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If Germany wants Greece to pay its debts, maybe Germany should pay Greece the reparations for World War II it owes the country.

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  • Lee Rudolph

    Brilliant. Simply brilliant.

    • Not only is it a brilliant move by the Greeks it looks like a great solution overall. It provides cover for a German bailout which fixes Greece and stabilizes the political side of the euro (for a while). It injects some stimulus where it’s needed. It’s awesome.

      • IM

        awesomely idiotic, perhaps. That may play for a day in Greece but will at best laughed at in Germany, if it doesn’t inflame public opinion.

        Also: If reparations are right and proper, couldn’t you use the same argument against Italy?

        • J. Otto Pohl

          Even more on point why shouldn’t most African debt to the US and Europe also not be eliminated as reparations for centuries of the slave trade and colonialism?

          • Lee Rudolph

            Sounds good to me.

            • Me too! That’d be less than what’s merited but would be better than nothing.

              Politically I think it’s (even) harder because 1) there’s no specific agreement already in place that can be activated, 2) it doesn’t provide any direct benefits to the contributing parties, and 3) I imagine some racism would kick in in a variety of ways.

              But too bad :(

        • awesomely idiotic, perhaps.

          Is the reparation debt not legitimate? (Well, naturally, opinions vary.)

          But who cares? The political problem is how to effect a fiscal transfer at least in the form of debt relief without a unified fiscal policy. This does it. It also avoids whinging about moral hazard since it’s not a bail out.

          What it doesn’t do, of course, is keep a stick on Greece.

          • IM

            what debt? there is no debt. three at best unspecified claims, And now, as I hinted at with my degression to Italy that is not a mechanism and would not be a good mechanism.

  • efgoldman

    I’ll gladly pay you tomorrow for a souvlaki today.

    • Lee Rudolph

      A working-class gyro is something to be.

      • Manju


      • Warren Terra


      • Mike G

        Oh, this is fun!

        Billy Don’t Be A Gyro
        We Don’t Need Another Gyro
        Juke Box Gyro
        Holding Out for a Gyro

        “We can eat gyros — just for one day” David Bowie

        • Warren Terra

          Shawarma, huh! What is it good for?

          • efgoldman

            Ouzo very, very nice!

        • wjts
        • Warren Terra

          Remember the golden rule: the man with the dolmathes the rules.

      • Manju

        John the Orthodox after torturing a thief
        Looks up at his gyro, the Commander-in-Chief
        Saying, “Tell me great gyro, but please make it beef
        Is there a hole for me to get sick in?”

  • howard

    what’s really pathetic about the german posture here is that it’s german banks that germany cares about, but it’s afraid to just straightforwardly bail them out for making stupid loans.

    so instead it routes the money through greece and pounds on it so that no one pays attention to what’s really happening.

    of course the greeks don’t like this game, nor should they.

    unfortunately, the real mistake for greece was joining the euro in the first place, but since germany has made it clear that as far as it’s concerned, the euro implied no collective responsibility (which makes one wonder what the frickin’ point of the euro was in the first place, and some of us noted at the time that a unified currency without a unified government was a recipe for disaster), i continue to think the best bet for greece is to leave the euro.

    yes, it will be a disaster for a while but at least it will be a disaster with some hope for the future, rather than the endless suffering the germans think is so good for other people’s character.

    • Ken

      Who/what controls the euro supply? Specifically, what keeps Greece from minting a trillion-euro coin and paying off its debt with it?

      • Scotius

        The European Central Bank controls the money supply. All countries joining the Euro surrendered their currency sovereignty so to speak.

        • howard

          which is what makes england’s policy choices so astonishing: they were smart enough not to join the euro, and yet they have acted, since the crisis hit, as though they are in the euro.

          that the tories would take an austerity approach is no surprise, but that labour has gone along?

          • Murc

            that the tories would take an austerity approach is no surprise, but that labour has gone along?

            Labour is out of power. They have no real choice but to go along.

            That said, this is Tony Blair’s New Labour we’re talking about here. They aren’t really what you’d call an enemy of the capital classes.

            • sibusisodan

              Plus Labour struggles under a double whammy of reputational issues.

              First, they were in government when the financial crisis hit, which in political theatre terms makes it ‘their fault’.

