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The Young Plan

German reparation payments stemming from World War I had been modified by international agreement under the terms of the U.S.-inspired Dawes Plan in 1924. By late in the decade, however, it was becoming increasingly difficult for the defeated nation to meet its obligations. The United States, which was not a direct recipient of reparations, again dispatched an expert to help salvage the threatened payments and avert an international crisis. Owen D. Young, an American financier, headed a committee that tried to remove ambiguities from the existing system. The following recommendations were made:

  • The amount of the annual payment demanded from Germany was reduced sharply to $473 million, a portion of which could be postponed with prior approval;
  • the total amount due was set at $26.36 billion or 121 billion Reichsmarks, payable over a term of 58 and a half years;
  • new tax programs were to be introduced in Germany as a means to generate revenue;
  • a bank for international settlements was to be established to collect and disburse reparations payments;
  • other forms of Allied control over the German economy were to be removed;
  • further reduction of the German obligation was held out as a possibility if the United States were to agree to the scaling back of war debts owed to it by its former allies.
The Young Plan won approval shortly before the beginning of the great world economic crisis of 1929, but Germany was able to make payments into 1931 before defaulting. President Hoover attempted to salvage the situation by arranging another moratorium in 1931-32, but the rise of Adolf Hitler in 1933 was quickly followed by his repudiation of the reparation obligation. In all, more than $4.5 billion in reparations was collected by the Allies from Germany.
See other foreign affairs issues during the Hoover administration.