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Young Plan

From Academic Kids

The Young Plan was a program for settlement of German reparations debts after World War I. It was presented by the committee headed (1929-30) by Owen D. Young. After the Dawes Plan was put into operation (1924), it became apparent that Germany could not meet the huge annual payments, especially over an indefinite period of time. The Young Plan—which set the total reparations at $26,350,000,000 to be paid over a period of 58 1/2 years—was thus adopted by the Allied Powers in 1930 to supersede the Dawes Plan. Designed to substitute a definite settlement under which Germany would know the exact extent of German obligations and to reduce the payments appreciably, the Young Plan divided the annual payment, set at about $473 million, into two elements—an unconditional part (one third of the sum) and a postponable part (the remainder). The annuities were to be raised through a transportation tax and from the budget.

Then came the crash of 1929 which main consequences are twofold: the American Banking system had to recall money from Europe and cancel the credits that made possible the Young Plan. Moreover, the downfall of imports and exports would affect the rest of the world. By 1933, almost two thirds of world trade had vanished. A new trade policy is set with the Hawley-Smoot custom duty. Following Kindleberger, that is the reason why we have to make a difference between the crisis and the Big Depression. The later is influenced by nationalism and the adopted economic policy. Unemployement soared to 33,7% in 1931 in Germany, and 40% in 1932.

Under such circumstances, US presider Hoover issued a public statement that proposed a one-year moratorium of the payments. he managed to assemble support for the moratoriuum from 15 nations by july 1931. But the adoption of the moratorium did little to slow economic decline in Europe. Germany was gripped by a major banking crisis. A final effort was made at the Lausane Conference in 1932. Here, representatives from Great Britain, France, Italy, Belgium, Germany and surprisingly Japan gathered to come to an agreement. By that time it was clear that the deepening depression had made it impossible for Germany to resume its reparations payments. They agreed: -not to press Germany for inmediate payments. -To reduce indebtedness by nearly 90% and require Germany to prepare for the issuance of bonds. This provision was close to cancellation, reducing the German obligation from the original $33 billion to $714 million. -It was also informally agreed among the delegates that these provisions would be inefective unless the US government agreed to cancellation of war debts owed by the Allied government. Hoover made the obligatory public statement about the lack of any connection between reparations and war debts. When the moratorium expired, the situation returned to the terms of the Young Plan, but the system had collapsed. Germany did not resume payments and once the National Socialist government consolidated power, the debt was repudiated.

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