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Wednesday, February 27, 2013

Greece helped post-war Germany recover. Where is reciprocity?

This is a powerful article comparing the debt approach today with that which was applied to Germany in 1953. The argument that Germany's creditors were 'generous' in 1953 on the grounds that this would allow Germany to become strong again, something which everybody wanted, is correct.

I would only add two points to this.

First, the debt forgiveness of 1953 was for an economy which held full promise that, if helped through debt forgiveness, it would become strong again.

And, secondly, that debt forgiveness didn't come just 'like that'. It took 8 years after the end of the war for Germany to achieve it and, during this time, enough evidence could be gathered about the prospects of what would likely happen to the German economy if it were forgiven debt.

As far as I tell, that Greece will eventually be given a very major debt forgiveness is more or less a fact. Some Germans have suggested more or less openly that probably the entire debt of Greee will have to be forgiven (ex-Chancellor Schmidt said more or less that in a TV interview). For whatever reasons (mostly political with a view towards upcoming elections), one still prefers to kick the can a bit more down the road before major decisions are taken. I am not saying that this is ok; I am just saying that this is a fact.

I would only argue that a debt forgiveness alone, as an action per se, would not change much in the Greek economy. One could forgive Greece its ENTIRE foreign debt (of the public as well as of the private sector; i. e. banks) and the Greek economy would still not be able to employ its people adequately. The only benefit would be that, after a debt forgiveness, Greece could borrow again heavily. That would, indeed, make things a lot better in the short term. In the longer term, it would just be a repetition of what happened since the Euro.

If a miracle happened and Greece would turn overnight into a well-structured economy with an efficient and adequately sized public sector, a debt forgiveness would work immediately (and I would venture to say that electorates in the North would have understanding for a debt forgiveness under such circumstances because it wouldn't look like throwing good money after bad).

One could, of course argue "Give us the debt forgiveness now and we will prove to you that we will achieve miracles". The Troika seems to argue "We will give you a debt forgiveness later provided that you prove first that you can achieve miracles".

Like anything in politics, one will probably end up with a compromise somewhere in the middle.

7 comments:

  1. Here is a personal request.

    The 'search-this-blog' function is no longer working. Does anyone have an idea what I could to to correct this problem?

    ReplyDelete
  2. I doubt there is anything you can do Klaus.

    A web search search for "blogger search not working" returns several like this Search not working on our blog

    CK

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  3. You say

    The Troika seems to argue "We will give you a debt forgiveness later provided that you prove first that you can achieve miracles".

    There is one thing that will help Greece: getting her richer people and industries to pay their fair share of taxes. That alone would be a start, and training bureaucrats whose first instinct is to get the job done and not think of how much cash they'll get is another.

    Both of those things have undermined the Greek economy for decades. Nobody looked at it, nobody has done anything about it. They enjoyed interest rates at 3% because it meant they could do less for longer.

    OffTopic

    Search: your other search tabs (linked to, beliebte links) are working. It may be that you hit a radio button - the problem with technology is "which one" and "where is it" both answers being so obvious as no to need any mention by the people who know where they hid them! It might have been that your search was corrupted in an update? I'll have a look and let you know. GL

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  4. I suggest you post the issue with the search box here:

    http://productforums.google.com/forum/#!categories/blogger/something-is-broken

    it appears to not be a known issue

    http://knownissues.blogspot.de/

    but no-cost technical support only really start to respond, when a lot of people start shouting about the same issue.

    Regarding "reciprocity". I found that article very irritating and moralising. Mind you, I find germans going on about how profligate greeks are to be just as irritating.

    the London Debt Conference, 1953 was in all parties' interests, basically.

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    Replies
    1. I too find it irritating when Germans belittle others or talk them down, and - believe me - we Austrians have quite a bit of experience with that. Mind you: Austria would today be another federal state of Germany if Bismarck had not insisted, back in 1871, to keep the Habsburgs out of the German union. Why? Because 'those Austrians' were too close to the Balkans and had adopted some of the 'uncivilized ways of the Balkans'; they didn't have the strength of character to qualify as Germans; etc. (all charges are part of the hurt Austrian psyche to this very day and Germans, of course, have a way of keeping such hurtings alive!). So much for that. When I heard of Steinbrück's comments on the 'two Italian comedians' yesterday, my first reaction was how can a senior official be so stupid?

      You correctly point out what the most important aspect of the 1953-deal was: "It was in all parties' interests". Most of all in the interest of those who did most of the paying (US) because they wanted a bulwark against the East. Given Germany's strategic importance, they wanted to have a say in what was happening in Germany. In today's speak: they wanted to interfer with Germany's sovereignty (which Germany didn't have at the time).

      I can't see in whose interest a debt forgiveness at this point would be. Of course not in the interest of the lending countries but I also fail to see how that should be Greece's primary interest at this time. Why invest energies into fighting for something now which you are going to get later on anyway and more or less as a matter of fact.

      Instead of a Debt Conference, I feel that there should be a Real Economy Conference. As I tried to explain in the article, a debt forgiveness alone won't produce much of a change in the Greek economy. A stream of foreign investments would. I once wrote an article titled "Don't send money. Send machinery & equipment, instead!"

      Personally, I think such a Real Economy Conference should have been the first thing to do as soon as it became apparent that the Eurozone was economically disintegrating. Why did it not happen? My personal opinion is: Europeans (and particularly their politicians) are very good at declaring themselves as 'Europeans'. When it come to putting your money where your mouth is, there are few 'Europeans' left. That does not only apply to today's lending countries. I would suggest that it applies to all. If I recall correctly, when the EU opened up to the East, one major issue was the reallocation of agricultural subsidies (for Poland, above all). The spirit of solidarity would have suggested that those who had previously benefited the most as recipients of such subsidies (above all France, but Greece also in an important way) would put on their generous hat and say "we received help when we needed it; now you need it and we will contribute some of what we have". And, if I recall, Greece was one of the most forceful opponents to giving up for redistribution any of the subsidies it had (if I recall correctly, Papandreou-father was accused of 'blackmailing' by some at the time).

      I simply don't see how 'real help for Greece' has much to do with the debt situation. All a debt relief would mean is that Greece could borrow again but that's not help in the sense of a real economy. What Greece needs more than anything else is jobs and the jobs won't come until there is investment in the real economy. I stop here because you are probably thinking now 'here he goes again...'





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  5. The blogger search problem is not new - I've found references to it dating back to 2009.

    There's a solution posted here Search not working It was posted in July last year, it might work here, but...

    And here's another alleged solution from Nov 2012 Create a Blogger search widget - same caveat

    If Blogger was an aeroplane it would have been grounded, but I'm not sure its any worse than the others, or better.

    The derived technologies used on the Web are quite good at hiding complexity, but they're even better at hiding the defects in the underlying, technologies «grin»

    CK

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  6. https://productforums.google.com/forum/?hl=en&fromgroups=#!category-topic/blogger/3-i6pKZa0n0

    MS

    ReplyDelete