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Why do we pick on the Greeks rather than the Germans?

There is a story popular in Germany, and often repeated in the UK, that the Greeks are being punished for their grievous financial misdeeds and the virtuous Germans are teaching them a lesson which, painful as it may be, needs to be learnt. Whilst it is true that Greece (and Greece was far from alone in these matters) suffered from a poorly organised taxation system, corruption of the State by an ultra-rich elite, and capital flight to tax havens or investment hot-spots across the world, finger-wagging at Greece and moralising about debt hardly fits the record. There have been three crucial periods in the last 60 years when Germany was in deep financial difficulty and was bailed out by creditor countries……including Greece.

The first and most important was in 1953 when Germany’s post-war debt trap was lifted in London at a creditor’ conference in London. The enormous war reparations owed were halved and the repayment period was extended over 30 years. It is almost certain that the post-war German economic miracle would not have occurred or brought the country to global economic power status, had it not been for the London Debt Agreement. Greece, one of the countries overrun by the Nazis and having suffered grievously under their domination less than a decade before, was nevertheless party to this agreement. So why are Greece, Spain and Portugal being demonised now and debt forgiveness isn’t even on the agenda?

It’s not as though Germany has itself faithfully obeyed the economic agreements into which it entered within the EU economy. During 2003-4 Germany repeatedly fell foul of the budget deficit rules set down by the EU Growth and Stability Pact. Was Germany penalised? In fact the German chancellor, Schroeder, demanded that his country be exempted from the appropriate penalties, and his bully-boy tactics succeeded. Again in 2006, while Spain and Ireland secured budget surpluses, Germany ran a deficit. Is any of this remembered today and similar treatment offered to today’s debtor countries?

A third example of letting Germany off the hook, while very firmly pinioning other countries on it, occurred in 2008. The German private sector got into deep trouble, but were bailed out according to a Bloomberg investigation by the US Federal Reserve. German banks and financial institutions had become drastically over-leveraged, but were saved from collapse by secret loans from the Fed.

In contrast to this serendipitous treatment afforded to Germany, the southern EU economies have been handled with unremitting severity. Merkel herself has been right accused of undermining the European project, impoverishing Germany’s neighbours (and export markets), and risking another worldwide economic downturn. Britain should of course be pressing for debt remissions and an end to counter-productive austerity. But in fact Britain is one of the worst offenders because Osborne’s policies are largely the same as Merkel’s and those of the eurozone as a whole.

3 Comments

  1. Dave Roberts says:

    It’s easy. The Greeks owe money the Germans don’t. I don’t think you will be a future Chancellor of anything.

  2. Dave Roberts says:

    And while we are at it would you like to answer your own question/ I have requested that you do this in the past but without success. I live in Spain and I am fully aware of why this economy is in the state it’s in, corruption. I

  3. Dave Roberts says:

    I pressed the wrong key. I will later direct you to a site run by a local estate agent one of whose sections explains why the Spanish economy collapsed.

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