A decidedly unofficial repository of the news, views, and attitudes of some young people who quite like NZ First.
Tuesday, June 30, 2015
A Short History Of German Debt Forgiveness ... By Other Nations. Why Not For Greece?
Right now, a sovereign debt crisis is engorging Europe. You've all probably read about it, so the precise details don't bear repeating here. But suffice to say Greece is left going "Join the Eurozone, they said. It'll be FUN, they said!" while the rest of Europe (particularly Germany) looks on in abject horror at the prospect of a Greek collapse taking a large swathe of one of the world's largest economies with it.
Into that miasmic malaise, as per usual, rode the horsemen IMF, ECB and E.U.. I believe they're still waiting on Death to turn up and join them.
Instead of bolstering a struggling economy by transferring funds as a form of charitable "development assistance", these institutions have made their loans to Greece conditional, for the most part, on the implementation of a far-right and fundamentally damaging economic agenda that is aptly known as "Austerity".
This hasn't exactly saved the Greek economy; and fed up with the tides of woebegotten misery inflicted upon them by their richer, more powerful neighbours ... the Greeks recently en-masse economically revolted by electing radical left-wing party SYRZA to lead their Government.
But some of the solutions to Greece's sovereign debt crisis (and it's multi-headed hydra enough as a problem to call for *solutions* in the definitive plural) need not be NEARLY so novel nor controversial.
For you see, this isn't the first time Europe has dealt with a sovereign debt crisis in an economy starting with G.
Way back in the 1920s, during the time of much-mythologized hyperinflation and Cabaret-listening Weimar Democracy ... it happened to Germany.
It first happened in 1923. Due to the way World War One panned out (with history, as per usual, being decided by the victors), Germany had been required to pay the victorious Allies an enormous sum totalling 132 billion gold marks (the equivalent of hundreds of billions of NZ dollars today). This, obviously, wasn't entirely feasible for the cash-strapped and broadly ruined post-war German economy - and so they effectively defaulted on their reparations.
One thing lead to another, and Germany's then-industrial heartland of the Ruhr found itself being jointly occupied by France and Belgium (the latter of which was presumably quite enjoying being an aggressive military power somewhere outside of Africa, for a change).
Predictably, the German economy suffered further as a direct result of the military occupation and the conditions imposed on Germany during same - leading to additional impairment of Germany's ability to pay the much sought-after reparations.
The result of this ongoing farce was something called the Dawes Plan - a foreign fiscal intervention designed to put Germany back in a position to meet her reparations debt ... by loaning money to her and externally imposing conditions on government fiscal and monetary policy.
Is this starting to sound familiar, yet ...?
To be fair, softening the conditions of repayment down to a mere *billion* marks a year (and, y'know ... de-occupying a large and important swathe of German economic activity) had some positive short-term effects. Getting Germany's creditors off her back somewhat, and an influx of foreign money certainly staved off the very real prospect of fairly immediate and sharp continued economic decline.
And yet, it wasn't enough.
By 1929, Germany was once again in danger of defaulting on its international debt obligations, requiring another reduction in the level of repayments and yet another round of international credit financing.
This was called the Young Plan - and despite being agreed immediately before that other great economic event of 1929, the Wall Street Crash - it pretty much never found itself implemented.
Ensuing events from 1933 onward featuring the popular election of a socialist government of a *decidedly* different stripe in Germany seemed to put the matter somewhat to rest.
This resulted in a situation wherein Germany was able to steadily whittle down
The really interesting part of the 1953 Settlement was a clause which limited German debt repayments to a percentage of German trade surpluses. Or, in other words, a slice of what Germany's creditor nations were buying off her in terms of exports.
Needless to say, this spurred German economic recovery by steadfastly encouraging the rest of the world to buy off the Germans - while also limiting what Germany would have to pay to her foreign benefactors to a reasonable and sustainable figure.
It's just a pity there apparently isn't the political will to continue to do this sort of thing today.
An entire Nation of people should not be made to suffer simply for the mistakes of a generation of politicians.
It may have taken quite literally thirty years, but eventually Germany's creditor nations realized this themselves.
We can but hope that Germany eventually learns to look to the mistakes of her past and take heed of them when dealing with another nation in a similar position.