German post-war debt cancellation shows 'right way to solve EU crisis'

By staff writers
January 26, 2015

German debt cancellation after the Second World War shows the equitable way to solve Europe’s crisis in the wake of the election of anti-austerity coalition Syriza in the 2015 parliamentary elections in Greece.

That is the response of debt campaigners. monetary reformers and those wanting to restructure the banking and finance sector in Greece and beyond.

A combination of the crashing of the economy and bailout loans made on reckless terms means Greek government debt has grown from 133% of GDP in 2010 to 174% today.

The election in Greece comes just a month before the sixty-second anniversary of Germany’s historic post-war debt cancellation.

These developments should be marked by demanding an end to the policies being imposed on indebted countries by the International Monetary Fund and European Central Bank, says the Jubilee Debt Campaign, which is supported by a range of NGOs, including the beliefs and values think-tank Ekklesia.

Alexis Tsipras, the leader of Syriza and Prime Minister designate in Greece says that "austerity is not the solution to a crisis; austerity IS the crisis we are facing, and which has caused devastation to our country."

German, Irish, Spanish and British campaigners have said Germany’s 1953 debt cancellation, agreed by countries including the US, UK, France, Greece, Spain and Pakistan, prove that the Troika’s policies in Europe will continue to have a disastrous impact.

The debt cancellation contrasts markedly with how debtor countries such as Greece, Ireland and Spain are being treated today, including by Germany, their largest creditor. While Germany was given deep, comprehensive debt cancellation, peripheral European countries today have been had very late, fragmented and shallow relief.

While Germany’s debt repayments were limited to 3% of export earnings, Greece today is spending well over ten times that. While Germany was offered negotiation to deal with further problems, southern Europe has faced harsh and undemocratic sanctions.

Back in 2013, the sixtieth anniversary of the German debt deal, Nick Dearden, currently director of Global Justice Now, which works for a world where resources are in the hands of the many not the few, commented: “The deal struck in 1953 meant western Europe was reconstructed successfully and thrived. Today Europe has been forced into its worst crisis since the Second World War by the actions of Europe’s leaders.

“If we had no evidence of how to solve a debt crisis equitably, we could perhaps regard the policies of Europe’s leaders as misguided. But we have the positive example of Germanyin 1953, and the devastating example of the Latin American debt crisis some 30 years ago. The actions of Europe’s leaders are nothing short of criminal,” said Deardon, then with Jubilee Debt Campaign.

Yesterday (25 January 2015), with the news coming out of Greece, he said on social media: "Syriza activists must remember what Franklin D Roosevelt told trade unionists in 1932: 'I agree with you, I want to do it, now make me do it'. Solidarity [is the way]."

"Greece becomes [the] first country in [the] EU to reclaim its economic policy from the Troika. Syriza's victory is for all of us. Now the work starts," he added.

The debt cancellation for Germany in 1953 was swift, taking place in advance of West Germany struggling to pay its debts.

In contrast, when Greece’s huge debts were revealed in 2010, rather than any being cancelled, the IMF and EU gave bailout loans. This paid off some of the reckless lenders, but the debt remained, and rapidly grew as austerity and debt payments crashed the economy.

A different way forward is needed in 2015, say campaigners and analysts of five years of failed austerity policy which have increased Greece's debt, cut its GDP by a quarter, increased regular unemployment by a third, left half of young people out of work, and created three million people living on the breadline - while bankers continue to line their pockets.

* How Europe cancelled Germany's debt (*.PDF Adobe Acrobat document):

* Jubilee Debt Campaign:

* Global Justice Now (formerly the World Development Movement)

* Nick Dearden of GJN on Twitter: @nickdearden75

* More on Syriza from Ekklesia:


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