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German Amnesia and the Eventual Collapse of the Euro
GERMANY’S MEMORY LOSS
Whatever happens to Greece, Greece the country will survive we all know that. The Euro project will not. This piece outlines current German amnesia and why the Euro will ultimately collapse.
GERMAN AMNESIA
Has Germany forgotten its own history as the greatest European beneficiary of debt forgiveness?
- Germans please remember that in 1948 the introduction of the Deutsche Mark supported by US dollars wiped out most of Germany’s domestic debt? These same dollars became known as Eurodollars and were a direct reason for the huge subsequent Eurodollar debt market which your financial institutions continue to profit from.
- Germans forget the 1953 London Debt Agreement in their debates on Greece. This agreement single handedly wiped out half of German debt.
- Germany, please remember that the remaining half which you had to pay only had to be paid out of your trade surplus. This is exactly what the Greeks have offered only for you to turn it down.
- Remind the Germans that their country’s debt repayment was limited in any one year to 3% of Germany’s export revenues.
In other words Germany’s creditors had to buy German exports in order to be paid. Therefore, Germany did not have to resort to the crazy scheme of issuing new debt to pay for old debt. Imagine if Greece asked that a certain percentage of Germans were obliged for the next ten years to eat Greek yoghurt and feta cheese in Greece in order to give Greece the hard currency to pay back German banks?
- Germans also please remember that not only was half of your debt wiped out but also all the interest payments.
- Remember also that you were given a full three decades in which to pay back the remaining debt.
- Remember also that in the 1950s your debt was less than 20% of your GDP, while much of the rest of Western Europe at that time had debts of about 200% of GDP as they struggled to pay for a war started by you know who. Yet they forgave you.
- All in all dear German the total debt forgiveness your country received from 1947 to 1953 was more than 280% of its 1950 GDP.
- That this compares to 100% of GDP that Greece has received in aid since 2010. So you hard working frugal Germans, you destroyers of Europe got almost three times more debt forgiveness than the Greeks, and they have not killed anyone!
Nine very important historical points.
That is how the victor looked after the vanquished. How else do you think you managed to rebuild your country?
These are the overlooked facts. Facts that have been replaced by the usual stereotypes that the Greeks and by extension Italians, Spanish, Portuguese are lazy and corrupt Southern Europeans.
The Greeks are not innocent in this drama, but the crucial aspect to understand is that Syriza is the consequence not the cause of the crisis. The crisis was caused by German banks (and others) lending money to successive corrupt Greek governments. None of these governments were ever described as radical when they were being entertained in Berlin and Brussels, yet they were radically reckless.
Now the government that is charged with trying to sort everything out is labelled radical! How does that make a Greek feel?
History is on the side of the Greeks. Whatever happens, Greece will survive, the Euro will not and here is why:
Greece nor any another member in the same predicament can be rehabilitated through the heaping of more debt on top of existing debt. That is a futile exercise.
In its present state the Euro is doomed in the long term.
A collection of disparate economic states working under a common interest policy does not work. The rich members grow to dislike their poor neighbours. This dislike turns into stress which escalates and results in a breakup.
The rich who instigate this breakup are however seeding their own demise by doing this.
The Euro is a currency made up of both weak and strong currencies. This means that the strong currencies have been replaced by a weaker one and the weaker currencies have been replaced by a stronger one.
The Deutsche Mark was a strong currency. Germany now has a weaker currency. Germany likes this. They sell lots and lots of stuff because they have a weak currency. If all their products were priced in Deutsche Marks Germany would not be the economic powerhouse it is today.
Therefore if Greece leaves the Euro will appreciate post the initial knee jerk reaction. The Germans do not like this.
So what Germany does is that it forces Greece to swallow more debt and remain in the Euro.
Germany has forgotten how the victor should treat the vanquished.
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