|Why should Germany be kinder to the PIGS countries? About Germany’s bankruptcies
The current European debt crisis can be viewed more as a chance to express true devotion to Europe through financial “generosity” than as a historic opportunity to dust off old plans for German hegemony in Europe. The renowned economist Albrecht Ritschl at the London School of Economics argues that Germany has gone bankrupt more times than any other country in the world over the last hundred years and warns that the mood across Europe could turn against it if the German government fails to keep the monetary crisis in check.
Although the Germans are susceptible in this regard and have perennially viewed their country as a victim of post-war reparations, there is no sound basis for Germany’s know-all attitude or its stance of “you’ll only get the money if you do as we say”. In the twentieth century, Germany underwent what were probably the biggest bankruptcies in modern human history. Its status as Europe’s teacher and its financial stability are thanks only to the USA, which waived reparations after both the First and Second World Wars. This fact is, alas, all too easily overlooked.
First there was the Weimar Republic (1924-1929), which survived on money borrowed from the USA to pay World War I reparations. The 1931 global crisis led to the collapse of this pyramid scheme of loans, generating phenomenal losses for American banks and setting in train a disaster for the entire global economy. The 110 billion euros owed by Greece look like pocket change by comparison with the 1931 crisis, if one estimates the losses suffered by American banks due to Germany’s insolvency as being on a par with those caused by the 2008 financial crisis.
Secondly, in the aftermath of World War II, the USA was careful to avoid claims for reparations being made against Germany. With few exceptions (compensation for Holocaust victims), all claims were deferred until such time as German reunification came about. This decision, which was adopted at the London Conference in 1953, was vital for Germany as it paved the financial way for the country’s economic miracle. At the same time, the victims of German occupation in Europe, including Greece, had to relinquish their claims for compensation against Germany, and in 1947, Romania had to write off the trading debts owed to it.
Fortunately, however, due to an error in the wording of the Paris Peace Treaty, Romania’s waiving of these debts is void and the matter is still of current interest. Economic growth was naturally made more difficult for these countries by the fact that they had to pay war reparations, and Romania also had to pay compensation to the Soviet Union.
The international community regards Germany as a byword for stability even though it went bankrupt three times during the last century. After the Weimar Republic went bust in the 1930s, in 1953 Germany was exempted from all claims for reparations, compensation for clearing deficits and also debts that the Reich had run up before and during the war. Its most recent bankruptcy occurred in 1990, when Chancellor Helmut Kohl refused to implement the London Agreement of 1953, thereby exempting Germany once again from having to pay hundreds of billions. Initially, it was agreed that Germany would pay reparations and compensation for clearing accounts in connection with World War II in the event of reunification.
In 1990, Germany merely pledged to pay small residual amounts stemming from obligations of the Weimar Republic. Since 1990 it has not paid any reparations, except compensation for forced labour, and it has not reimbursed loans squeezed by virtue of clearing arrangements out of the countries it occupied or the cost of military occupation, to either Greece or Romania. Just as it was in Germany’s case in the 1950s, it is wishful thinking to believe that the Greeks will ever pay off their debts without external support. Germany’s export industry has profited immensely from orders from the margins of Europe.
Let us not forget that after Germany started two world wars in the twentieth century, its erstwhile enemies later wrote off its debts to an extremely generous extent, enabling it to relaunch its economy and prosper. The anti-Greek feeling that is currently rife within the German media is extremely dangerous. Even if Germany has forgotten the fact, the Greeks and others have not yet forgotten that Germany’s post-war success was also made possible by the munificence of other nations. If the mood in Greece or other European states worsens, we can expect old claims for war reparations and compensation for clearing accounts to resurface. As Professor Alfred Ritschl underlines, the rescue of Greece is a convenient solution when considered alongside the amounts that Germany would have to stump up if other European countries called in their unpaid post-war debts. There is a danger that this will happen if Germany continues to kick up a fuss and acts as Europe’s teacher.
What Europe needs is not a wise teacher who constantly wags the finger and lectures an entire continent about “austerity”, but rather a unit based on the principle of self-determination of nations and sovereignty of states. But where does this “teacher attitude” come from, and what is its rationale? In a memo sent to Emperor Wilhelm II in 1918, Chancellor Maximilian of Baden explained how Germany should go about achieving its goals in Europe: “Such extraordinary force as we have displayed in this war, if it is to be endured, must be justified in the world from an ethical point of view… Consequently, in achieving our aims, we must also pursue goals common to all of humanity, because to colonize is to be a missionary.”
Klaus Kinkel, a former German foreign minister, remarked in an interview with Frankfurter Allgemeine Zeitung (19/3/1993) that in its imminent eastward expansion, Germany had reached the point at which it had twice stopped previously. It seems that history-writers are not yet so advanced that they regard two world wars as an attempt to bring about European integration. Kinkel’s suggestion about Germany’s role in Europe – on account of not only its central geographic location, but also its language and culture – resembles the recommendations of Werner Daitz as discussed in my last article (Historic continuity: European economic government).
The discovery of a role that dovetails with Germany’s aspirations and potential, as the former German foreign minister underlined, is impressive proof of Germany’s recurring ambitions. I do not believe that Prussia’s 19th-century recipe for the unification of other German-speaking countries can be applied on the scale of an entire continent.
But what would be the best solution for Greece – and for Germany? As German history has taught us, writing off debts is the surest way of making a fresh start. This would probably give not only Greece, but also other countries a chance to restart their economies, and would also enable Germany to put an end to such unsavoury discussions. Since Europe is not a testing ground for different integration techniques, we should be more sceptical and prudent about what it means to hand over responsibility for a continent to a single country, however good the economic, financial and political advice may be, and refrain from indulging in speculation about sovereignty.