Executive Intelligence Review


Look to Debt Conference of 1953 for ‘How to Handle the Greek Debt’

July 7, 2015 (EIRNS)—A financial column in today’s Washington Post by Chico Harlan quotes extensively from a recent interview in the German Die Zeit by well-known French economist Thomas Piketty in which he suggests that “when it comes to how to handle Greece in 2015,” the best answer is the 1953 debt reduction for Germany.

The author notes that some “prominent economists” are concerned about Germany’s hardline on the Greek crisis, and says:

“But in the interview with Die Zeit, Thomas Piketty went even farther, saying that the Germans are only in the strong economic position they are today because they benefited from the forgiveness of their neighbors after World War II.

“It was in the 1950s, [Piketty] notes, that Germany benefited from a massive—and, in those days, surprisingly common—round of debt forgiveness that catapulted its rise into a peaceful economic power. Greece was one of the nations forgiving Germany’s debts. In other words, Piketty suggested, when it comes to how to handle Greece in 2015, the best argument against Germany might be...Germany, circa 1953.

“’We cannot demand that new generations must pay for decades for the mistakes of their parents,’ Piketty says to Die Zeit, and ’the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s. We need to look ahead. Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.”’

Harlan emphasizes the importance of the recent IMF report that says that Greece must have further relief measures, “And such measures are exactly what Greece is asking for,” he writes.

And there is a precedent.

“In recounting the history of debt forgiveness in the Die Zeit interview,” says Harlan,

“Piketty is referring to the period after World War II when Germany, or more specifically West Germany, was a defeated nation struggling to find its role in the world.

“When a new government was created to replace the German Reich, it inherited a mess. The West Germans still owed reparations from World War I. They needed epic loans to fund reconstruction .... Bonn owed money to the U.S. and much of Europe including Spain, France, and yes, Greece.

“Then, those countries gathered in London in 1953 for a debt summit. Archived accounts suggest that the creditor nations seemed to believe they were helping to serve the broader goal of a stable Europe by giving West Germany far easier terms. The formal agreement that came from the summit said debts were being partially forgiven in order to help Germany make a contribution to the development of a prosperous community of nations.

“The creditor nations waved goodbye to roughly 50 percent of what they were owed,”

Harlan concludes.

In the weeks before the July 5 referendum, Piketty was actively giving interviews in support of the “No” vote.

See EIR article: Convene a Euroopean Debt Conference for 2015

Subscribe to EIR