Remembering when Germany was bailed out with Ireland’s help
Jan 20th, 2012 | By admin | Category: FOREIGN
With Germany reluctant to allow debt write-downs least of all by Ireland it’s interesting, as Patrick Guinness notes in a comment on Constantin Gurdgiev’s recent article, how little attention has focused on Ireland’s signature on a 1953 bailout for Germany.
The London Agreement on German External Debts between the Federal Republic of Germany on one part and Belgium, Canada, France, Greece, Iran, Ireland, Italy, Liechtenstein, Luxembourg, Norway, Pakistan, Spain, Sweden, Switzerland, the Union of South Africa, the UK, the USA, and Yugoslavia among others. The Agreement comprehended a number of different types of debt from before and after the second World War. Some of them arose directly out of the efforts to finance the reparations system, while others reflect extensive lending, mostly by US investors, to German firms and governments.
In the London Agreement, the (Western) German government under Chancellor Adenauer undertook to repay the external debts incurred by German government between 1919-1945
The total under negotiation was 16 billion marks of debts from the 1920s which had defaulted in the 1930s, but which Germany decided to repay to restore its reputation. This money was owed to government and private banks in the U.S., France and Britain. Another 16 billion marks represented postwar loans by the U.S. Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and prolonged over 30 years, and in the context of a fast-growing German economy was of minor impact.
The agreement significantly contributed to the growth of its post-war industry and allowed Germany to enter international economic institutions such as Gatt, the IMF and the World Bank
Germany finally cleared its First World War debt by repaying nearly €80 million in October 2010. The reparations were set by the Allied victors as compensation and punishment for the 1914-18 war.
The reparations were set at the Treaty of Versailles on June 28, 1919, by the Allied victors – mostly Britain, France and America. Most of the money was intended to go to Belgium and France, whose land, towns and villages were devastated by the war, and to pay the Allies some of the costs of waging it.
The initial sum agreed upon for war damages in 1919 was 226billion Reichsmarks which was later reduced to 132 billion.
This is certainly interesting as an anecdote, but it the end absurd.
The two things are really not connected at all. It would be disastrously naive to compare Ireland’s situation, having taken a beaten from the last few years of global recession, to that of post-war Germany. War-reparations, imposed by the victors of WWI are very different from the private gambling debts of Ireland’s bankers and builders of Celtic-tiger excess. The comparison, even in a sideways way such as this is both a false and a distasteful one. More than that, it is a dangerous example of looking to place the blame elsewhere. If we want to blame someone, surely we can find many of the guilty still living the good life, enemies of the people at large in Dublin.
More to the point though, we are all culpable – very few mainstream commentators really spoke out against the excessive and unsustainable growth of the Irish economy on the grounds of fictitious wealth. Developers developed unnecessary properties at triple their actual price, the bankers played dice with the devil as the government freewheeled with a blindfold on towards the edge of a cliff, and us consumers, we just kept consuming. As we are seeing now, those sectors of the Irish economy which were always solid are what is keeping the show on the road, though most of the pain is felt by those least deserving of it.
This kind of distraction-tactic, somehow blaming the Germans, is absurd. We just don’t want to face the reality – this is simply not within the frame of the argument.
@ Ronan:
I think the general theme of debt write-down is a valid topic of discussion; the different circumstances of each case examined are clearly discernable but the effects of both are equally disastrous. Achieving the best outcome possible should now be the focus, we know who is to blame but we need practical solutions, let the heads roll in good time. Furthermore, no, we are not all culpable. I did not become indebted, did not take out a plainly ludicrous mortgage, and am now forced to live abroad to earn a living. I am sure there are many more in my situation.
The debt writedown for the crimes of Nazi Germany was a very generous move that allowed West Germany to thrive. It seems the Germans have forgotten this! But no! Because if you look at the former DDR today eastern Germany shows what happens when the occupying power, Soviet Russia, did not do debt forgiveness. And Germany knows this very well.
” let the heads roll in good time” For the poor emigrants and the heartbroken elderly the rolling of heads cannot come soon enough. A bunch of uneducated buffoons were running the country and could get back into power at the next election. Politicians who through recklessness and incompetence commit financial treason must be brought before the courts to answer for the mismanagement of their offices. A process must be introduced into politics whereby stupid buffoons, such as are currently found in political parties in large numbers are prohibited from going forward for election to the Dáil, the Seanad or Local Elections.
It is true that in the London Debts Agreement of 1953 the repayable amount which Germany had to pay was drastically reduced. However this was not just a gracious gesture on the part of the creditors. An important political aspect of the bail-out for Germany in the London Agreement should not be forgotten: it was the U.S. government which insisted that Germany’s economy not be strangled to make sure that it would be a strong bulwark in the western block able to withstand any threats on the part of the Soviet Union. The British and French government shared this view even though the man/woman of the street were not of the same sentiment.
It would be an interesting exercise to ask which political role Greece plays within the European Union, especially with regard to the other states on the Balkan and with regard to Turkey. It might be politically important for the European Union to bail out Greece and not risk a state of political unrest in that region.