200 THE ECONOMIC CONSEQUENCES OF THE PEACE ch.

however, shows sufficiently the scope and significanceof its authority. This authority is rendered of fargreater significance by the fact that the demandsof the Treaty generally exceed Germany 's capacity.Consequently the clauses which allow the Com-mission to make abatements, if in their judgmentthe economic conditions of Germany require it, willrender it in many different particulars the arbiter ofGermany 's economic life. The Commission is notonly to inquire into Germany 's general capacity topay, and to decide (in the early years) what importof foodstuffs and raw materials is necessary ; it isauthorised to exert pressure on the German systemof taxation (Annex II. para. 12 (&)) 1 and on German internal expenditure, with a view to ensuring that Re-paration payments are a first charge on the country'sentire resources; and it is to decide on the effecton German economic life of demands for machinery,cattle, etc., and of the scheduled deliveries of coal.

By Article 240 of the Treaty Germany expresslyrecognises the Commission and its powers "as thesame may be constituted by the Allied and AssociatedGovernments," and c£ agrees irrevocably to the pos-session and exercise by such Commission of thepower and authority given to it under the present

1 This appears to me to be in effect the position (if this paragraph meansanything at all), in spite of the following disclaimer of such intentions in theAllies' reply:—" Nor does Paragraph 12 (6) of Annex II. give the Commissionpowers to prescribe or enforce taxes or to dictate the character of the German budget."