Germany and the Young Plan

THE name "Young Plan" has become identified with the decision for a complete and final settlement of the reparations question which was reached in Paris June 7, 1929, by the experts of the participating nations, under the chairmanship of Mr. Owen D. Young. It is a companion title to the name "Dawes Plan," applied to the decision reached by the experts on April 19, 1924, which led to the first temporary settlement of the reparations question and showed the way out of the chaos of the Ruhr Occupation. Furthermore, just as we understand by the Dawes Plan the entire arrangement between the creditor nations and Germany, including the subsequent agreement reached in London on August 16, 1924, so the name Young Plan covers also the agreement of The Hague dated January 20, 1930, whereby the governments of the creditor nations came to terms with Germany as to the final settlement of reparations in accordance with the decision of the experts of June 7, 1929, and The Hague Protocol of August 31, 1929. It is true that this entire agreement is officially known as the "New Plan," but it is likely to be known in world history as the "Young Plan" and for that reason it will be so designated here.

The Young Plan was accepted by the Reichstag on March 12, 1930, and was immediately ratified by Germany. Thus it took more than nine months -- much longer than in the case of the Dawes Plan -- to transform the Young Plan from a mere decision of the experts into a definite agreement between the Powers concerned. This is all the more remarkable because it was designed to effect, for the first time, a voluntary agreement between Germany and her creditors: it did not represent simply the more or less compulsory acceptance of dictated terms.

It is necessary, of course, to remember that the "complete and final" settlement of reparations which was the aim of the Young Plan entailed at the same time the settlement of a series of other difficult and complicated financial questions between Germany and the creditor nations -- above all, that of the liquidation of German private property in the various erstwhile enemy countries. Furthermore, the military evacuation of the Rhineland, which had become closely bound up with reparations, and the question raised by the press as to the sanctions provided in the Treaty of Versailles, could not be settled overnight. However, the long delay was largely due to the conflict among the creditor nations themselves over the apportionment of the German annuities; indeed this was the chief subject of the first Hague Conference in August 1929. A later contributory cause of delay was the fact that the parties in the Reichstag made the acceptance of the Young Plan conditional upon a reform of the Reich's finances.

The longer the political conflict in Germany over the acceptance of the Young Plan dragged on, the greater became the general uneasiness. There is, in fact, scarcely anybody in Germany who would publicly declare himself satisfied with the settlement which the Plan prescribes. Both the German Government and the leaders of industry who came forward in support of it have always insisted that it was far from offering the solution which Germany might have expected; but, they added, under the pressure of circumstances it must be accepted, as it represented a lesser evil than the continuation of previous conditions. Above all, it was consistently pointed out that it was quite impossible to reject the Young Plan and revert to the system of the Dawes Plan, as that would bring about endless political and industrial trouble in Germany.

Thus with negative rather than positive arguments it finally became possible to defeat the fierce attacks which were made upon the Young Plan by the extreme Right and Left parties in Germany. Germany has accepted the Young Plan, but without any real satisfaction or real conviction. She regards it as a makeshift in a very difficult situation, but not as a "complete and final" settlement of the reparations problem.

Why did the German Government commit itself to negotiations with its creditors concerning a new debt settlement when the result finally achieved has proved so unsatisfactory? It will be remembered that on September 16, 1928, the five leading Powers among the reparations creditors, which had met at Geneva in pursuance of the German demand for an immediate evacuation of the occupied territory, had come to an agreement with Germany that, among other things, it was necessary finally and completely to settle the reparations problem, and to call a conference of the financial experts of the six governments for that purpose. At that time, Germany had gone to Geneva to demand the evacuation of the Rhineland, independently of the question of reparations. However, at the instance of France, and against the wishes of Germany, the two problems became so closely involved that the evacuation of the Rhineland was not to take place until the reparations debt had been finally settled. Thereafter, evacuation and reparations could not be treated separately in practical politics, and the only question was whether the German Government should take the initiative in calling together the reparations experts.

