Don't Mention the War

It's always risky to stray from one's area of expertise but one consequence of spending a lot of time surfing the internet in order to compile the blog is the temptation to go down other fascinating avenues. This morning's blog is not about probation at all, but if there's any tenuous link that can be claimed it's to do with my increasing exasperation with mainstream media and the economic and political orthodoxy we're continually being fed. 

It's the subject of Greece and their general election being held tomorrow that's temporarily taken my eye off the increasingly depressing probation ball. We're told it's highly likely that a left-wing government will be elected by a people utterly fed up with having to endure the enforced austerity imposed on them by a German-led Troika. It seems they are minded to default on the huge bail-out loans made to them in the wake of the international monetary crisis, thus putting the future of the Eurozone in jeopardy. 

The orthodox view seems to be that the Greeks have brought all this woe upon themselves for being very naughty for a number of years, squandering vast amounts of government money on jobs for the boys and girls, excessive pensions and lax tax collection. I'm sure this is all very true, but it's not the whole truth. What can possibly be behind the fast-growing and ugly hate of Angela Merkel and the German nation? The answer is unfinished business from the Second World War and the thorny issue of reparations.

I must admit I had not appreciated that one consequence of the Berlin wall coming down and German reunification was that claims for war reparation would resurface, including something I was completely unaware of, enforced interest-free loans. Some say this is all in the past and was sorted out. Others say the Greeks have a case. This from the Huffington Post in 2013:-

The claims have been written off by the London Agreement of 1953. 

Article 5, paragraph 2, of the London Agreement of 1953 states:
"Consideration of claims arising out of the second World War by countries which were at war or were occupied by Germany during the war, and by nationals of such countries, against the Reich and agencies of the Reich, including costs of German occupation. ... shall be deferred until the final settlement of the problem of reparation."      

Thus, the obligation of Germany to pay reparations was not written off by the London Agreement of 1953.

No claims can be made so many years after the end of the war.

Greece has demanded payment of the war reparations, awarded by the Paris Conference of 1946, as well as of a forced occupation loan, in 1945, 1946, 1947, 1964, 1965, 1966, 1974, 1987, and 1995. At the London Conference of 1953, Germany sought and succeeded to defer payments. It was successfully argued that the German government should not have to assume the obligation for the entire debt since it represented only West Germany, and settlement of claims was postponed until Germany would be reunited.

Germany was unified in 1990 with an agreement between Germany, the USSR, Great Britain, the USA and France. On July 23, 1990, the German magazine Der Spiegel wrote that with this Agreement, Germany avoided the nightmare of a peace agreement, which would have brought to the fore demands of reparations from all directions. In other words, with this Agreement Germany sought to circumnavigate article 5, paragraph 2 of the London Agreement.

Today's Germans cannot be held responsible for reparations.

The demand of Greece for payment has been made continuously from the end of the war up to date, to the generation responsible for the crimes and to their children. It is the Germans that requested and succeeded, with the London Agreement of 1953, to postpone payment of their obligations, and transfer them to their children and grandchildren. These children and grandchildren benefited greatly from the deferral of payments. Germany's affluence today is greatly due to the fact that Greece and other countries accepted to defer payment of reparations, and to give the opportunity to the Germans that committed the crimes to rebuild and build a better future for their children, while the Greeks had to build on the ruins left behind by the German war machinery after a brutal and completely unprovoked war.

Concerning the matter of the forced loan, here's an article from Forbes in 2012:-

Another legal issue that has surfaced concerns the 476 million reichsmarks lent against its will to Germany by the Greek National Bank during the war. If this were to be considered a form of war damage, then in principle it would be subject to reparation — except that according to the 1990 treaty, Germany would not have to pay it. If the money were, however, to be considered a normal credit, then Greece would be entitled to get the money back.

Without interest, the amount in today’s money would amount to $14 billion. With interest at 3% over 66 years, that would come to at least $95 billion. The problem is this: even partial recognition of such a debt would create a precedent that could bring untold claims in its wake.

