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SYRIZA new ruling party of Greece, is an attractive argument for writing off Greek debt wasn t Germany, now the biggest opponent of the debt relief, itself the recipient of unprecedented largesse in 1953, however, when , external debt has been reduced by half attractive, doesn t mean convince Parallels between Greece and Germany in 1953 today are sheer demagogy.
The Federal Republic of Germany with creditors - 20 countries, including Greece - indeed agreed at a conference in London to write 55 percent of the 32 3 billion DM of the external debt of the country More than 50 percent of Greek debt needs to be written off, says top economist John SYRIZA Milios the solution that was given to Germany at the London conference in 1953 is what we must do to Greece.
Milios went to college in Germany; He has a doctorate from the University of Osnabrueck in Lower Saxony He knows reminding Germans of their 20th century history and appealing to their conscience can be effective, the devil is in the details, though.
About half of the total German debt discussed at the London conference - Jan. 16 billion Deutschmarks - came before World War II Some of them had arisen unpaid reparations to the victors of the First World War Requirements unbearably high on the German economy had helped the Nazis, who had promised to do away with the repairs, the conquest of power yet Konrad Adenauer, first Chancellor of post-war Germany, had acknowledged the debt in 1951 as part of an effort to transform Germany from a ruined state defaulters in a responsible member of the economic system of the western world.
It was a goodwill move Much of the debt was issued in currency later lost most of their value and interest of the years between the wars was difficult to calculate So when Adenauer took bonds acceptable conversion rate for creditors, it was recognized at the outset that Germany would not be required to pay the full bill that would emerge from a purely technical calculation of debt, Timothy Guinnane Yale wrote in 2004 in the document the most authoritative to date on the loan forgiveness 1953.
As for the post-war debt, here's what Frankfurt is present financial center of Germany and the seat of the European Central Bank, like in 1953.
There are ruins in central Athens, too, but they are a little older.
Germany needed a lot of money to restore the infrastructure and housing destroyed by the war in some German cities, there is no pre-war buildings left outside those painstakingly restored in the past 70 years, however, after Germany was divided in two by the allies in World war II, 10 million refugees in the eastern part controlled by the Soviet country - almost as many as there Greece has today - west flooded, creating a humanitarian disaster of enormous magnitude.
Germany had brought upon himself, of course, but it was no longer ruled by the Nazis he was doing his best to atone for his past work that continues and defines the consensual nature, value-based management German European creditors have now estimated that they needed to help this effort.
The circumstances in which Greece drew its debt are very different After the restoration of democracy in 1974 after seven years of military rule, the Greek government splurged on a full range of socialist benefits, including higher pensions and health care accessible to all, as well as a big government he supported a railway which had more staff than passengers; even before the military coup, he began to pay the salaries of Orthodox priests, and he does it again, but there was a pay cut after international creditors demanded for three decades, Greece has accumulated unsustainable budget deficits, borrowed to cover - and lied about them to Eurostat so that it can join the euro in 2001.
There is a not so subtle difference between taking on debt voluntarily made by previous, rogue governments at an exchange rate favorable to creditors - and recklessly accumulated debts of s own while concealing the true size of the deficits budget In the first case, the implication is the self-imposed discipline and severe penances In the second case, prodigality.
It could even be argued that if Germany deserved a second chance after all he has done in Europe, then surely Greece should be granted.
It's technical answer to that as Guinanne wrote, The people of some countries are now working to repay international debts incurred by previous governments that they have not elected or want Often the debt was used either to provide a luxurious lifestyle for some corrupt, or pay for the suppression of the mass of the population, however, according to the rules of the international financial system, the locals are still responsible for the debt or risk losing access the international credit markets.
There is, however, a stronger reason why it would be wrong to write off Greek debt as the country is led by Syriza.
In 1953, the countries of the Eastern bloc were absent from London speaks Soviet puppet state, the German Democratic Republic, does not shoulder all of the former German debt in 1953, workers were riots in the east, and Soviet tanks were called in to quell the unrest, so that the RDA does not need additional economic burden after Germany reunified in 1990, he had to pay part of the part of the east of the debt under the London agreement.
Part of the reason why West Germany was granted debt relief lay in the importance of the Federal Republic as a Western bulwark in the fight against communism As Jurgen Kaiser wrote in a paper for Friedrich Ebert last year.
In the case of Germany, it is the time of the cold war and competition system between the West on one side and the Soviet Union and its allies on the other there was a lot of interest from key creditors, the United States and to a lesser extent in the UK, in stabilizing the country, both politically and economically as quickly as possible.
The West German governments that have benefited from debt relief were resolutely anti-communist and anti-Marxist CDU, now the party of Chancellor Angela Merkel, ran West Germany for the first two decades of its existence, it was economically less liberal than it is now, and it has built a state of well-being considerably over the years, but it was still a center-right, capitalist force that believes that only private initiative could lead to prosperity more or less universal.
The far-left political forces were out of the process in London in 1953; Now they were in the GDR, far left SYRIZA wants to be inside, with plans to nationalize the banks and utilities and expensive promises to voters will use the debt relief to provide free electricity to households, subsidize rents, restoration Christmas bonuses to pensioners, increase minimum wages - that is, to return to the practices that led to the accumulation of debt in Greece is an extreme case of moral hazard, governments German postwar conscientiously avoided.
Of course, there are political arguments for the relief of the Greek debt, as there was in the case of Germany there are 62 European leaders fear that Greece could leave the eurozone and trigger disintegration it may be cheaper to cancel part of the debt of such disastrous consequences of tighter Then take, however, the problem should be framed in such clear terms the creditors of Greece would pay ransom to his government far left it doesn t mess the common currency, that Greece had no business adoption in the first place.
If that is the case, we should parallel with the 1953 London Conference spared There were more noble goals, and Germany was much better placed to put the generosity of creditors wisely that Greece's SYRIZA.
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To contact the writer on this story Leonid Bershidsky.
To contact the editor on this story at Cameron Abadi.
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