Even at that time those familiar with German affairs gave warning that the moment was ill chosen for a revision of the Dawes Plan, because there was as yet no economic experience upon which to base an accurate estimate of Germany's capacity to pay. The German Government nevertheless allowed itself to be persuaded to make a proposal that the experts be called together as soon as possible. An essential factor in this decision was the activity which the Agent General for Reparation Payments, S. Parker Gilbert, had been displaying for some time. As early as December 10, 1927, in his report on the third year of reparations, Mr. Gilbert had called for a thorough and satisfactory settlement of the reparations problem which would finally determine the amount of Germany's indebtedness, set aside the prevailing transfer measures, and abolish the Dawes Plan supervision of German finances. By repeated visits to the governments of the creditor nations, Mr. Gilbert had further prepared the way for a revision of the Dawes Plan. After the Geneva Agreement of September 1928 his conversations in London and Paris assumed a more definite shape and, thanks to his endeavors, there finally was found a formula for bringing the experts together on which all the participants could agree. Mr. Gilbert also cleared up the difficulties which immediately arose in Washington in connection with the participation of America in the Committee of Experts and the appointment of an American expert as chairman. The assurance and energy with which he took these responsible steps lead to the conclusion that, not only from his own study of German conditions but also in his relations with our government circles, he must have found some evidence that success would crown the meeting of experts -- in other words, that between the demands of the creditors and Germany's willingness to pay a compromise could be found acceptable to both parties.

The sort of final settlement of reparations which would be drawn up by the experts in Paris could be defined in advance fairly accurately. Everybody knew, from the various speeches of M. Poincaré as well as from the official answer of the French Government to the German request for a conference of experts, that France would ask from Germany not only the discharge of her own foreign war debt but also further compensation, which must be large enough to cover her domestic war losses. England continued to take her stand on the Balfour Note of August 1, 1922, by which she demanded only so much in reparations and receipts on war debt account as would meet her debt to America; she also presented the reparations claim of the British Dominions. In reply to the diplomatic notes in which the creditor nations put forward their claims, the German Government rightly refused to discuss the material settlement of reparations until the opinion of the experts was available. It could, however, easily calculate what would be the approximate total of the creditors' claims, and all depended on the skilful negotiation as to how much those claims could be reduced. Those who were not blind could see that, under a system of annuity payments over a number of years according to the model of the Allied debts to America, the reparations settlement would probably provide for an average yearly payment of approximately two billions of reichsmarks, and that it might be possible with the help of American influence to reduce this sum by a few hundred millions.

This condition of affairs should have determined the tactics to be followed by the German negotiators, once it had actually been decided to send them to Paris for the settlement of reparations. No practical purpose could be served by negotiations at that time unless the German delegates were prepared in case of necessity to reconcile themselves to an annuity of some two billions of reichsmarks, and had adapted themselves from the beginning to that contingency. Instead, the German Government tried a different method. They insisted that the negotiations in Paris should be placed in the hands of experts who, independently of the demands of their Governments, were to investigate the general conditions governing Germany's capacity to pay and to make proposals for the settlement of reparations based solely upon practical conclusions. It is true that the creditor nations formally agreed to this, but the German standpoint in no wise influenced the character of the negotiations. The only government which left its experts in Paris free to act according to their own best judgment was the German. The experts of the other Powers were more or less strictly bound by their instructions. Dr. Schacht, the head of the German delegation, was exposing himself to bitter disappointment if he believed that, by choosing this form of negotiation, he could induce the creditors to abate their demands and on the basis of an independent examination of German conditions reach a conclusion that had no connection with the sums which they had been talking about.

