EU Economy
German historian says Germany was 'biggest debt transgressor of the 20th century'
By Michael Hennigan, Founder and Editor of Finfacts
Jun 22, 2011 - 7:21 AM

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German Unification Day at Berlin's Brandenburg Gate, October 03, 1990.

Germany is king when it comes to debt and calculated based on the amount of losses compared to economic performance, Germany was the biggest debt transgressor of the 20th century, according to German economic historian, Albrecht Ritschl.

Ritschl told Der Spiegel magazine that Germany was the worst debtor nation of the past century. He warns the country should take a more chaste approach in the euro crisis or it could face renewed demands for World War II reparations.

He said Germany was responsible for what were the biggest national bankruptcies in recent history. It is only thanks to the United States, which sacrificed vast amounts of money after both World War I and World War II, that Germany is financially stable today and holds the status of Europe's headmaster. "That fact, unfortunately, often seems to be forgotten," the historianargues.

From 1924 to 1929, the Weimar Republic lived on credit and even borrowed the money it needed for its World War I reparations payments from America.

With only a few exceptions, all reparation demands after World War II were put on the backburner until Germany's future reunification. For Germany, that was a life-saving gesture, and it was the actual financial basis of the Wirtschaftswunder, or economic miracle (that began in the 1950s). But it also meant that the victims of the German occupation in Europe also had to forgo reparations, including the Greeks.

After the first default during the 1930s, the US gave Germany a "haircut" in 1953, reducing its debt problem to practically nothing.

Ritschl said that measured in each case against the economic performance of the USA, the German debt default in the 1930s alone was as significant as the costs of the 2008 financial crisis. Compared to that default, today's Greek payment problems are actually insignificant.

The historian said that in 1990, then-Chancellor Helmut Kohl refused to implement changes to the London Agreement on German External Debts of 1953.

Under the terms of the agreement, in the event of a reunification, the issue of German reparations payments from World War II would be newly regulated. The only demand made was that a small remaining sum be paid, "but we're talking about minimal sums here."

"With the exception of compensation paid out to forced laborers, Germany did not pay any reparations after 1990 -- and neither did it pay off the loans and occupation costs it pressed out of the countries it had occupied during World War II. Not to the Greeks, either," Ritschl said.

As the saying goes, eaten bread is soon forgotten!


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