In 1924 an international committee of financial experts headed by American banker Charles G. Dawes met to re-examine reparations from a broad perspective. The resulting Dawes Plan (1924) was accepted by France, Germany, and Britain. Germany’s yearly reparation payments were reduced and linked to the level of German economic output. Germany would also receive large loans from the United States to promote economic recovery. In short, Germany would get private loans from the United States in order to pay reparations to France and Britain, thus enabling those countries to repay the large war debts they owed the United States.

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This circular flow of international payments was complicated and risky, but for a while it worked. With continual inflows of American capital, the German republic experienced a shaky economic recovery. Germany paid about $1.3 billion in reparations in 1927 and 1928, enabling France and Britain to repay the United States. In this way the Americans belatedly played a part in the general economic settlement that, though far from ideal, facilitated a worldwide recovery in the late 1920s.

A political settlement accompanied the economic accords. In 1925 the leaders of Europe signed a number of agreements at Locarno, Switzerland. Germany and France solemnly pledged to accept their common border, and both Britain and Italy agreed to fight either France or Germany if one invaded the other. Stresemann reluctantly agreed to settle boundary disputes with Poland and Czechoslovakia by peaceful means, although he did not agree on permanent borders to Germany’s east. In response, France reaffirmed its pledge of military aid to those countries if Germany attacked them. The refusal to settle Germany’s eastern borders angered the Poles, and though the “spirit of Locarno” lent some hope to those seeking international stability, political tensions deepened in central Europe.

Other developments suggested possibilities for international peace. In 1926 Germany joined the League of Nations, and in 1928 fifteen countries signed the Kellogg-Briand Pact, initiated by French prime minister Aristide Briand and U.S. secretary of state Frank B. Kellogg. The signing states agreed to “renounce [war] as an instrument of international policy” and to settle international disputes peacefully. The pact made no provisions for action in case war actually occurred and would not prevent the arrival of the Second World War in 1939. In the late 1920s, however, it fostered a cautious optimism and encouraged the hope that the United States would accept its responsibilities as a great world power by contributing to European stability.