The German delegation in Paris was permitted to set forth the economic situation of Germany in detail to the other experts. But nothing could be proved thereby, particularly as to the limitations of Germany's capacity to pay. The experience of four years had shown that Germany had punctually met the rising demands of the Dawes Plan in regard to the payment and transfer of annuities, apparently without any particular clashing with economic necessities; indeed the Agent General had regularly pointed out this fact with great satisfaction in his periodical reports. It was quite useless to refer to the fact that Germany's reparation payments were effected only through intolerable taxation and the heavy mortgaging of industry, and that the transfer of Germany's reichsmark payments under the Dawes Plan had been made possible only through a steady stream of devisen from foreign loans. Although all this was granted, it still was not admitted that Germany, out of her own resources, could pay only up to a certain point. It was precisely this which was to have been proved by the experience of the Dawes Plan over a period of years, but no such experience was available so long as there were no tangible obstacles in the way of the execution of the Dawes Plan. If economic results were really to be employed for the final solution of the reparations problem, there was no choice but to await the further development of events under the Dawes Plan, and to undertake its revision in favor of Germany only when it had been demonstrated that German industry was no longer in a position to meet the Dawes Plan annuities completely and to transfer the sums in question. It was premature, then, to go to Paris to negotiate through "experts" about the reduction of the German debt.

The German delegates quickly realized that they had come not to an economic inquiry but to a political deal, and this realization necessarily led to a crisis in the conference. The representatives of the creditor nations regarded the economic statements of the German experts as being merely the conventional introduction to a serious offer, as is usual in business; whereas the Germans were not in a position to enter into such negotiations. This explains why the experts spent months on the discussion of all sorts of secondary questions, without dealing with the kernel of the whole matter -- to wit, the amount of the yearly payments -- for fear of the conflict which would immediately ensue when the creditors named their terms and the Germans came forward with a counter-offer which would partially expose the complete misunderstanding as to Germany's capacity to pay.

But this eventuality could not be avoided; it occurred when finally the Germans met the demand of the creditors for average annuities of more than 2,200 millions over a period of fifty-eight years, with their own proposal of an average of 1,650 millions over thirty-seven years, and dependent upon innumerable conditions. This seemed to spell the failure of the conference. Even Mr. Young's compromise proposal, which settled the average annuity of the present Young Plan at 2 billions in round figures, was not in itself calculated to simplify the conflict of the parties, because it was no more based upon economic knowledge than was the demand of the creditors or the offer of the Germans. From this proposal it finally became very clear that what was afoot in Paris was, not the recognition of economic possibilities, but a purely political deal. That being the case, the German delegates would have had ample grounds for handing their resignations to the German Government. This conclusion was reached at the last minute by only one of the experts, Dr. Vogler, the representative of industry. The three other delegates were empowered by the German Government to take cognizance of the existing conditions and to come to an agreement with the creditors, according to their own best judgment, on the basis of Owen D. Young's proposal. The breaking off of the conference would have precipitated a crisis of incalculable consequences, whose beginnings were already heralded by panic on the German Stock Exchanges and in the ominous oscillations of the reichsmark.

If we recall the errors and uncertainties out of which the Young Plan was born, we find it perfectly easy to understand why there is no satisfaction in Germany now that the Plan is in operation. It is not the final solution of the reparations problem for which all who had the welfare of Germany at heart had hoped. It is not the result of economic experience, postulated by the Dawes Plan as the condition of a final solution. On the contrary, it is a political venture, determined by the chance circumstances of the hour, and its success is entirely dependent upon the development of events in the future. The general feeling in Germany is that the Young Plan does not, as it purports to do, settle the reparations problem "finally and completely," but that it is only one step farther along the reparations road and towards German economic reconstruction.

However, if the acceptance of the Young Plan has not brought joy in Germany it would be wrong to draw the conclusion that the treaty, now that it has been made, will be observed by the German people with less earnestness and good will than an agreement which corresponded more closely to their expectations. In the manifesto addressed by President von Hindenburg to the German people on the ratification of the laws relating to the Young Plan, he exhorted Germany, with all his customary moral earnestness and stern sense of duty, to unite in working for the common good of the people and the country now that the conflict over the Young Plan had terminated. That this appeal of the President's met with enthusiastic approval is the best proof that Germany will proceed as faithfully with the execution of the Young Plan as during five years she met the demands of the Dawes Plan.

