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In October 1929, the Wall Street Stockmarket, after weeks of panic finally settled down, ending fears of a stockmarket collapse. The international economy continued to recover after the pressures of the Great War and the world entered a new age of prosperity and stability.
Though blighted by occasional Fascist and Communist violence, Germany enters the thirties under a stable Grand coalition government. In 1932 the Liberal Parties combine, and 1934 sees the end of the Centre party, members joining existing parties. This leaves the German political scene dominated by Social Democrats, the Liberals, and to a lesser extent, the Conservatives. The country is more stable than in the previous decade, and consequently the economic situation improves and the Reparation payments become a mere nominal duty.
The Ramsey Macdonald government of late twenties undertakes social welfare reforms, with the introduction of universal healthcare in 1936.
The 1942 Corridor Crisis
In reward for Germany's strict observance of the Treaty of Versailles, Britain and France begins negotiations with the German government to repress some of their grievences. There was also an element of appeasement in this action. Despite restrictions of the treaty, Germany had been expanding its military in the Russian steppe under provision of a secret treaty. By giving in to some German demands, Britain and France hoped to bring German military expansion into the open and thereby making it easier to monitor.
Though Germany had accepted its Western borders with the Locarno treaties, it had never accepted it eastern borders. Its main grievence was with the Polish corridor, as this cut off East Prussia, and with Danzig, administered by the League of Nations. In attempt to quiet German demands for a land bridge between its two territories. Plebiscites were held in Danzig and the Lituanian territory of Memel, both of which had been German before the war. Both Plebiscites were won by safe margins, and the territories were integrated easily.
However, this did not end German demands for the Polish corridor. The issue was important in the 1941 Reichstag election, Which ended up with the assertive Conservative holding the balance of power with 22% of the seats. The Liberal Party, which had been in power since 1931, suffered its worst electoral result in over a decade with 46%. The party was split between forming a coalition with the Conservatives. The right wing of the party, holding 25% of the Reichstag seats, formed a government with the Conservatives and other minor right-wing parties, including the small Anti-Semitic National Socialist Party, lead by Adolf Hitler, a man whose only claim to fame had been a failed Putsch in 1923. This new coalition, known as the 'Nationalist Coalition', pursued a deliberately atagonistic policy towards Poland, stationing troops on both sides of the Polish Corridor. In attempt to prevent war, British Prime Minister, Neville Chamberlain, suggested a meeting of himself, the French Prime Minister, the German Chancellor and the Polish Prime Minister, which was hosted at Munich. The situation was resolved by the creating of a special territorial zone between the two halves of the German Reich. This STZ was still Polish territory, though its regional government was given a great deal of autonomy and had its actions supervised by a council of five representatives of the German government and five of the Polish government, and chaired by a League of Nations representative. Prime Minister Chamberlain returned clutching a piece of paper and declared 'peace in our time'. (In this time line it actually proves true.)