realistic. It also included loans to help the German economy recover from hyperinflation. In 1929, the Young Plan reduced the total amount of reparations that Germany had to pay by a significant amount and extended the payment period even further. Unfortunately, the Great Depression had a far greater impact on the Germany economy than either the Young or Dawes Plan.

Hyperinflation was an indirect consequence of reparations. The German government did not print extra money to pay the reparations. However, once France occupied the Ruhr after Germany had failed to make a payment, the German government printed enormous amounts of notes in order to pay the striking workers. This is what led to hyperinflation.

The size and scale of the reparations imposed by the Treaty of Versailles caused enormous anger and resentment amongst millions of German citizens. The Great War had been a disaster for the German people with millions of young men killed and injured and the country bankrupted. Many saw reparations as a humiliating way of preventing Germany from recovering - especially following the occupation of the Ruhr and hyperinflation. The anger caused many to turn Hitler’s Nazi party who promised to tear up the Treaty of Versailles. 

Demands for reparations at the end of the Second World War were largely led by Stalin’s Soviet Union. America and Britain were keen to learn lessons from the past and avoid humiliating defeated nations. They also wanted Germany, Japan and Italy to quickly recover economically. This was because these nations would then be more likely to become capitalist trading allies and less likely to become communist. The reparations that were imposed, such as the $100 million that Italy was directed to pay, were most likely covered by the far higher sums that America invested in the Italian economy. 

Britain’s historic role in the trans-atlantic slave trade has led to demands for reparations from communities and nations that suffered as a consequence of the trade. Britain gained enormous wealth for many centuries through the buying and selling of enslaved African people. When slavery was finally abolished in the British Empire in 1834, the owners of enslaved people were given compensation. The enslaved people were not. Campaigners argue that Britain owes the people of 14 Caribbean nations both an apology and trillions of pounds in compensation. 

Frequently Asked Questions

Why did Germany have to pay Reparations at the end of the First World War? 

The First World War was a catastrophic event for all nations involved. Over 1.3 million French soldiers were killed and around 800,000 soldiers fighting in the British Army also died. Much of the western front was in France and enormous areas of French land had been devastated by 4 years of war. On top of this, Britain and France had spent millions and millions of pounds fighting the war. Once the fighting had stopped, there was a real desire amongst the people of Britain and France to punish Germany. David LLoyd George had been elected British Prime Minister in 1918 on the promise he would “make Germany pay”. Georges Clemenceau, the French leader, wanted to ensure Germany was permanently weakened so France could never be invaded again. As far as many people in France and Britain were concerned, Germany had caused the war so German money should now be used to rebuild things. That is why reparations were imposed in the Treaty of Versailles. 

People in Germany obviously felt very differently. Over 2 million German soldiers had been killed in the fighting and they believed that Germany had been surrounded and threatened by Russia, Britain and France - making war inevitable and not solely their responsibility. 

How much did Germany have to pay in reparations?

The figure set out in the Treaty of Versailles was 132 billion gold marks - or £6.6 billion. This figure was drastically reduced by the Young Plan of 1929 to around £2 billion, although different historical sources give different figures. 

Did Hitler stop paying the reparations?

Both yes and no. Reparations payments were suspended in 1931 due to the impact of the Great Depression and before Hitler was elected into power. The repayments were not restarted whilst HItler was in charge. However, West Germany did resume payments after the Second World War.

How did reparations cause hyperinflation?

Reparations did not directly cause hyperinflation. Failure to pay an installment caused France and Belgium to send troops to occupy the Ruhr region of Germany with the intention of taking materials instead of payment. However, the German workers and miners in the Ruhr became united with their government in the face of the French troops. The workers went on strike and refused to make or mine anything that the French could seize and the German government agreed to keep paying the striking workers. To do this they printed more money. That is what caused hyperinflation. 

Were reparations the most significant aspect of the Treaty of Versailles?

This is a classic historical debate. The reparations were undoubtedly a very significant part of the Treaty of Versailles and caused great resentment and economic hardship. Reparations led to the occupation of the Ruhr which in turn led to hyperinflation. However, the territorial terms saw Germany lose vast areas of both land and millions of its population to other countries. The military terms saw Germany’s once mighty armed forces stripped down to a shadow of its former self. It was limited to 100,000 soldiers and not allowed any tanks, submarines or aeroplanes. The War Guilt clause also forced Germany to admit that the First World War was their fault - which caused anger and resentment. Which of these terms is most significant remains a debate amongst historians to this day.  

Related Glossaries

Capitalism

Communism

Economic

Hyperinflation

Depression