The Greek debt crisis is often portrayed as a dispute between two actors with two very different economic visions: a German government that seeks austerity over anything else and a Greek government desperate to escape its debts without suffering the pain that austerity would bring.
That is not necessarily an inaccurate vision. It does, however, miss out on an important historical element: that Germany's own strong position was possible only because it has escaped its debts in the past.
This point was hammered home during an interview between Thomas Piketty, the rock star anti-inequality economist, and Die Zeit, a German newspaper, that went viral online over the past few days. “Germany is the country that has never repaid its debts," Piketty said. "It has no standing to lecture other nations.”
Piketty is talking specifically about the aftermath of World War II, when West Germany owed a number of creditors about $7 billion, or $62 billion in today's dollars. In 1953, these creditors agreed to reduce the debt by about half, hoping that an economically stable Germany would be good for the rest of Europe and acknowledging the role that reparation payments had in fermenting the Nazi movement.
This isn't a new theory. Albrecht Ritschl, an economic historian, has calculated that Germany had truly been exceptional when it came to escaping its debts. "Germany is king when it comes to debt," Ritschl told Der Spiegel in 2011. "Calculated based on the amount of losses compared to economic performance, Germany was the biggest debt transgressor of the 20th century." Notably, Ritschl's research at the London School of Economics has concluded that debt cancellation for the euro zone's troubled economies (including Greece but also Italy, Ireland, Portugal and Spain) would be roughly equal to the debts canceled by the Allied powers after World War II.
You can go back even further into Germany's debt issues. As the Economist has pointed out, Germany defaulted on its debts during the 1930s, and the German states that predated a unified Germany defaulted at least three times in the 19th century. Modern-day Germany, the economic powerhouse of Europe, is a product of all these defaults.
Perhaps it is not fair to compare the current situation in Greece to what Germany found itself in during the Weimar years and after the end of World War II: The economic and political context at work now is certainly very different. But it is hard to deny that the grand idea of the European Union — an idea that Germany is trying to protect — was created at least partly in response to such financial problems.
And in Greece — a country that was owed money by Germany in 1953 — history still matters. Under the leadership of the current Syriza government, Greece has pushed for Germany to pay reparations for its conduct during World War II, a sum that could be as high as $340 billion by some estimates and includes estimates of the structural damage that Axis occupation did to Greece.
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