In 1924, an international committee of financial experts met to re-examine reparations from a broad perspective. The resulting Dawes Plan (1924) was accepted by France, Germany, and Britain. Germany’s yearly reparations 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.

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. Thus, 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. Collectively, the agreements resolved many, but not all, of the most pressing international issues. 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 could 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.