If, in the course of time, it should appear that the Young Plan cannot be carried out permanently, this will be due, not to any lack of good will on Germany's part, but rather to the fact that the burden of reparations which it imposes upon Germany is in effect unbearable. The enormous figure of two billions of reichsmarks (the average over thirty-seven years) frightens all Germans who are accustomed to think seriously in terms of economics. After her escape from the catastrophe of inflation, Germany fell heavily into debt under the régime of the Dawes Plan; and now it is feared that the reparations burden imposed by the Young Plan will involve Germany in even greater indebtedness, until finally her economic life completely collapses. Facts and figures cannot allay this anxiety, since the experiment of the Dawes Plan offers no criterion of what reparations payments Germany can make abroad yearly out of her own resources -- that is to say, without constantly accepting new foreign loans. Whether the Young Plan can be executed or not, whether it finally and completely solves the reparations problem or whether it will soon prove necessary to revise the agreement with a view to a new settlement -- these are questions which may perhaps be answered with one's feelings, but not with one's reason. The optimist will take a very different attitude toward them than will the foresighted skeptic.

In signing the Young Plan Germany is not unmindful of two conditions of the Plan which do not, it is true, expressly anticipate revision, but which offer the hope that they might lead to that result. One of these is the so-called political clause, the inclusion of which was effected by the German representatives in Paris. It states that, in spite of all efforts to reach an agreement on economic and financial grounds (as was established in the case of the Dawes Plan), political factors necessarily set certain limits within which an acceptable solution must be found; accordingly, the Plan rests not only on economic but to some extent on political considerations. How far this general reference to the political side of the Plan might be practically employed for purposes of revision, in case of necessity, remains to be seen.

The second clause of the Young Plan that is indicated as an opening for future revision is incorporated in the official statement of indebtedness of the German Reich regarding the payment of annuities. It reads as follows:

In case Germany should declare a postponement, or if, at any other time, the German Government should declare to the creditor Governments and to the Bank for International Settlements that they have come to the conclusion in good faith that Germany's exchange and economic life may be seriously endangered by the transfer in part or in full of the postponable portion of the annuities, the Bank for International Settlements shall convene the Special Advisory Committee mentioned in Part 8(e) of the Experts' Plan of June 7, 1929.

The Special Advisory Committee shall forthwith consider the circumstances and conditions from every standpoint, as provided in the New Plan, and shall indicate for consideration by the creditor Governments and the Bank what in their opinion are the measures that should be taken in regard to the application of the present Plan.

This is followed, it is true, by the statement that any recommendation of the Committee affecting the rights of the creditor Governments shall not be binding upon them until it has been accepted by the Powers which participated in the Geneva Decision of September 16, 1928, concerning the calling together of the Committee of Experts.

Opponents of the Young Plan in Germany have declared that these possibilities of later revision indicated by the experts at Paris have become illusory by reason of the so-called sanctions clause of The Hague Agreement. By "sanctions clause" is meant that provision in the appendix of The Hague Agreement dealing with the possibility that in the future some German Government might engage in actions indicating an intention to scrap the Young Plan. In that case, the Permanent Court of International Justice at The Hague is to consider whether the German Government has engaged in such actions; if it has done so, the creditor Powers shall, with Germany's consent, resume their complete freedom of action in order to insure the execution of Germany's obligations under the Young Plan.

Whatever we may think of this -- whether the sanctions clause has any place in The Hague Agreement, in view of the entire development of the reparations question since the Treaty of Versailles -- it is nevertheless clear to every reasonable, thinking person that it can be applied only in case of the deliberate rejection of the Young Plan by Germany, and it has nothing to do with the difficulties which may arise so long as Germany shows her willingness to execute the Plan faithfully.

