Germany's £3.2bn bid to close book on Nazi past leaves only rifts and rancour in its wake

Nearly one million surviving slave workers of Nazi Germany will at last receive their meagre pay cheques, after Germany yesterday signed a historic DM10bn (£3.2bn) deal to compensate them.

Nearly one million surviving slave workers of Nazi Germany will at last receive their meagre pay cheques, after Germany yesterday signed a historic DM10bn (£3.2bn) deal to compensate them.

The German Chancellor, Gerhard Schröder, said: "With this agreement we close a last open chapter of the past. More than 50 years after the end of the Second World War and the Nazi dictatorship, we are making a long-awaited humanitarian gesture to all former Nazi forced labourers."

However, Germany's belated generosity has led to a rift among the beneficiaries, with East Europeans complaining that they are receiving a fraction of what has been awarded to Jews.

Even in the Jewish community, which is embroiled in a storm over the morality of Holocaust compensations, there are bound to be mixed feelings. The latest settlement comes after a furore sparked by the Jewish intellectual Norman Finkelstein, who launched a ferocious attack last week in his book entitled The Holocaust Industry.

"The current campaign of the Holocaust industry to extort money from Europe in the name of needy Holocaust victims has shrunk the moral stature of their martyrdom to that of a Monte Carlo casino," Mr Finkelstein wrote in his provocative book. The author's main thesis was that much of the money extracted from Germany has gone to feather the beds of the establishment, and not enough to the victims.

Such sentiments cannot be aired in Germany, of course. The German taxpayer must shoulder most of the burden of the latest pay-off, as only a tiny minority of the companies that exploited the labour of Jews and enslaved citizens of the occupied countries had agreed to contribute.

The American Jewish Committee (AJC) last year produced a list of about 400 German firms that coerced Jews and citizens of occupied countries to work for the Nazi war effort. At the last count, about half these companies had still not pledged a single pfennig.

Deidre Berger, managing director of the AJC's Berlin office, said: "These companies have obstinately rejected their responsibilities." Even many of those that have agreed to participate have pledged only token sums.

Among the 3,217 companies that did volunteer are household names such as Volkswagen, DaimlerChrysler, the publisher Bertelsmann, Lufthansa and even the German subsidiary of Coca-Cola. Some firms, such as the software house SAP, agreed to contribute out of a sense of decency and shared guilt, even though they were founded decades after the war.

Mr Schröder said: "[The agreement] underlines we are conscious of the German past and will remain so. It's a long-term sign of our historical and moral responsibility."

The agreement is almost certainly the last big payout to victims of the Third Reich. Germany has paid about $60bn (£40bn) in reparations, most of it to Israel and Jewish groups. Some of the money, especially the smaller sums channelled through the communist governments of Eastern Europe, never reached the people they were intended to help.

Worst off were citizens of the occupied countries who were forced to work in Germany and received no pay for their toil. While Jews among them were covered by previous Holocaust deals, non-Jews have not been paid until this day.

About 12 million Jews and non-Germans were press-ganged into serving the Nazi war effort. They worked largely in the factories belonging to private companies and never received payment or compensation. These were the so-called "forced labourers", kept in pitiful conditions, although not condemned to death. About 85 per cent survived the war.

There is a second category of "slave labourers", predominantly Jews, who were taken into concentration camps to work in nearby factories. They were not meant to survive, and less than 5 per cent did. Many of these survivors, though, had received some compensation from the German government for their suffering, but no wages from the companies that inflicted it.

Evidence emerging in recent months shows that all kinds of organisations, large and small, used forced labourers, including farms and even the churches. Last week the Lutheran church announced that it was contributing DM10m to the new Holocaust Fund after discovering that it was as guilty of the practice as private companies. The Catholic church has so far made no such admission, but has promised to examine its wartime files.

Victims' groups have been campaigning for compensation for decades, but their suits were constantly rejected by German courts and the German government. The turning point came when American lawyers discovered that pressure on Switzerland could yield financial rewards. Flushed with that success, they turned their attention to the plight of slave labourers about three years ago. They launched class action suits against the biggest names in German industry, but without any result.

Then a new government was elected in Germany, promising a fresh start. To forestall damaging litigation, Chancellor Schröder struck a deal with some of the biggest companies and agreed to underwrite the joint private-public Holocaust Fund.

A total of DM10bn is to be collected and paid to victims. Half of this sum was to come from the German government. But, because of the reluctance of companies to donate a fraction of their profits, the fund is about DM1.8bn short. This will also now have to be covered by the government.

Germans have had mixed feelings about the unseemly haggling of the past two years. Many feel that their country has paid out enough, although they were shocked by the stinginess of cash-rich corporations. The Nobel Prize-winning writer Günter Grass last week caused controversy with his suggestion that every German adult should chip in with DM20 each.

The final signing ceremony, originally due to have taken place during President Bill Clinton's visit to Berlin in May, was delayed by disputes between the United States and German negotiators. At the last minute, German companies demanded legal guarantees of protection from future prosecution, which the US said it was unable to provide.

Now that all obstacles have been removed, the 900,000 survivors can look forward to their payment. Slave labourers are entitled to receive DM15,000, and forced labourers will be paid DM5,000.

However, East Europeans who did not have the backing of powerful Jewish organisations or American lawyers feel hard done by. "Everyone is not satisfied," said Anatoly Ivanov, a representative of Russian claimants. "Everyone wanted more."

Bartosz Jalowiecki, the head of the Polish agency administering German compensation, pointed out that people in Eastern and Central Europe had received only 1 per cent of all payouts, even though this part of the world had borne the brunt of Nazi terror.

Several East European countries complained that they had been excluded from thedecision-making process, while a Ukrainian representative said he had been bullied into signing the deal.

"In Washington they said, 'If you don't like it we're going to sign anyway'," said Markiyan Demidov, head of Ukraine's Union of Victims. "They forced us to accept it. The amounts are a joke, an insult from Germany."

A Polish survivor lucky enough still to be alive when the DM5,000 cheque drops through the door might be inclined to agree with this sentiment - especially if he were to learn that the handful of US lawyers who managed to hold up the negotiations several times are taking a $100m cut from the DM10bn in fees.