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As Thomas Piketty pointed out, 60% of German debt was cancelled in 1953. (http://thewire.in/?p=5851 http://thewire.in/?p=5851) France defaulted on its debts aft

by bhickey 11y ago

As Thomas Piketty pointed out, 60% of German debt was cancelled in 1953. (http://thewire.in/?p=5851 http://thewire.in/?p=5851) France defaulted on its debts after the Napoleonic wars. The United Kingdom defaulted in 1932. Apart from Greece's inability to inflate its way out of debt, how is this any different?

rbehrends 11y ago
> Apart from Greece's inability to inflate its way out of debt, how is this any different? The debt forgiveness because of the London Debt Agreement amounted to about 11% of West Germany's 1953 GDP. Most of West Germany's public debt was internal and was wiped out by the currency reform in 1948 (which meant that West German savings took a 93.5% haircut) [1]. Germany has to be thankful to the Allies for imposing only very light sanctions after WW2; but debt forgiveness didn't play much of a role in Germany's recovery. I.e. there is a strong moral argument that you can make, especially given that Greece largely waived WW2 reparations, but the economic situation isn't the same. [1] Also, East Germany wasn't as lucky and got hit hard by reparations.
- igravious 11y ago
  Why should they be "thankful"? I'm wary of this attitude. Isn't defeat and the brutal horror of war (especially that war) sanction enough? Not trying to be smart here, genuine question. Did not know the numbers though, thanks. The situations aren't as alike it seems as people (myself included) are making it out to be. But they're not completely unalike and people remember history ...
  - rbehrends 11y ago
    Sorry, I meant to write reparations, not sanctions. Reparations to help restore the economies of those countries that the Third Reich had looted and pillaged and left in ruins.
- Rondom 11y ago
  I think this article also gives some insight into the differences. http://www.theguardian.com/commentisfree/2013/feb/27/greece-spain-helped-germany-recover http://www.theguardian.com/commentisfree/2013/feb/27/greece-...
jeffdavis 11y ago
If war is the cause of the debt, its reasonable to think the country will be fiscally responsible during peacetime, and get back on its feet. Greece's fiscal problems are purely fiscal, and there's no reason to think they will be fixed without fiscal changes in Greece.
ricw 11y ago
That's besides the point. Even if Greece would have all its debt cancelled (hypothetically), no one would trust it with more money. Debt is about trust, and after five wasted years of crisis and not delivering on its promises there is seemingly none left for Greece.
- aptwebapps 11y ago
  Five wasted years indeed. The austerity imposed on the Greeks has left them with a greater deficit than when they began.
  - ricw 11y ago
    It's actually not only austerity. It's reforming their economy that they haven't delivered on, unlike all other euro countries that needed bailing out. 8% of Greece's population still works for the state. I don't blame other EU states to not take Greece seriously anymore, particularly as everyone seems to forget that 50% debt cancellation that happened in 2011. All in all a lack of fiscal responsibility and incompetent governments that let down their European partners for the last five years..
    - ars 11y ago
      > 8% of Greece's population still works for the state What's the figure for other EU states?
      - kiiski 11y ago
        I'm not sure what that 8% includes (municipal/city workers? military? police?), but in Finland the government claims on their website to employ 79 000 people (~1.5%). No idea if the numbers are comparable.
pmorici 11y ago
The other thing that is lost in all of this is that a lot of Greek debt was originally owned by private banks. Over the past several years though most of that debt was sold off to EU governments transferring all the default risk to EU tax payers.
- branchless 11y ago
  This is the takeaway. Private banks lent to corrupt Greek officials. If you don't want to have trouble getting your money back don't lend billions of it to people who probably won't be able to pay it back.
sampo 11y ago
In 2012, Greek debt was cut from 350 billion to 250 billion: https://en.wikipedia.org/wiki/Second_Economic_Adjustment_Programme_for_Greece https://en.wikipedia.org/wiki/Second_Economic_Adjustment_Pro... Also something was done in 2010, but by just reading the Wikipedia page, I am not able to understand what the involved numbers were: https://en.wikipedia.org/wiki/First_Economic_Adjustment_Programme_for_Greece https://en.wikipedia.org/wiki/First_Economic_Adjustment_Prog...
twoodfin 11y ago
Because Greece still needs money from the ECB even after they refuse to pay back existing debt. If it were as simple as Greece defaulting, this drama would have been over weeks ago.

