As German Chancellor Angela Merkel continues to insist on harsh austerity measures for Greece in return for international bailouts she supports, Germany on Feb. 27 noted the 60th anniversary of an agreement in which it was allowed to write off its WWII debt.
With the signing of the deal in London in 1953, Germany began a post-war economy that boomed and set the basis for its growth, unshackled from the same kind of debt that is crippling Greece, whose government created it by packing public payrolls with unneeded workers for generations in return for votes.
German historian Ursula Rombek-Jašinski from the University of Stuttgart said that, “The London Agreement has played an important role in Germany’s ‘economic miracle.’ It can be argued that without the debt cancellation, the economic miracle would not exist,” she said, according to Deutsche-Welle.
An analyst on debt issues, Jürgen Kaiser, also a member of the association Eerlassjahr.de added that the deal was the boost Germany needed to propel itself and free itself of paying other countries, including Greece, the Nazis had plundered. Nearly 70 countries had claims against Germany both during the pre-war and the post-war period.
The total debt reached 30 billion German marks although in 1953 it accounted just for 23% of Gross Domestic Product thanks to the arrangement. Greek debt today is at about 176 percent of GDP and even after $325 billion in two bailouts and pay cuts, tax hikes and slased pensions it’s still expected to be about 124 percent in the year 2020.
However, for Germany of 1953, austerity and repaying loans were not options. The German economy needed “fresh” money to rebuild the country and boost the financial development. After tough negotiations, the creditor nations agreed to write off nearly 50% of the debt, and ghe rest was supposed to be re-examined one day.
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