Germany's interest in a possible subsequent revision of the Young Plan is all the greater because the much-talked-of transfer protection incorporated in the Dawes Plan has been abolished by the new settlement. As we know, the Dawes Plan obliged Germany to pay only in reichsmarks; it was the Reparation Agent's duty to receive the reichsmarks and, after having procured the necessary devisen, to transfer them to the creditor Powers. The Dawes Plan expressly provided that the transfer -- that is to say, the exchange of reichsmarks into foreign money -- should be made only in so far as this did not injure the German gold standard. If this danger arose, the reichsmarks taken from Germany were to be credited to the account of the Agent for Reparation Payments at the Reichsbank, and invested in Germany in a manner definitely prescribed. If 5 billions of reichsmarks were ever thus accumulated and there was no possibility of making the transfer, then the payments from the Reich budget and the railway tax were to be reduced until such time as transfers could be increased and the domestic accumulation cut down below the limit of 5 billions. In this way German exchange was to be protected from serious damage due to the pressure of the purchase of devisen for reparations.

As I have already said, this transfer protection of the Dawes Plan has hitherto never been put into operation, because the Agent for Reparation Payments could freely dispose of all the sums paid by Germany in reichsmarks without any danger to German exchange, owing to the steady offer of devisen which flowed into Germany from the rich stream of foreign loans. In accepting the Young Plan, Germany has renounced the protection which was provided for her in case of necessity by the Dawes Plan. Now the German Government must, in principle, pay the total yearly amount in monthly payments in foreign currency. But a difference has been made. One part of the annuity, to the amount of 612 million reichsmarks, must in all circumstances be paid unconditionally. And to this must be added the service of the 7 percent German Foreign Loan of 1924 -- the so-called Dawes Loan. For the remaining, and larger, portion of the annuity, the German Government can claim a delay of the transfer for two years at most. In that case the postponed payment must be made in reichsmarks to the Reichsbank account of the Bank for International Settlements until the transfer again becomes possible; or the amount can be employed, under special agreement, for deliveries in kind. After the lapse of a maximum of two years, the obligation to make payments of the postponed amount in foreign currency, to the full extent, again occurs. In case the transfer delay has already lasted a year, Germany is entitled to postpone for one year the payment in reichsmarks of 50 percent of the amount susceptible to postponement.

Therefore, contrary to the Dawes Plan régime, Germany is now solely and independently responsible for the payment of reparations in foreign currency. She no longer enjoys a permanent transfer protection, but can merely postpone the transfer of single annuities from time to time for a maximum of two years. The Young Plan rests on the assumption that in normal times Germany is able not only to pay the total annuity in reichsmarks but also to transfer it abroad. The moratorium that is granted applies only to cases of special necessity which may occur in the course of the further economic development of Germany. In such emergencies the help of the Bank for International Settlements shall be invoked. This organization, newly created under the Young Plan, is primarily designed to take over the entire system of reparations payments and to replace the organization destined for that purpose by the Dawes Plan. The Bank is further to encourage the coöperation of the large central banks and to create new opportunities for industrial and financial operations, in order that the transfer of reparations shall be facilitated as much as possible.

The fact that the transfer protection of the Dawes Plan is lost to Germany has furnished the opponents of the Young Plan in the various circles of German industry with their sharpest weapon. They declared that it was an irresponsible thing to surrender a guarantee the purpose of which was to protect German exchange from the dangers of an unusually large reparations burden, and to do this at a time when it was very doubtful (to say the least) whether German industry in the long run would be in a position to bear the burden of the new agreement. In answer to this it was widely contended that the transfer protection of the Dawes Plan had really been merely a pure theory of its inventor's, and that it could never have worked practically in accordance with the laws of economic development. Others, again, were quite willing to admit the great practical significance of the provisions in the Dawes Plan regarding the transfer, but they declared that the so-called transfer protection actually represented a serious danger for Germany, because at the moment when the Reparation Agent was compelled to suspend the transfer, lest German exchange be endangered, a general economic crisis would occur in Germany, and probably a political one as well.

