Germany Had Their Debts Cancelled After World War II. They Should Return the Favor to Greece
04 February 15
y demanding Greece pay back their debts in full, German chancellor Angela Merkel wants the rest of the world to forget her country’s recent history. Given the state of Germany as both a failed economy and a pariah state in the wake of World War II, Merkel’s current insistence on Greek bailout repayment is the kind of ballsy hypocrisy that deserves to be put on full display.
After Adolf Hitler committed genocide against millions of ethnic minorities and had his infrastructure leveled by the American, British, and Russian armies as a result of the war that Hitler brought on himself, Germany was officially a failed economy by May of 1945, when they officially surrendered to the Allies. And in 2009, after the global banking cartels leveled Greece’s economy by manipulating their currency, Greece began its downward spiral into the failed economy it has become today. Greece is indeed in a similar pickle today to the one Germany was in 70 years ago, but the difference is that Greece didn’t create their own crisis – they were manipulated into it by the big banks.
As Greg Palast has written, Greece’s economic crash wasn’t brought about by high public sector wages and Greece’s “living beyond its means,” as supply-side economists would say, but by the greed-driven Wall Street casino. Goldman Sachs had been trading currency swaps that masked Greek debt to seem like it was within the Eurozone debt limit of 3 percent of GDP. By 2009, the currency swaps had been exposed as fraudulent, and vulture investors who bought and sold Greek debt demanded their money back with high interest rates, sending the Greek economy into astronomical levels of debt. (One of these vulture investors Palast wrote about is Paul Singer, a billionaire investor who buys up debt for pennies on the dollar, then uses complex financial maneuvers to bilk developing economies out of hundreds of millions of dollars.)
Because Greece still uses the Euro as its currency, the European Central Bank, the European Commission, and the International Monetary Fund (the “Troika”) locked Greece into a banker-imposed austerity regime. In the years that followed, Greece’s public utilities were privatized, wages were cut to the bone, and its public investments were brought to a screeching halt. Palast, an economist who studied with Milton Friedman, notes a conversation with Friedman’s friend Robert Mundell, who invented the Euro. Mundell prided himself on inventing a currency that allowed banks, not governments, to make the rules that governed national and international economies.
“Without fiscal policy,” Mundell told Palast, “the only way nations can keep jobs is by the competitive reduction of rules on business.”
The Greek “bailouts” that Germany is credited for never actually bailed out Greek workers or infrastructure. The billions spent in Greece bailed out foreign creditors like Deutsche Bank and other central banks and private banks across Europe. Germany only “bailed out” Greece because Germany’s banks owned Greek debt and wanted their pound of flesh once Goldman Sachs’ jig was up. The mere act of debating Greece’s “debt” to Germany should be questioned, since the bailout Greece needed but never got would have been in the form of jobs, increased demand, and public investment. But since those reforms would require deficit spending and currency devaluation, their creditors would have never agreed to them.
So how much are these banks saying they’re owed?
Greece’s debt is roughly 177 percent of its GDP as of 2014, which, in terms of a raw dollar amount, is $363 billion (317 billion Euros). But that figure pales in comparison to the debt West Germany accrued from 1947 to 1953, when the London Agreement was established. According to economist Albrecht Ritschl, of the London School of Economics, West Germany’s debt forgiveness over those six years exceeded 280 percent of its 1950 GDP. To put that in perspective, Germany’s 1950 GDP was $265.3 billion in 1990 dollars ($480.6 billion in 2014 dollars), according to a table devised by British economist Angus Maddison. 280 percent of that would be $1.3 trillion. So, in a nutshell, Germany had more than four times as much debt forgiven over the course of its financial crisis in the mid-20th century as Greece wants to have forgiven today. Syriza’s demand of German debt forgiveness is more than fair, given recent history.
It’s expected that Greece and Germany will agree on a debt plan soon, but as Greg Palast has already said, Greece will continue to be captive to Germany’s wishes as long as it uses the Euro as its currency. For Greece to overcome its financial woes, it should do as Germany did and create public banksthat exist for the sole purposes of granting a safe, speculation-free haven for storing tax dollars, and making low-interest loans available for public infrastructure projects, which will create plenty of new jobs. Greece should also do as Sweden and Denmark have done and use their own currency, independent of the Euro. Both Sweden and Denmark manage to do well without the Euro, and as a result, have a stable society that provides free university education, free healthcare, free childcare, and paid parental leave. Even McDonald’s workers in Sweden make as much as $21 an hour.
Syriza was elected on a mandate to undo the austerity that’s plagued Greece since 2009. If they’re serious about fulfilling that promise, they have bold decisions to make.
Carl Gibson, 27, is regular featured columnist and editor for Reader Supported News, @RSN_Godot. In addition Carl co-founded US Uncut, a direct action group that mobilized thousands against corporate tax dodging and budget cuts in the months leading up to Occupy Wall Street. Carl and other US Uncut activists are featured in the award-winning, Sundance-selected documentary We're Not Broke, which is available on Netflix. He is also author of the book, How to Oust a Congressman, about his experience organizing the ouster of a member of Congress from New Hampshire in the 2012 elections. Carl has been profiled in Fox Business, Marketwatch, and Crikey.com. Carl has been a guest on MSNBC and many other political discussion forums.
Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.
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