(1929) Renegotiation of Germany's World War I reparations payments by a committee chaired by the U.S. lawyer Owen D. Young (1874–1962) in Paris. The Young Plan, a revision of the Dawes Plan, reduced the amount due from Germany to $26.3 billion, to be paid over 59 years, and ended foreign controls on German economic life. It went into effect in 1930, but the world depression affected Germany's ability to pay. When Adolf Hitler came to power in 1933, he repudiated the obligations of the Treaty of Versailles, including reparations.
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The Young Plan—which set the total reparations at $26,350,000,000 to be paid over a period of 58½ 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.
Amongst other provisions, the plan called for an international bank of settlements to handle the reparations transfers. The resulting Bank for International Settlements was duly established at the Hague Conference in January.
Between agreement and adoption of the plan came the Wall Street Crash of 1929, of which the main consequences were 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 affected the rest of the world. By 1933, almost two-thirds of world trade had vanished. A new trade policy was set with the Hawley-Smoot custom duty. The latter was influenced by nationalism and the adopted economic policy. Unemployment soared to 33.7% in 1931 in Germany, and 40% in 1932.
Under such circumstances, U.S. President Herbert Hoover issued a public statement that proposed a one-year moratorium of the payments. He managed to assemble support for the moratorium 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 Lausanne Conference in 1932. Here, representatives from Great Britain, France, Italy, Belgium, Germany and 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:
This agreement had been preceded by bitter diplomatic struggles, and its acceptance aroused nationalist passions and resentment. It also weakened, rather than helped the advocates of a policy of international understanding.
The coalition's goal was the enactment of the Freiheitsgesetz ("Liberty Law"). This law would renounce all reparations and make it a criminal offense for any German official to cooperate in their collection. It would also renounce the German acknowledgement of "war guilt" and the occupation of German territory which were also terms of the Versailles treaty.
Under the terms of the German constitution, if ten percent of the eligible voters in the country signed a petition in favor of a proposed law, the Reichstag had to put the matter to a vote. If the Reichstag voted against the law, the proposal would automatically be put to a national referendum. If fifty percent of the people voted in favor of it, it would become a law.
The Liberty Law proposal was officially put forth on October 16 1928. The Nazis and other groups held large public rallies to collect signatures. The government opposed the Liberty Law and staged demonstrations against it. However, the coalition succeeded in collecting enough names to put the proposal before the Reichstag. The Reichstag voted the bill down by a 318-82 margin. In the subsequent popular vote on December 22, the Liberty Law referendum only received 13.8 percent of the votes in its favor.
While the Liberty Law was not enacted in 1929, the campaign for it was a major factor in bringing Hitler and the Nazis into the political mainstream. Following the defeat, Hitler denounced Hugenberg and said the loss was a result of his poor leadership. Hugenberg and many other conservatives soon found themselves being eclipsed by the Nazis. Hitler would later enact by decree most of the proposals of the Liberty Law after achieving power.