One article, from Bloomberg, places the Greek crisis in the wider context of economic instability in the so-called PIGS nations (Portugal, Ireland, Greece, and Spain). Demosthenes no doubt wanted to remind me of the fact that Greece is not alone, and if I haven't made that sufficiently clear in my posts so far, I'm happy to do so now. Not only is the crisis not just about Greece (which rules out explanations for the crisis like 'Greeks are just lazy'); it's not even just about Mediterranean countries - the 'I' in the acronym stands for Ireland, not Italy. The particular form that the crisis has taken has varied from country to country (in Ireland a collapse in the baking sector, in Spain the bursting of a real-estate bubble), and the differences among the PIGS countries (in population, religion, and culture) make any single explanation for the crisis inadequate.
One of the things that Demosthenes seems to have taken issue with was my implicit endorsement of the German Foreign Ministry's statement that the Greeks had received their war reparations - and then some. But in an interview for Der Spiegel, Albrecht Ritschl, a German academic at the London School of Economics, turns this account of things on its head. According to Ritschl, Germany has never properly repaid the countries it plundered in World War II, Greece included. At the same time, Germany received vast sums of money from the USA in the form of the Marshall Plan. The post-war economic miracle came about not because Germans worked hard, but because they were being given money and because they didn't pay their real debts. In accordance with his theory, Ritschl proclaims Germany 'Schuldenkaiser', 'Emperor of Debts'.
In an equally iconoclastic piece in the German edition of the Financial Times, Thomas Fricke argues that Germany is not so much helping Greece by lending it money than it is helping itself. The loans that Germany is offering - even in the bailout packages - come with interest, some of it considerable. Because of this, Germany stands to profit by lending Greece money, and shouldn't pretend either that it has been injured by the smaller nation's profligacy or that its aid is reluctant or altruistic.
The contention of Ritschl, a financial historian, that Germany never paid full reparations to the countries it devastated in the 1940s may well be accurate. But he admits that Germany did make some payments of this sort; he simply considers them peanuts compared with the damage that Germany did to Greece. But accurately quantifying a violation of that nature is surely difficult. If what Ritschl is saying is partly that Germany has a historic responsibility to Greece, few would disagree. But it is a responsibility that Germans are arguably already conscious of, though they might go about fulfilling it with slightly less complaining.
It also seems unconvincing to me to argue that the economies of Germany and Greece grew at different rates in the post-war period almost entirely because Germany was receiving money from the US. Other European nations (including Greece) received funds under the Marshall Plan; but not all of them became one of the world's most competitive economies. On a more basic level, aid doesn't go very far towards explaining growth; if it did, Tanzania, which received more foreign aid than any other country in the 1970s, would not have seen its economy shrink during that period.
As for Fricke, I'm not sure that he understands the reason that people pay interest. People pay interest because there is value in gaining liquidity in the present, and there is a cost in the risk lenders take on in giving money to somebody else for a time. To say that Germany will profit from interest payments is to state the obvious, and to accuse Germany of foul-play for charging interest is to compare them with interest-free lenders that rarely exist in the marketplace. The point is not that Germany is lending Greece money, but that it is lending Greece money at a time when no rational lender with a concern for his own wallet would lend it. And with that, there comes a very real risk that the Germans - as well as the many others who have lent to Greece - will never get their money back.
Greece is everywhere, meaning that governments have incurred too much debt everywhere. This includes, a/o, Germany. Expect some bankruptcies in future. In about ten years, the average pension in Germany will fall below the poverty line. No reason for Germans to look down on Greece.
ReplyDeleteThe Greeks should not expect any miracle bail out with Germany paying up for war-time debt. It is true that Germany never really made up for the many thefts that happened during the war, but to believe that they will now re-imburse and save the Greek is futile.
Thanks for your comment. It's definitely true that many governments besides that of Greece have built up massive amounts of debt, especially the UK and the US. It's just that these economies are so big that nobody seriously thinks they will default (though to me this looks like wishful thinking). Does Germany really have that much debt, though? My understanding was that it had a large trade surplus.
ReplyDeleteI agree that Greece's evocation of wartime debt is not particularly helpful. My impression is that most Germans nowadays are conscious of their past and eager to be good citizens at the European and global levels. This makes it harder for them to refuse to help poorer EU countries out at all than it is for the UK, say. But looking for compensation for sins committed 70 years ago doesn't seem to me to be a useful response to the crisis.