Reparation Bonds in the 21st Century: Lessons from the Dawes and Young Loans for the Germany–Poland and Ukraine–Russia Cases

Abstract

This paper estimates the contemporary cost of sovereign reparation bonds by calibrating the historical spreads of the Dawes Loan (1924) and Young Loan (1930) to 2025 market conditions. A two‑step procedure is employed: first, historical spreads are adjusted for today’s risk‑free environment; second, they are modified for institutional quality—proxied by the World Bank’s Rule of Law index – and for the presence of value‑maintenance clauses. In two illustrative scenarios – a German sovereign issue funding reparations to Poland and a Ukrainian issue collateralised with frozen Russian assets – the equivalent 2025 spreads amount to roughly 107 basis points (bp) and 275 bp over the 10‑year EUR OIS curve, respectively. A Domar‑style sustainability test shows that the German bond remains fiscally neutral under moderate nominal growth, whereas the Ukrainian bond requires full multilateral supervision of an escrow account and sustained high GDP growth. Analysis confirm that tangible safeguards and international oversight can compress spreads (as historical evidence suggest by about 30 bp), while tokenisation mainly lowers post‑trade costs without eradicating political risk. The paper calls for an EU‑wide regulatory framework for reparation bonds – aligned with MiCA and the DLT Pilot Regime and suggests the need for further research (including panel regression and DSGE‑based research incorporating reparation‑debt components).