The austerity policy being forced on Greece by Germany and the eurozone cannot command democratic consent over time. The last time Germany needed a bail-out from world creditors, it secured better terms than shattered Greece last week.
By Ambrose Evans-Pritchard
7:21PM GMT 12 Feb 2012
The US, Canada, Britain, France, Greece, and other signatories at the London Debt Agreement of 1953 granted Chancellor Konrad Adenauer a 50pc haircut on all German debt, worth 70pc in relief with stretched maturities. There was a five-year moratorium on interest payments.
The express purpose was to give Germany enough oxygen to rebuild its economy, and to help hold the line against Soviet overreach. This sweeping debt forgiveness caused heartburn for the British - then in dire financial straits, themselves forced to go cap in hand to Washington for loans. The Greeks had to forgo some war reparations.
Yet statesmanship prevailed. The finance ministers of the day agreed to overlook the moral origins of that debt, and the moral hazard of “rewarding” a country that had so disturbed the European order.
The Wirtschaftswunder whittled down the burden of German debts to modest levels within a decade. Germany emerged as a vibrant democracy and a pillar of the western security system.
Greece has less strategic relevance, and must comply with tougher terms.
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