As German leaders continue to pressure Greece over its debt, French economist Thomas Piketty says Germany, “has no standing to lecture other nation” when it comes to repaying creditors.
In a forceful interview with German newspaper Die Zeit (translated by Gavin Schalliol on Medium), Piketty chided Germany for what he called, ”their shocking ignorance of history.”
Piketty said that while Germany never repaid its massive debts after both world wars, it has continuously demanded other nations, especially Greece, to pay theirs.
After Hitler’s defeat in 1945, Germany’s debt was more than double the country’s GDP. After ransacking their way through Europe and causing the deadliest war in the history of mankind, Germany had to pay billions to the rest of the world, on top of their outstanding reparations from World War I.
However, as Piketty — who last year rose to prominence with the publishing of his book on inequality “Capital in the Twenty-First Century” — pointed out, a great amount of German debt was forgiven over the years.
This includes the cancellation of 60% of the country’s foreign debt at the London Debt Agreement of 1953.
Today, however, Germany is certainly not going as easy on Greece.
“When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke!” Piketty said.
More from Piketty:
Germany is really the single best example of a country that, throughout its history, has never repaid its external debt… However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.
Greece tried raising this issue in April, when it’s leaders unsuccessfully demanded Germany pay them €278.8 billion ($US303 billion) for Nazi war crimes.
Piketty believes that Greece should receive the same package that Germany got: inflation, a tax on private wealth, and debt relief.
He says that current measures being recommended to Greece mimic the reparations and “strict budgetary discipline” imposed on the British Empire in the 19th century after starting wars with France.
“For over 100 years, the British gave up two to three per cent of their economy to repay its debts, which was more than they spent on schools and education,” Piketty said.
When Die Zeit reporter Georg Blume explained that Germany’s reparations were eased after World War II because the enormous debt from the previous war helped Hitler rise to power, Piketty strongly disagreed, saying:
This had nothing to do with moral clarity; it was a rational political and economic decision. They correctly recognised that, after large crises that created huge debt loads, at some point people need to look toward the future. We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s. We need to look ahead.
Piketty called for a conference to address all of Europe’s debt, like after World War II. He believes that legislators should be given a more substantial role in their countries’ budgetary processes.
“To undermine European democracy, which is what Germany is doing today by insisting that states remain in penury under mechanisms that Berlin itself is muscling through, is a grievous mistake,” he said.
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