June 23, 1931
- By 1933, almost two-thirds of world trade had vanished. In the wake of the European banking crisis of 1931, 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 on the payments. He managed to assemble support[...]
By 1933, almost two-thirds of world trade had vanished. In the wake of the European banking crisis of 1931, unemployment soared to 33.7% in 1931 in Germany, and 40% in 1932. Under such circumstances, United States President Herbert Hoover issued a public statement that proposed a one-year moratorium on 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 of 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: 1.) Not to press Germany for immediate payments; 2.) 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 $32.3 billion to $713 million; 3.) It was also informally agreed among the delegates that these provisions would be ineffective unless the United States government agreed to the cancellation of war debts owed by the Allied governments.
Hoover made the obligatory public statement about the lack of any connection between reparations and war debts, however in December 1932, the United States Congress rejected the Allied war debt reduction plan, which technically meant that the war reparations and debt reverted to the debt reduction previously granted Germany by the 1929 Young Plan. However, the system had collapsed, and Germany did not resume payments. The plan ultimately failed, not because of the United States Congress’ refusal to go along, but because it became irrelevant upon Hitler’s rise to power.
Once the National Socialist government consolidated power, the debt was repudiated and Germany made no further payments. By 1933, Germany had made World War I reparations of only one eighth of the sum required under the Treaty of Versailles, and owing to the repudiated American loans the United States in effect paid “reparations” to Germany.
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.
After Germany’s defeat in World War II, an international conference (London Agreement on German External Debts, 1953) decided that Germany would pay the remaining debt only after the country was reunified. Nonetheless, West Germany paid off the principal by 1980; then in 1995, after reunification, the new German government announced it would resume payments of the interest. Germany was due to pay off the interest to the United States in 2010, and to other countries in 2020. In 2010, Time Magazine reported that Germany made “final reparations-related payment for the Great War on October 3, nearly ninety-two years after the country’s defeat by the Allies.”
Transcript
Das deutsche Volk und die deutsche Regierung haben mit herzliger Dankbarkeit die Vorschläge des Präsidenten Hoover angenommen.
Eine neue Hoffnung für Europa und Deutschland sehen wir aus diesem Vorschlage erwachsen.
Er bringt Deutschland eine Hilfe in einem entscheidenden Augenblick seiner Geschichte, in dem Schwierigkeiten bis zum äußersten sich aufgetürmt haben.
Der erste wirksame Anfang für eine bessere Zukunft ist erfolgt.
Aber warnen muss die Reichsregierung vor dem Glauben, als ob durch diesen Vorschlag des amerikanischen Präsidenten, wenn er von allen in Frage kommenden Nationen angenommen wird, wir über die Gesamtheit der uns bedrängenden Nöte in Wicht seien.
Wenn die Reichsregierung auch in den wiederholten, harten Maßnahmen der Notverordnungen vom Dezember und der letzten Notverordnung versucht hat, die hereinbrechenden Gefahren zu meistern und gezwungen war, dem deutschen Volke ein äußerstes an Lasten und Einschränkungen zuzumuten, um über die kommenden Monate und vor allem über den nächsten Winter hinwegzukommen, so war sie sich dessen bewusst, dass das Jahr 1932 aller Voraussicht nach den Höhepunkt der finanziellen Schwierigkeiten erst bringen würde.
The German people and the German government accepted President Hoover’s proposals with heartfelt gratitude. We see new hope for Europe and Germany arising from this proposal. It brings Germany help at a crucial moment in its history, when difficulties have piled up to the utmost. The first effective beginning for a better future has been made. But the Reich government must warn against the belief that this proposal from the American President, if it is accepted by all nations in question, will mean that we are in control of the entirety of the needs that beset us. Even if the Reich government tried to master the impending dangers in the repeated, harsh measures of the emergency decrees of December and the last emergency decree and was forced to impose the utmost burdens and restrictions on the German people in order to survive the coming months and above all To get through the next winter, she was aware that the year 1932 would most likely bring the peak of the financial difficulties.
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