The acceptance of the Young Plan has put an end to the debate as to the importance or unimportance of the transfer protection. For Germany was compelled to surrender the transfer protection if she desired to secure a reduction of the yearly burden which the Dawes Plan imposed upon her. The creditor Powers would have had no reason, from their point of view, to grant Germany any modification of their terms, if they in their turn had not secured this advantage: that, instead of the temporary and indefinite settlement of the Dawes Plan, a final and definite debt agreement had been reached, on the basis of which the regular payment of the reduced annuities seemed to be assured, as far as possible, over a period of time.

The Young Plan provides for a system of carefully calculated annuities rising in the course of thirty-seven years from 1.7 billion to a maximum of a little over 2.4 billion reichsmarks; during a further period of twenty-two years the annual payments fall from about 1.6 billion reichsmarks to some 900 millions. In The Hague Agreement Germany's yearly payments to the United States were deducted from these figures, as they were to be paid direct to the United States, according to the terms of a separate agreement between the two countries.

For the purposes of comparison with the figures of the Dawes Plan, the German payments to America must be added to the Young Plan figures, as must the payment of the amounts due for the service of the Dawes Loan (until completely amortized in the year 1949), as both these payments were included in the Dawes Plan. To the annuities of the Young Plan must be added the German payments to Belgium for the next thirty-seven years, in accordance with the agreement of July 13, 1929. Taking all these facts into account, it will be found that the reduction of the Young Plan annuities in comparison with the Dawes Plan annuities amounts to something less than 700 million reichsmarks yearly, during the first three years. But this does not take into account the so-called index of prosperity, which was introduced by the Dawes Plan; this provided for an increase in German reparations payments calculated according to definite factors in terms of the increasing development of German industry. The difference between the Young Plan annuities and the 2½ billion of the Dawes Plan gradually diminishes: after the lapse of ten years it amounts to some 400 million reichsmarks and after thirty-seven years to some 100 million. The financial relief which Germany receives under the Young Plan is of particular importance in the immediate future. For later years the comparison is of little value, as it is impossible to calculate what would have been the effect of the index of prosperity and the transfer protection under the Dawes Plan.

In addition to its financial advantages, the Young Plan provides the German people with achievements of great importance, especially in the field of national politics. Contrary to the wishes of Germany, the evacuation of the Rhineland was coupled with reparations. The result, however, has been that, in consequence of the acceptance of the Young Plan, the Rhineland is being freed of foreign troops five years before the date set by the Treaty of Versailles. By June 30, 1930, the last foreign soldier must have left German territory.

Further, the Young Plan eliminates the controls and guarantees created by the Dawes Plan for the payment of reparations. It restores the German Government's financial independence by abolishing the entire Dawes Plan organization for the supervision of German finances and by releasing the pledges which hitherto existed to insure the receipt of the reparations payments. Not only the Reparations Agent and the Transfer Committee, but also the foreign members of the Boards of the Reichsbank and the State Railways are eliminated. All powers conferred by the Treaty of Versailles upon the Reparation Commission in respect of Germany are rescinded. The German State Railway Company and German industry are released from the reparation bonds imposed upon them. Instead of the bond debt, however, the State Railways must for thirty-seven years pay the Bank for International Settlements a tax of 660 million reichsmarks per annum as their contribution to reparations.

On that portion of the Reich's income which was hitherto pledged (customs and consumers' tax), the creditor nations now retain only what is called a negative lien, which consists in the fact that the German Government has pledged itself not to mortgage this income for any other debt to the extent of 150 percent of the maximum yearly budget contribution to reparations, without the consent of the Bank for International Settlements.