              Second, the Tories have a de facto reputation of economic competence. Labour has the opposite: frivolous tax n spenders (never mind the facts right now – Simon Wren Lewis has some good posts on how the facts might point the other way…).

              So if its important for Labour to appear to be an electable alternative, unfortunately they don’t have much room for manoeuvre. Alas.

          • Sly

            which is what makes england’s policy choices so astonishing: they were smart enough not to join the euro, and yet they have acted, since the crisis hit, as though they are in the euro.

            Even if it isn’t part of the monetary union, many of the debtors of the UK’s banks are. So the UK government has a choice; either bail out their own banks in full, thus incurring additional ire from the people who keep you in office, or mitigate that ire by putting the burden on someone outside the political system.

            This is why “a unified currency without a unified government was a recipe for disaster” is so salient.

            I think its helpful to think of it this way: imagine the United States was still operating under the Articles of Confederation, but had a national currency and a Federal Reserve Bank that held sway everywhere except the state of Illinois. A nationwide financial crisis hits. How do state governments in New York, Pennsylvania, Massachusetts, California, and Illinois (the states with the five largest financial centers) react? Probably by demanding debt repayment and austerity in other states, and that includes Illinois because they’re essentially in the same boat as the other four.

            That doesn’t happen in reality because we have something called the United States Congress. While its true that the people of Mississippi and Florida and Minnesota and New Hampshire are still paying off bankers in the major financial centers through bailouts and engaging in austerity at the state level, Congress can do stuff like ARRA and Dodd-Frank to mitigate some of it, and politicians in the financial center states cannot unilaterally impose one-sided policy changes in other parts of the country.

            • shah8

              Wait just a minute now. That actually happened. Virginia being all nastiminded and Massachusetts being under a debt mountain for reasons not its fault. It was indeed a big reason for the failure of the Articles of Confederation.

          • Labour policy, under Gordon Brown during the early part of the crisis, up to the elections in 2010 was actually surprisingly sensible: no austerity, stay the course which meant that under Brown the UK economy was recovering from the crisis.

            It only really got into trouble when the ConDems started austerity.

    • Morat

      I would say that default and exit is the best of the remaining realistic options. It would be awful, but then it would be over within a couple of years, with a return to growth. The current troika plan is slightly less bad year-to-year, but they apparently want it to continue for another decade, with no plausible path back to growth and/or sustainable debt levels. And yeah, “not being able to borrow money” is bad, but it is less bad than “only being able to “borrow” money that immediately flows out to foreign banks along with several percent of GDP”.

      It would be better to have the EU reform itself so that Greece could function within it, but it’s clear that the insane ideology that Germany has swallowed has rendered that impossible.

    • MacK

      It’s a bit worse yet. Merkel talks a good game about how the banks won’t be bailed out the next time – but in the here and now the banks that are in the most trouble are the German Landesbanks, who many in Europe think are cooking their books to show less loan impairment than the reality. The boards of those banks are stuffed full of CDU and SDP politicians – particularly CDU. The political fallout were there to be an admission of the foolish lending and the concealment that has gone on would be huge.

  • shah8

    /me still sour…

    The real issue is that the Euro economic policymakers has to make an appropriately expansionary policy. No ifs, ands, or buts. Somehow.

    Tsiripas’ goal is NOT the elimination of debt. It’s the elimination of contingency and the removal of Troika “governance”. To put a further spin on it, Tsiripas is going to insist that the risk of policy failure be *shared* between the government of Greece and the Euro authorities. It doesn’t matter if there is still is a resulting huge debt pile that’s still “unpayable” so long as there is a “final workout”. Of course the debt will still be unpayable, but the creditors starts assuming losses.

    The Euros do not want to do this because being an actual responsible agency essentially means that they can’t socialize any more private banking losses on government balance sheets that presumably going forward will be better protected from such shenanigans (because lots and lots of citizens are upset at the crowding out of essential services and functions, and are motivated to hold authority to account, now).

    Which means Brussels has some serious issues wrt to the consequences of having to inflate away debt (or writing it down) and handle the necessary-for-recovery fiscal expansion on top of that. I don’t know what really follows. I just know that these guys are the equivalent of war criminals, and trying them in court is entirely justified if it could be done. Post-2008 policy was an utter and criminal disgrace.