by bhickey 11y ago

rbehrends 11y ago

> Apart from Greece's inability to inflate its way out of debt, how is this any different? The debt forgiveness because of the London Debt Agreement amounted to about 11% of West Germany's 1953 GDP. Most of West Germany's public debt was internal and was wiped out by the currency reform in 1948 (which meant that West German savings took a 93.5% haircut) [1]. Germany has to be thankful to the Allies for imposing only very light sanctions after WW2; but debt forgiveness didn't play much of a role in Germany's recovery. I.e. there is a strong moral argument that you can make, especially given that Greece largely waived WW2 reparations, but the economic situation isn't the same. [1] Also, East Germany wasn't as lucky and got hit hard by reparations.

igravious 11y ago
Why should they be "thankful"? I'm wary of this attitude. Isn't defeat and the brutal horror of war (especially that war) sanction enough? Not trying to be smart here, genuine question. Did not know the numbers though, thanks. The situations aren't as alike it seems as people (myself included) are making it out to be. But they're not completely unalike and people remember history ...
- rbehrends 11y ago
  Sorry, I meant to write reparations, not sanctions. Reparations to help restore the economies of those countries that the Third Reich had looted and pillaged and left in ruins.
Rondom 11y ago
I think this article also gives some insight into the differences. http://www.theguardian.com/commentisfree/2013/feb/27/greece-spain-helped-germany-recover http://www.theguardian.com/commentisfree/2013/feb/27/greece-...

jeffdavis 11y ago

If war is the cause of the debt, its reasonable to think the country will be fiscally responsible during peacetime, and get back on its feet. Greece's fiscal problems are purely fiscal, and there's no reason to think they will be fixed without fiscal changes in Greece.

ricw 11y ago

That's besides the point. Even if Greece would have all its debt cancelled (hypothetically), no one would trust it with more money. Debt is about trust, and after five wasted years of crisis and not delivering on its promises there is seemingly none left for Greece.

aptwebapps 11y ago
Five wasted years indeed. The austerity imposed on the Greeks has left them with a greater deficit than when they began.
- ricw 11y ago
  It's actually not only austerity. It's reforming their economy that they haven't delivered on, unlike all other euro countries that needed bailing out. 8% of Greece's population still works for the state. I don't blame other EU states to not take Greece seriously anymore, particularly as everyone seems to forget that 50% debt cancellation that happened in 2011. All in all a lack of fiscal responsibility and incompetent governments that let down their European partners for the last five years..
  - ars 11y ago
    > 8% of Greece's population still works for the state What's the figure for other EU states?
    - kiiski 11y ago
      I'm not sure what that 8% includes (municipal/city workers? military? police?), but in Finland the government claims on their website to employ 79 000 people (~1.5%). No idea if the numbers are comparable.

pmorici 11y ago

The other thing that is lost in all of this is that a lot of Greek debt was originally owned by private banks. Over the past several years though most of that debt was sold off to EU governments transferring all the default risk to EU tax payers.

branchless 11y ago
This is the takeaway. Private banks lent to corrupt Greek officials. If you don't want to have trouble getting your money back don't lend billions of it to people who probably won't be able to pay it back.

sampo 11y ago

In 2012, Greek debt was cut from 350 billion to 250 billion: https://en.wikipedia.org/wiki/Second_Economic_Adjustment_Programme_for_Greece https://en.wikipedia.org/wiki/Second_Economic_Adjustment_Pro... Also something was done in 2010, but by just reading the Wikipedia page, I am not able to understand what the involved numbers were: https://en.wikipedia.org/wiki/First_Economic_Adjustment_Programme_for_Greece https://en.wikipedia.org/wiki/First_Economic_Adjustment_Prog...

twoodfin 11y ago

Because Greece still needs money from the ECB even after they refuse to pay back existing debt. If it were as simple as Greece defaulting, this drama would have been over weeks ago.