The Reparations Agreement was the first major treaty to regulate German reparations for the Holocaust. While it laid the groundwork for future individual compensation, the treaty was about reparations to the Jewish State. West Germany committed to paying 3.45 billion Deutsche Mark, a significant sum even in today's money. But it wasn't just a cash transfer to the new Israeli state. Two-thirds of this sum was paid in the form of industrial goods. One-third was paid in the form of crude oil bought from British companies.
At the time, leading German figures expressed fears that the agreement would overly strain the German budget. One of them was Hermann Josef Abs, chairman of Deutsche Bank and financial advisor to chancellor Konrad Adenauer. Just a few years earlier, Abs had been responsible for the “Aryanization” of Jewish property.
Given the influence of former Nazis such as Abs on the negotiations, it took a long time and the near-breakdown of talks until a final agreement was reached. Contrary to the fears of Abs and others, the Reparations Agreement turned out not to be a strain on the German budget. In the rapidly growing West German economy, reparations to Israel never exceeded more than 0.2% of their Gross National Product. And according to economic historian Adam Tooze, in the year 1953, when reparation deliveries started, Germany spent 13-times as much on the integration of German refugees from the East as it spent on reparations to Israel.
The form that two-thirds of the reparations took was of industrial goods: factories, machinery, ships, trains, chemical products, and much more. They worked as a Keynesian stimulus to the Israeli economy – a small contribution to Germany’s Wirtschaftwunder.
Antisemitism ran strong in German postwar society – many, including chancellor Adenauer, still feared an imaginary “Jewish power”. The reality was of course different: Israel was a poor agrarian state that desperately needed the influx of German industrial goods to build up its industry. This explains why David Ben-Gurion signed the Reparations Agreement in the face of widespread domestic protests that almost took down his government.
That Israel agreed to receive reparations from Germany had nothing to do with forgiving the Germans, and everything to do with securing the survival of the Jewish state.
Accepting reparations from Germany signified the victory of the needs of the state over individual feeling. Nahum Goldmann, Israel’s chief negotiator, called the agreement ”a downright salvation” for Israel. It was: German deliveries were a huge push toward the industrial development of the Israeli economy and laid the foundations for the high-growth, high-tech Israel of today.
But it's perhaps no coincidence that President Herzog did not stay for the 70th anniversary of the Agreement, even though his German hosts might have wanted him to. Looking back, the Reparations Agreement was a political exchange that both sides had clear reasons to enter. The agreement helped rehabilitate an unrepentant Germany. In return, it helped build the Israeli state. 70 years later, the Reparation Agreement simply does not make for good commemorative speeches.
