The Unmentioned Debt


A poster of 1942 during World War II in suppor...
A poster of 1942 during World War II in support of Greece. (Photo credit: Wikipedia)

Most of us, at some point recently, will have been glued to the news coverage of the Greek financial crisis. We’ve seen anti-austerity riots. We’ve seen governments fall. We’ve seen elections fail. And we’ve seen the rest of the Eurozone nations, most notably Germany, try to dictate terms to Greece.

Rather than pick up the can and fix the problem, the leaders of Europe have kicked that can a little further down the street, buying a few weeks at a time. There have been lots of arguments about the failings of Greece and the German demands for greater austerity and closer fiscal union.

But one thing that doesn’t seem to get mentioned too often is the debt between Greece and Germany. I talk not of the €130 billion Germany has used to bail Greece out. That’s had LOADS of coverage.

I’m talking about the €75 billion that Germany owed Greece in the first place. For Germany still owes Greece those billions in unpaid war reparations.

Despite the danger of Godwin’s Law, and not wanting to simplify the complex relationships of European nations to 6 years in the early 1940s, there’s a case to be made.

In 1941, Germany invaded Greece, and then continued to occupy the ancient home of democracy until 1944. During that time, the Germans forced the export of goods from Greece, ruining the Greek economy. That export of goods for no payment led to massive inflation for the Greeks. At the same time, the National Bank of Greece was made to lend Nazi-run Germany 476 million Reichsmarks with absolutely no interest.

At the post-war reparations conference, Greece claimed $10 billion – 7.95 billion Euros – from Germany. Economists calculated that, in terms of quantifiable economic damage through occupation, Greece came fourth behind Poland, the Soviet Union and Yugoslavia. Eventually, Greece received $25 million worth of material goods – machines, industrial supplies and so on. That’s the equivalent of almost $3 billion at today’s value.

However, in 1953, the London Debt Agreement deferred reparation payments until a peace treaty was signed. You’d think that would’ve been signed by 1953, but you’d be wrong. You’d think, then, that it’d be done within a year or two of the London Debt Agreement. You’d still be wrong. In fact, it wasn’t signed until 1990! And that peace treaty made no requirement of Germany to pay further reparation to Greece or other occupied nations. Only individual claims could be made for reparation.

Having been in NATO with Germany since 1952, and in other European organisations from 1961, Greece was in a difficult position diplomatically when it came to demanding reparations. So it meekly accepted the treaty, barring the occasional mention from Greek politicians.

Despite Greece’s acceptance of the terms of the original reparation conference, the London Debt Agreement, and the final peace treaty, payments were made. Germany has paid as much as $41 billion – €33 billion. West Germany also paid compensation to individual victims of the occupation under an agreement between them and Greece for a total of 115 million Deutsch-marks. Some of those claims are still before the courts to this day.

The interesting element of all this is the loan that Greek banks were forced to make to Germany.

Because of the 1990 treaty, if the outstanding money was treated as war damage, reparation would no longer have to be made for it. However, if this debt was treated as just that – credit owed by Germany to Greece – then Greece would be entitled to that money.

476 million Reichsmarks borrowed in 1941, with no interest added, would be $14 billion – or €11 billion – at today’s value. With interest added at a more-than-reasonable 3%, that would be $95 billion, or €75 billion Euros.

That’s €75 billion that Germany owes Greece and has never repaid. And nobody is mentioning it.

One comment

  1. […] New Democracy 29.94% 130 seats; Syriza 26.68% 71  seats; Pasok 12.44% 33  seats; Independent Greeks 7.47% 20  seats; Golden Dawn 6.92% 18; Democratic Left 6.13% 16  ; KKE 4.49% 12  seats The amazing thing I have found following this story is that in Euro dependent countries the spin on this story is all positive Greece will stay in the Euro and all is well. Reporters outside the Euro-zone are painting a much bleaker picture. Lets watch this closely over the next few days and weeks.   The Unmentioned Debt […]

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