The Reparations Agreement between Israel and the Federal Republic of Germany (“Luxembourg Agreement”, “Wiedergutmachungsabkommen” or “Reparations Agreement”) was signed on September 10, 1952, and entered in force on March 27, 1953. According to the Agreement, West Germany was to pay Israel for the costs of “resettling so great a number of uprooted and destitute Jewish refugees” after the war, and to compensate individual Jews, via the Conference on Jewish Material Claims Against Germany, for losses in Jewish livelihood and property resulting from Nazi persecution.
In 1952, the first Israeli Prime Minister David Ben-Gurion argued that the reparation demand was based on recovering as much Jewish property as possible “so that the murderers do not become the heirs as well”. His other argument was that the reparations were needed to finance the absorption and rehabilitation of the Holocaust survivors in Israel.
According to the website of the Conference on Jewish Material Claims Against Germany, or Claims Conference, “In response to calls from Jewish organizations and the State of Israel, in September 1951 Chancellor Konrad Adenauer of West Germany addressed his Parliament: “… unspeakable crimes have been committed in the name of the German people, calling for moral and material indemnity … The Federal Government are prepared, jointly with representatives of Jewry and the State of Israel … to bring about a solution of the material indemnity problem, thus easing the way to the spiritual settlement of infinite suffering.”
One month after Adenauer’s speech, Nahum Goldmann, co-chairman of the Jewish Agency for Israel and president of the World Jewish Congress, convened a meeting in New York City of 23 major Jewish national and international organizations. The participants made clear that these talks were to be limited to discussion of material claims, and thus the organization that emerged from the meeting was called the Conference on Jewish Material Claims Against Germany—the Claims Conference. The Board of Directors of the new conference consisted of groups that took part in its formation, with each member agency designating two members to the board: “The Claims Conference had the task of negotiating with the German government a program of indemnification for the material damages to Jewish individuals and to the Jewish people caused by Germany through the Holocaust.”
Israel’s relations with Germany, already extremely delicate on account of the Holocaust, were complicated further by Cold War politics and the division of Germany into mutually hostile Eastern and Western states; the former a communist satellite aligned with the Soviet Union, the latter a liberal democracy oriented towards the West. Due to a variety of factors, it quickly became apparent that West Germany would be the state most willing and able to deal with Israeli claims related to the Holocaust. To complicate matters further, Israel also had to be sensitive to the strategic interests of the United States which, following the breakdown in the wartime alliance with the Soviet Union, had come to believe the establishment of a prosperous West German economy was essential to forge a reliable and productive alliance with the postwar democratic government, seated in Bonn.
Israel was intent on taking in what remained of European Jewry. Israel was also recovering from the 1948 Arab–Israeli War and was facing a deep economic crisis, which led to a policy of austerity. Unemployment was very high, especially in the ma’abarot camps, and foreign currency reserves were scarce. David Ben-Gurion and his party, Mapai, took a practical approach and argued that accepting the agreement was the only way to sustain the nation’s economy. “There are two approaches”, he told the Mapai central committee. “One is the ghetto Jew’s approach and the other is of an independent people. I don’t want to run after a German and spit in his face. I don’t want to run after anybody. I want to sit here and build here. I’m not going to go to America to take part in a vigil against Adenauer”.
Negotiations were held between Israeli Foreign MinisterMoshe Sharett and West German ChancellorKonrad Adenauer. In 1951, Israeli authorities made a claim to the four powers occupying post-war Germany regarding compensation and reimbursement, based on the fact that Israel had absorbed and resettled 500,000 Holocaust survivors. They calculated that since absorption had cost 3,000 dollars per person (equivalent to $31,300 in 2021), they were owed 1.5 billion dollars (equivalent to $15.7 billion in 2021) by Germany. They also figured that six billion dollars worth of Jewish property had been pillaged by the Nazis, but stressed that the Germans could never make up for what they did with any type of material recompense. Negotiations leading to the Reparations Agreement between Israel and West Germany began in March 1952 and were conducted between representatives of the government of the Federal Republic, the government of the State of Israel, and representatives of the World Jewish Congress, headed by Dr. Goldmann. These discussions led to a bitter controversy in Israel, as the coalition government, headed by David Ben-Gurion, claimed that reparations were necessary to restore what was stolen from the victims of the Holocaust. The agreement was signed by Adenauer and Moshe Sharett on September 10, 1952, at Luxembourg City Hall. The German Parliament (Bundestag) passed the agreement on March 18, 1953, by a large majority, 239 for and 35 against, though only 106 of the ruling CDU/CSU’s 214 MPs supported the motion, which relied on the unanimous support of the opposition Social Democrats to get through. The Arab League strongly opposed the motion and threatened a boycott of the Federal Republic of Germany after it passed the restitution agreement, but the plan was abandoned due to economic considerations, namely that the Arab League would suffer far more from losing trade with West Germany than West Germany would from the Arab League.
Israel’s economic situation was so precarious at the time that the (survival) viability of the state was acutely threatened. The agreement also paved the way for diplomatic relations between Germany and Israel. Together with other agreements and grant agreements, around 80 billion euros have been made available to date and at least 3-digit millions are added every year. Israel evaluates these donations, but also those from the USA and other countries, as “government revenue”, which is why the country today has a seemingly remarkable GDP and per capita income (during the life of the agreement, German reparations payments accounted for about 15% of Israel’s GDP, created 45,000 jobs and ensured Israel’s survival). The actual situation of the citizens clearly cannot keep up with the statistical acrobatics.
