Germany blind to own debt past in Greece crisis, say critics

BERLIN (AFP) - Berlin's refusal to grant debt forgiveness to Greece has exposed it to charges of hypocrisy by critics who point out Germany's own post-war 'economic miracle' was based on Western largesse.

Greece's hard-left Prime Minister Alexis Tsipras, and several leading economists, have pointed out that Germany's post-World War II economic recovery came after lenders forgave the shattered nation over half its debt.

Chancellor Angela Merkel's government, while maintaining a tough line on Athens, has rejected the comparison, made by Tsipras in an address to the European Parliament Wednesday.

"In 1953, the European nations at the London conference showed what European solidarity is," Tsipras said in Strasbourg.

"Sixty per cent of Germany's debt was erased. This was the most significant manifestation of solidarity in history."

Germany's Finance Minister Wolfgang Schaeuble countered on Thursday that the situation in Greece could not be compared to that of Germany, which was occupied by the Allies in 1945.

"This parallel is misleading, do not make that mistake," Schaeuble insisted at a conference in Frankfurt.

"Obviously there was Nazism and the Allies took the very intelligent decision to lift the German debt after the Second World War, but the circumstances were completely different."

It was the first response by the Merkel government to the debate about a historical parallel which has gathered steam online and in the media in recent days.

"Germans forget post-war history lesson on debt relief in Greece crisis," ran a headline in The New York Times on Tuesday.

The commentary accused Germany of "hypocrisy", pointing out that "the main creditor demanding that Greeks be made to pay for past profligacy benefited not so long ago from more lenient terms than it is now prepared to offer".

Hypocrisy

Several of the world's best-known economists, including Thomas Piketty of France and Jeffrey Sachs of New York's Columbia University, this week urged Merkel to relent on Greece, urging a "humane rethink of the punitive and failed programme of austerity".

They pointed out that "in the 1950s, Europe was founded on the forgiveness of past debts, notably Germany's, which generated a massive contribution to post-war economic growth and peace".

Piketty previously made the point in an interview with Germany's Zeit weekly, charging that "Germany is THE country that has never repaid its debts" and therefore had no right "to lecture other nations".

The debate isn't new. Four years ago, economic history professor Albrecht Ritschl asserted in an interview with news weekly Der Spiegel that Germany has been "the worst payer of debts of the twentieth century".

At the London conference of February 27, 1953, after nearly two years of negotiations with all creditors, including Greece, then-West Germany was forgiven debts dating from the Weimar Republic (1918-1933), post-WWI loans and money lent since 1945 by the Allies.

Germany owed some 30 billion deutschmarks, or 28 percent of gross domestic product (GDP) at the time. This compares to the Greek debt of around 180 percent of GDP today.

At the time the great powers, especially the United States, wanted to avoid repeating the mistakes made after World War I.

Historians have blamed German resentment over crushing WWI reparations for aiding the rise of Adolf Hitler in the 1930s.

In London, creditors also decided that only a small part of German export revenues would be dedicated to debt repayments.

"Germany was then servicing a debt which is well below that which many developing nations or Greece must pay," said Juergen Kaiser, an activist for poor-country debt relief, who coordinates an initiative of several hundred organisations.

For some economists, the "gift" received by a young West Germany paved the way for its economic miracle to become the export-driven economic motor of Europe.

Historian Ursula Rombeck-Jaschinski, author of a study on the Treaty of London, stresses that the geopolitical context was radically different.

She said that post-war West Germany, given its geographic location at the heart of Europe, assumed a major strategic role during the Cold War, which helped explain the "generosity" of its new ally, the United States.

AFP