    • catclub

      It’s the elimination of contingency and the removal of Troika “governance”.

      Essentially this is ‘extend and pretend’. And usually, it is the debtor who wants to keep doing this. But now Skirpas explicitly does not want it because he knows it means years of austerity with no possible end in sight. Pain now is better because it cannot get much worse than 28% unemployment. Who cares in that condition if there is a run on the banks on Grexit.

  • cpinva

    I’m guessing that with interest, the german war debt is at least a trillion plus. if this guy really had balls, he’d order his treasury dept. (or whatever the hell it is in Greece) to do a journal entry on the country’s books offsetting the war debt (plus interest) against whatever debts the german banks are owed. take it to the bankers, and tell them to go to their gov’t if they wish to get paid. my guess is that those same banks (or their predecessors) collectively benefited from the rape & pillage of Greece during WWII, and I’d bet money there’s written evidence of it.

    now, those banks could, in theory, sue the greek gov’t at the world court, but I’m guessing once those WWII documents were shown to them, they wouldn’t, they’d just eat the loans, or bitch to angela merkel about them.

    • Mrs Tilton

      That wouldn’t work very well because, by this point, Greece owes virtually nothing to the German banks. German financial institutions have a aggregate of less than EUR 200MM in Greek sovereign debt on their balance sheets — pocket change. The banks don’t need to sue Greece at the world court (?) or anywhere else.

      Greece owes many metric shit-tons of money to the ECB and somewhat fewer metric shit-tons to the IMF. Merkel did not bail out the Greeks; she bailed out Germany’s banks by having these international institutions buy the banks’ Greek positions. If Greece (say) unilaterally imposes a 90% haircut, or repudiates outright, she will be left needing to explain to the electorate why she gave all their money to the shareholders of Deutsche Bank and now cannot replace it. This could, possibly, go some way to explaining the German government’s increasingly hysterical posturing.

      Tsipras actually enjoys a pretty significant amount of leverage.

      • cpinva

        got ya. I misunderstood who owed who how much. still, he could do the same JE, only the debits would now be the ECB & IMF, with the german gov’t being the offsetting credit.

      • MacK

        It was not just DB – bigger was the Landesbanks, many of whom cooked the books quite a lot – and they are stuffed with CDU pols.

        • IM

          That was a very good argument back in 1998.

          Regarding the second world war something, something argument: That helps with 29% of the debt and another 19% if you use the same argument on Italy. And what then?

  • Zamfir

    Does the WW2 stuff really add anything to the situation? Does anyone think that Greece is treated unfairly because Germany once occupied it, but otherwise everything is OK?

    No argues that Italy should be treated extra harsh by the ECB because of its axis history. Or that France or Poland should run up large debts at the ECB, to be annulled because of the war. Etc.

    There is a serious case to argue that Germany or Western Germany got away too easily from the war. Perhaps even that the current Germany should make very large financial contributions to the countries it once occupied.

    I just don’t see how such an argument would ever lead to the specific outcome that right now, the ECB should treat Greece differently then it would without the war history.

  • Jean-Michel

    This is kind of a terrible article that leaves out most of the historical context, including the U.S. role in all this. The entire reason Germany can claim to owe no reparations to Greece is because Article 5 of the London Debt Agreement (which the U.S. effectively imposed on Europe, with some help from the UK) put off all questions of reparations until a “final settlement.” Germany claims that the 1990 Two-Plus-Four Treaty was this final settlement (its formal name was after all the “Treaty on the Final Settlement with Respect to Germany”) and that the fact it makes no mention of reparations means that none are owed. This was again down largely to the U.S., which wanted a unified Germany in NATO ASAP and didn’t want things getting bogged down in negotiations over reparations. Germany’s reasoning appears to have cut sufficient legal ice and the new Greek government (contrary to what the article here claims) is really focused on Greece’s wartime debt, which could be regarded as “normal” debt outside the supposedly “settled” reparations issue. German economist Albrecht Ritschl (who has been very sympathetic to the Greek position) gave an excellent interview on this whole can of worms, which can be read here.

  • Zamfir

    @Jean Michel, that’s indeed a good interview, thanks.

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