The Dawes Plan (1924) had attempted to deal with the massive inflation and large-scale unemployment in Germany that had been caused by reparations ordered as part of the Treaty of Versailles. Although initially a success the Wall Street Crash created new problems for the German economy. In 1929 the Allied Reparations Committee asked an American banker, Owen D. Young, to investigate the situation.

Young's report suggested that the total amount of reparations should be reduced by about three-quarters and that Germany should make annual payments on a sliding-scale up to 1988. The Young Plan was accepted by all the governments concerned but it was severely criticized in Germany by right-wing politicians such as politicians like Adolf Hitler and Alfred Hugenberg. The President of the Reichsbank, Hjalmar Schacht, also disagreed with the plan and resigned from office.

Unemployment continued to grow in Germany and in 1931 it was decided to suspend all payments of reparations. The following year a conference of creditors at Lausanne cancelled reparations. By this time Germany had only paid one eighth of the sum originally demanded.