Sunday, January 11, 2015

Greece: Not War Loan or Not. Instead, Loan or Not!

The forced loan to Nazi-Germany has finally made it into a headline of Der Spiegel. That is a remarkable event! I have expressed my opinion on several occasions: a loan is a loan, and a loan only disappears when it is either repaid or forgiven. That is really not a question of war loan or not. It's a question of loan or not.

It would really be in the benefit of all sides if this issue could be cleared up once and for all. Provided, of course, that it is kept separate from the negotiations about Greece sovereign debt.


  1. " Provided, of course, that it is kept separate from the negotiations about Greece sovereign debt."

    In the memorandum, there is a clause, that for most people, especially foreigners, passes unnoticed. It says that Greece will not repay the loans it receives after calculating eventual "greek claims on other parties". To put it simply, Greece won't be able to say "i owe you 50, you own me 20, so i pay you 30". Now, the only such country that this clause would apply to, is Germany.

    Tsipras 2 days ago, said he will claim the occupation loan from Germany. Mind you, he said nothing about war reparations, like he used to. Of course, he will get nothing, unless Germany has the political will to give back the loan, which she doesn't. But it brings votes, so Tsipras presents it as sure thing.

    Without Germany willing, there is no legal means to confront Germany. The options are:
    - The International Court of Justice: Germany refuses to recognise cases before 2008.
    - Unilateral action on Greece's part (seize german assets in Greece). Politically impossible.
    - Call of an assembly of the Arbitration Court according to London 1953 Treaty. In this court, Germany can choose 4 out of 10 foreign judges of her liking. Greece can choose none. Plus, it would be like digging in a grave, calling upon a 1953 court... Politically unacceptable.

    So, it is pointless to say that "a loan is a loan", when there is not really a third party authority that can force the payment or in case of dispute, judge it.

    So, Germany will continue to deny, Greece can only do some reputation damage to Germany and that's it. For instance, in Italy, most newspaper commentators now know about that and the war reparations and say "why did we pay reparations?".

    1. The German government may not be willing but what if German public opinion gets involved in this issue. Don't mistake the German people to be completely egotistical without any sense of conscience and responsibility. That's why I thought it was a major event that Der Spiegel would put this on its fron page.

    2. Mr. Kastner,

      If there was a chance for the german public to do anything about it, this chance was gone the moment Greece asked for loans in 2010. I have seen and read countless accounts of Greeks that live in Germany for 20-30 years or even their children, that all describe, this peculiar financial racism. Saying alone "i am greek", was enough to get any kind of insult.

      This is typical exactly in countries where debt is sin. My own nephew happened to study in UK. He as well as many other greek students there, couldn't even find a house to rent. My nephew, from a very rich family, would propose 1 year of rent anticipated and they still wouldn't rent him a room! His mother was going insane.

      I won't bother you with finding video or written accounts of Greeks in Germany with similar stories. And i have google translated occasionally discussions in german newspapers and seeing the comments, i don't think i remember one that was positive.

    3. Again, I have a different opinion, but opinions are opinions.

    4. Mr. Kastner,

      It is impossible for people who have lived different experiences and in different countries, to comprehend a reality that they have never seen.

      I think, though that this is indicative. As you very well know, Germany up until now, has gain several dozens of billions in a way or another from this crisis (despite what Germans believe).

      Italy, is also a creditor to Greece and has gained nothing from the crisis. It's actually in a crisis of its own, although much less severe.

      If you search google for "Greece owes us money" in italian, you will not find 1 italian article. The results are about german war reparations owed to Greece. Funny isn't it. Give it a try.

      Why one would wonder. For the same reason that a German politician like him would never get 25% of the vote and would never go to the catacombs to address a new year's eve message to his compatriots:

      He also speaks german for a while if you watch it. You know one thing he says? "Because, us Italians, are different". And this is also the reason, for which the EU in the way it functions today, is a time bomb. And this is how this man ends up with 25% of the vote and doesn't look like any politician one sees in Germany. Even more impressing? He isn't neither of right nor of left. He has mixed positions that range from extreme left to extreme right. The main glue is the need to "escape from the euro".

