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 (, 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 1940, after the Fall of France durin ...

paid to the

German Empire The German Empire (),; ; World Book, Inc. ''The World Book dictionary, Volume 1''. World Book, Inc., 2003. p. 572. States that Deutsches Reich translates as "German Realm" and was a former official name of Germany. also referred to as Imperia ...

after the French defeat in the

Franco-Prussian War The Franco-Prussian War or Franco-German War, often referred to in France as the War of 1870, was a conflict between the Second French Empire and the North German Confederation led by the Kingdom of Prussia. Lasting from 19 July 1870 to 28 Janua ...

in 1871.

Background

An armistice was concluded on 28 January 1871 to allow

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

to the

French National Assembly The National Assembly (, ) is the lower house of the Bicameralism, bicameral French Parliament under the French Fifth Republic, Fifth Republic, the upper house being the Senate (France), Senate (). The National Assembly's legislators are known ...

. 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 (; born ''Otto Eduard Leopold von Bismarck''; 1 April 1815 – 30 July 1898) was a German statesman and diplomat who oversaw the unification of Germany and served as ...

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 who served as President of France from 1871 to 1873. He was the second elected president and the first of the Third French Republic. Thi ...

, 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, 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 servi ...

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 Napoleon Bonaparte (born Napoleone di Buonaparte; 15 August 1769 – 5 May 1821), later known by his regnal name Napoleon I, was a French general and statesman who rose to prominence during the French Revolution and led Military career ...

on Prussia in the

Treaties of Tilsit The Treaties of Tilsit (), also collectively known as the Peace of Tilsit (; ), were two peace treaties signed by French Emperor Napoleon in the town of Tilsit in July 1807 in the aftermath of his victory at Friedland, at the end of the War o ...

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 Conscription, also known as the draft in the United States and Israel, is the practice in which the compulsory enlistment in a national service, mainly a military service, is enforced by law. Conscription dates back to antiquity and it conti ...

. 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 economic depression in Europe and North America that lasted from 1873 to 1877 or 1879 in France and in Britain. In Britain, the Panic started two decades of stagnation known as the "L ...

which ushered in the

Long Depression The Long Depression was a worldwide price and economic recession, beginning in Panic of 1873, 1873 and running either through March 1879, or 1899, depending on the metrics used. It was most severe in Europe and the United States, which had been e ...

until 1896.Steinberg, pp. 329-330.

Notes

{{reflist, 2

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