On the other hand, the Young Plan leaves the guarantee for the 7 percent German Foreign Loan of 1924 -- the Dawes Loan -- completely undisturbed, as this is not a reparations debt but an agreement between the German Government and private creditors. The principle that, in cases of dispute, the decision should be left to an outside tribunal, was largely established by the Dawes Plan, whereas previously the creditor nations had repeatedly used forceful sanctions against Germany. In this respect, also, the Young Plan marks considerable progress, as it consistently applies the principle of decision by tribunal. All matters of dispute as to the legal or the practical application of the Young Plan which may arise between the participating governments and the International Bank will be finally settled by tribunal.

Whatever advantages must be conceded to the Young Plan as compared with the Dawes Plan, they cannot blind us to the fact that the new arrangement binds Germany for two generations to pay fixed annuities which German industry may or may not be able to bear. Responsibility for the decision to accept the Young Plan is not lessened by the mere hope that, despite the "complete and final settlement" which Germany has now signed, we may some day be able, should difficulties arise, again to meet the creditor Powers at the conference table and try to find a better settlement.

The more closely one examines the Young Plan, the more one is convinced that the creditor nations strove hard to evade any possible revision of the Young Plan by themselves and to leave direct negotiations so far as possible to Germany and the United States. Hence the distinction between the share of 612 million reichsmarks which must be paid in devisen, under all circumstances, unconditionally, and the share the transfer of which can be postponed for a certain time. The 612 million are destined to compensate for the war losses of the creditors; they must be commercialized and mobilized as quickly as possible, that is, bonds must be issued for them. This changes the political reparation debt into an ordinary financial debt of the German Government, hence into one not liable to any possible later revision. The postponable share of the annuities, however, corresponds, on the whole, to those amounts which the Allies have to recover on the basis of their various debt agreements with the United States, and it is particularly significant that the German payments during the last twenty-two years of the Young Plan almost exactly correspond in amount and extent to the Allied debt payments during the same years to the United States. It is remarkable that American experts effectively coöperated in the reparations settlement made in Paris on this basis, whereas the Government and people of the United States to this day maintain the principle that there is no connection between reparations and the Allied debts.

The intentions of the creditor nations, in the event of a revision of the Young Plan, are most clearly revealed in the separate agreement which their experts concluded in Paris on June 7, 1929, with the German representatives, and which was not signed by the American experts. This "concurrent memorandum," as confirmed by the governments at The Hague, provides that two-thirds of every reduction of the American claim on the Allies during the first thirty-seven years shall be passed on to Germany, while the total amount of any relief during the last twenty-two years will be credited to her. According to this, the creditor Powers have obviously left the prospect of any subsequent reduction of the reparations debt to the good will of the United States alone. They have even arranged matters so that, if there is any partial remission of their American debt during the first thirty-seven years, they retain a fourth part for themselves and give the balance of the original third to the Bank for International Settlements.

The German Government would be ill advised to order their policy as if the country's salvation depended in some degree upon a revision of the terms of the Young Plan. Germany has now accepted the Plan, and must use all her endeavors to carry it out. The question whether it will be possible for German industry to meet the yearly payments under the Young Plan regularly and to the full amount must make way for the fixed determination to do everything to make the new agreement as completely successful as possible. This requires not alone the energies of the entire working nation; above all it demands that public finances be handled in a way beyond criticism at home or abroad. Only if the budgets of the Reich, the provinces and the communes are consistently balanced, if all unnecessary public expenditure is avoided, and if the creative energy which lies in German industry is used to procure the necessary capital for Germany's needs -- only then shall we have a firm foundation upon which the German people can look forward with calm and certainty to the development of events under the Young Plan.

Confidence at home and confidence abroad are the foundation of German credit and industry. The ability to win that confidence lies exclusively in the hands of the German people. Under the bewildering influence of the uncertainty and the lack of self-dependence which weighed so heavily upon the German situation during the years of the Dawes Plan errors may have been made, especially in the administration of public finances. But the conflict over the Young Plan has now established the conviction that it is Germany's noblest task to bring the strictest order into her finances and to encourage the creation of private capital, in order that we may be at all times armed to meet the onerous demands of the future.