But as you can see, even that is problematic. There’s rather a Catch-22 situation there. If they can show that the money was stolen then it doesn’t have to be paid back. If it’s a normal credit then, well, inflation of a zero interest loan has been such that Germany could pay it all back tomorrow without breaking a sweat and without improving the Greek situation more than only the tiniest amount. That’s a tough needle to thread in a legal sense: proving that it was a simple commercial transaction but then arguing that it was under duress which is why no interest was charged.

I'll end this digression with an excellent article from the Guardian in 2013 that makes a case that Germany's debts were effectively settled by the United States and the Marshall Plan, but a moral debt probably remains:-

In one sense Athens is right to point out that Berlin is hypocritical when it accuses indebted eurozone countries of reckless behaviour. Germany was an aggressor in two world wars and failed to pay the debts it incurred. During the second world war it forced countries such as Greece to hand over huge sums in the form of 0% loans that were not repaid.

Greece was ordered to pay $528m by Adolf Hitler. It was not just a huge sum – equivalent to $7.1bn now – it weakened the currency and, according to Apostolos Vetsopoulos, in his 2002 doctoral thesis for University College London, "aggravated inflation in the Greek economy because the Bank of Greece was forced to issue inflationary notes to cover these extraordinary expenses". Avramopoulos has applied compound interest to this sum to reach $54bn.

The trouble with the Greek stance is that by the end of the war Germany was broke and in huge debt. It was not only unable to pay outstanding loans, but also unable to pay the reparations many countries wanted to cover the cost of all the damage wreaked by the Wehrmacht.

France wanted reparations and so did the Benelux countries. So did Britain. They got their money, though not from Germany. Their recompense came from the US, which had come to the conclusion that punishing Germany, Japan and all the Axis nations would trigger a return to fascism. So it stepped in with large sums of cash from 1945 onwards, which in 1947 turned into the Marshall plan. Like most of Europe, Greece was a beneficiary of the Marshall plan. The sums were so large they replaced the money due from Germany and more. In effect, Washington paid Berlin's debt.

Vetsopoulos points out that much of the problem for Greece then, and it is probably true today, is that the money was wasted. First, Greece descended into civil war after 1945 when other countries were busy rebuilding. From 1947, when things settled down, the corruption in public life and schlerotic business sector meant much of the money went unspent, at least not on investment to re-tool a largely agricultural economy.

So the point is that no one extracted any money from the Germans after the war. Almost all its debts were forgiven, first at an international conference in 1953 and then in 1989, when Helmut Kohl said he could not possibly absorb East Germany and pay second world war debts.

And there is another twist. If the Greeks refuse to relinquish their 70-year-old claim, they should also approach the Italian government for unpaid loans. As Germany's Axis partner, Rome was a beneficiary of the same deal, and Benito Mussolini's soldiers helped destroy much of Athens.

In the end, the lesson both sides need to learn is humility, because both are wrong. But that said, Germany should revise its position on eurozone debt. It must recognise the hypocrisy of its current stance and, more importantly, the dire consequences of making it stick. The Americans were wise when it came to German debts, it is time Germany adopted the same stance.

Regular readers might recall that last year I took time out from the blog in order to spend a week exploring Berlin, a great city. Being fascinated by modern history, it raised a number of strong emotions visiting the site of the wall, the Holocaust Memorial, Jewish Museum and Templehoff, but strangely I felt most ill-at-ease by the vast regeneration projects that are in-train, all signs of a vibrant, flourishing economy. 

No sign of austerity here I thought, but instead a very uncomfortable feeling that what Albert Speer had failed to achieve was perhaps taking shape? These are not good thoughts and it's worrying to hear of anti-German feeling evident in Greece. I can't help agreeing with the Guardian article that a bit of humility right now would be a jolly good thing.... 

I promise normal service will resume shortly and I hope readers will forgive this temporary digression, but I can't help feeling there are valuable lessons to be learnt here; that there's very few absolute truths; that it's always sensible to understand the history of something before judging the current situation and above all else, the wisdom of questioning everything.