      And he alone is the proof that the EZ is sitting on a time bomb unless something in the way it functions changes.

  2. " a loan only disappears when it is either repaid or forgiven. "

    According to greek legals, there is a 3rd option. You don't pay it for long enough, so that if at some point, you do accept a legal arbitration, you can advance the position that since it hasn't been served for so long, it has fallen into prescription. It's what Germany is doing.

  3. A loan forced at gunpoint from a beaten enemy is just collateral damage. Why should war loans be unfarly privileged over retributions for other damages? They are not. This has been settled together with the other claims, no matter how much the Greeks dream of a hidden fortune waiting for them.

    1. Well, that is the key question, isn't it? I. e. whether the loan was a loan or whether it was part of war damages. If it was the latter, I agree that the case is closed. But it looks like it was the former.

    2. Let's not beat around the bush: That money was stolen from Greece, the Nazis certainly didn't intent to pay for that. Just like czechoslovakian LT-35 tanks were stolen or french Gnome-Rhone engines. Neither the Czechoslovaks nor the French did get their loss fully reimbursed. That all was settled in 1953 (for a damn good reason, to not repeat the mistake of Versailles!). Why should there be any special treatment for the Greeks? Doesn't make any sense to me.
      Nevertheless, I'm for a favorable treatment of Greece reagarding the debts. Eventually, Germany should cover a large part of the inevitable debt relief. But not as official reparation payment, or else this would reopen the Pandorra's box closed in '53! And not now, or else the Troika would lose a lot of leverage necessary for reforms and the next Greek government would start spending freshly borrowed money again.
      Life isn't fair, and war is hell, period. Desastrous wrong can never be fully repaired, that's just impossible.

      Btw, what about the Italians? THEY started the war against Greece (Hitler didn't want that) and I've read they received a part of that phony loan. What about them, really? Shouldn't they contribute more to the Greek misery, too?

    3. Stolen yes, but recorded as a loan. And --- the Nazis did service the loan as long as they were in power, giving credence to the fact that it was a loan. Only the new German government stopped servicing the loan. Everything I have read about this subject says that if it could be shown that it was a loan, Germany would still owe the money.

      The Italian part I was not aware of. Interesting point!

  4. Well, I've read it was a zero interest loan (makes sense, "at gunpoint"!), so what was there to service?

    But let's assume that loan of RM 476 millions is legally still unsettled. Now, loans are not subject to inflation adjustment, they are repaid at nominal value plus interest. And the bad old Reichsmark, a rather weak currency, converted to Deutsche Mark in 1948 at a rate of whopping 0,65 DM for 10 RM. Well, Greece should have demanded the about 31 million DM back then, but they didn't. So, this credit has to be converted once again, into Euro, at a rate of about € 0.5 for 1 DM. Ok, now that I think about this again, I guess we shouldn't be nitpicking and repay that generous credit to Greece, all 15.5 million Euros of it. Ha, let's be nice and pay 16 millions, let them keep the change!

    1. You're the banker here, not me, Klaus -can you confirm that my calculation is correct? Even with interest piling up, there is no way a 476 million reichsmark credit can lead to a 15 billion repayment today! I suspect some Greek politician confused millions with billions when calculating this.
      The details of the loan would be interesting, though. In which currency had it been given, which interest rate was promised? Did you find a relevant document about this? Media reports are more confusing than specific, sadly.

    2. I suppose the recent Greek inquiry into all this would provide the necessary information. I do not believe any of it is public.

      I am sure that, when the loan was made/forced, the agreement did not spipulate anyting about what would happen if there were a successor currency to the RM or whatever. After all, the RM was supposed to last at least 1.000 years...

      So even if both sides agreed that it was a loan and that it is still unpaid, the real fight would only begin because there are so many ways to calculate todays value of it. You come to 16 MEUR, a fanatic Greek came to 70 BEUR or even more, etc. I once read a rather serious hypothetical calculation in a rather serious German paper and, if I recall, they came to about 7 BEUR in today's value.

      In short, this is simply a can of worms which could only be solved by a negotiated agreement. But it takes two to negotiate...