The French indemnity was the

indemnity In contract law, an indemnity is a contractual obligation of one party (the ''indemnitor'') to compensate the loss incurred by another party (the ''indemnitee'') due to the relevant acts of the indemnitor or any other party. The duty to indemni ...

the

French Third Republic The French Third Republic (french: Troisième République, sometimes written as ) was the system of government adopted in France from 4 September 1870, when the Second French Empire collapsed during the Franco-Prussian War, until 10 July 194 ...

paid to the German Empire after the French defeat in the Franco-Prussian War in 1871.

Background

An armistice was concluded on 28 January 1871 to allow

elections An election is a formal group decision-making process by which a population chooses an individual or multiple individuals to hold public office. Elections have been the usual mechanism by which modern representative democracy has opera ...

to the French National Assembly. A preliminary peace was signed on 26 February with the Treaty of Frankfurt signed on 10 May. The Prussian State Ministry on 8 February recommended an indemnity of 1 billion thaler (3 billion francs), 95% of which would be paid to the army. The Prussian Finance Minister Otto von Camphausen said:

The German nation had after all suffered so many additional losses in blood and material goods which are beyond all accounting that it is entirely justified to assess the price of the war generously and in addition to the estimated sum to demand an appropriate surcharge for the incalculable damages.Jonathan Steinberg, ''Bismarck: A Life'' (New York: Oxford University Press, 2011), p. 309.

The Prussian Chancellor

Otto von Bismarck Otto, Prince of Bismarck, Count of Bismarck-Schönhausen, Duke of Lauenburg (, ; 1 April 1815 – 30 July 1898), born Otto Eduard Leopold von Bismarck, was a conservative German statesman and diplomat. From his origins in the upper class of ...

sent his personal banker Gerson von Bleichröder to negotiate between the French government and French financial circles.

Adolphe Thiers Marie Joseph Louis Adolphe Thiers ( , ; 15 April 17973 September 1877) was a French statesman and historian. He was the second elected President of France and first President of the French Third Republic. Thiers was a key figure in the July Rev ...

, the head of the French provisional government, offered an indemnity of 1.5 billion francs and claimed that France would be unable to pay 5 billion. Bismarck responded by saying that the Prussian Army would occupy France, "we will see if ''we'' can get 5 billion francs from it".Geoffrey Wawro, ''The Franco-Prussian War: The German Conquest of France in 1870-1871'' (Cambridge: Cambridge University Press, 2005), p. 305. Bismarck wrote that "France being the richest country in Europe, nothing could keep her quiet but effectually to empty her pockets". The French National Assembly ratified the terms by 546 votes to 107.

Indemnity

The indemnity was 5 billion francs (£200 million or $1 billion), with German troops occupying France until it was paid. The 5 billion gold marks, converted using the

retail price index In the United Kingdom, the Retail Prices Index or Retail Price Index (RPI) is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a representative sample of retail goods and ser ...

in 2011, was worth 342 billion. Converted using the GDP deflater it amounted to 479 billion and substantially more according to other comparisons such as GDP per capita. The indemnity was proportioned, according to population, to be equivalent to the indemnity imposed by Napoleon on Prussia in the

Treaties of Tilsit The Treaties of Tilsit were two agreements signed by French Emperor Napoleon in the town of Tilsit in July 1807 in the aftermath of his victory at Friedland. The first was signed on 7 July, between Napoleon and Russian Emperor Alexander, wh ...

in 1807.

Aftermath

The last payment of the indemnity was paid in early September 1873, two years before the deadline, and the German army of occupation was withdrawn in mid-September. It was generally assumed at the time that the indemnity would cripple France for thirty or fifty years.Wawro, p. 310. However, the Third Republic that emerged after the war embarked on an ambitious programme of reforms: it introduced banks, built schools (reducing illiteracy), improved roads, increased railways into rural areas, encouraged industry and promoted French national identity rather than regional identities. France also reformed the army, adopting conscription. In Germany the swift payment of the indemnity caused a stock market boom, along with an asset bubble in the form of a property boom. This lasted until the

Panic of 1873 The Panic of 1873 was a financial crisis that triggered an depression (economics), economic depression in Europe and North America that lasted from 1873 to 1877 or 1879 in France and in United Kingdom, Britain. In Britain, the Panic started two ...

which ushered in the

Long Depression The Long Depression was a worldwide price and economic recession, beginning in 1873 and running either through March 1879, or 1896, depending on the metrics used. It was most severe in Europe and the United States, which had been experiencing str ...

until 1896.Steinberg, pp. 329-330.

Notes

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References

*Wolfgang Schivelbusch, ''The Culture of Defeat: On National Trauma, Mourning and Recovery'' (London: Granta, 2003) *Jonathan Steinberg, ''Bismarck: A Life'' (New York: Oxford University Press, 2011). *A. J. P. Taylor, ''Bismarck: The Man and the Statesman'' (London: Hamish Hamilton, 1955). *A. J. P. Taylor, ''The Struggle for Mastery in Europe 1848-1918'' (Oxford: Oxford University Press, 1983). *David Thomson, ''Europe since Napoleon. Second Edition'' (London: Longman, 1963). *Geoffrey Wawro, ''The Franco-Prussian War: The German Conquest of France in 1870-1871'' (Cambridge: Cambridge University Press, 2005).

Background

Indemnity

Aftermath

Notes

References

Further reading