Germany and the Greek Crisis: The Golden Rule

One should treat others as one would like others to treat oneself.

Adenauer and ChurchillIn London on February 27, 1953, an agreement was signed that effectively cut Germany’s debts to its foreign creditors in half.

To critics of Germany’s insistence that Athens must agree to more painful austerity before any sort of debt relief can be put on the table, the precedent serves as a blunt retort: the main creditor demanding that Greeks be made to pay for past profligacy benefited not so long ago from more lenient terms than it is now prepared to offer. (Pictured here: Churchill and Chancellor Konrad Adenauer, head of the German delegation.)

The 20th century offers a rich road map of policy failure and successes addressing sovereign debt crises. The good news is that by now economists generally understand the contours of a successful approach. The bad news is that too many policy makers still take too long to heed their advice – insisting on repeating failed policies first.

Source: The New York Times, July 7


4 responses to “Germany and the Greek Crisis: The Golden Rule

  1. Might this be because policy makers put the needs of the financial industry before all else?

  2. I’m no expert but my understanding is that the continued austerity which Germany is demanding is itself a “policy failure”: five years of it have left Greece worse off than ever. The counter-argument seems to be that until Greece’s economy is somehow nudged into growth mode, it can only sink deeper into a hole of more debt. And no-one seems to have a clue about how the Greek economy might be nudged toward growth. Presumably Germany’s situation in 1953 was very different in this respect.

  3. Elisabeth Ecker

    You can’t get blood out of a stone. The imposed austerity in Greece has decreased their economy by 25% which means 25% less in taxes. We always keep forgetting that money is only covered by the economy and a means of exchange. This system only works if economies are healthy and sensible safeguards are in existence. All the bailout money gave the money back to the lenders, encouraging them to do reckless lending in the future. There must be a system in place that makes it impossible for a country to have a permanent surplus and that money of the rich disappears in tax-heavens. A surplus in one country creates a deficit in another country with the consequential problems. Where is John Maynard Keynes when we need him?


    Have read details and commentary of the 1953 Agreement in recent days that identifies key flaws in attempted parallel. First, Eurozone (and IMF) IS offering Greece Aid. Second, Europe has already written-off some of the debt. Third, Greece is not in Post War ruin. Fourth, West Germany was not asked to pay East German share of Nazi debt in 1953, but did make major additional payment after unification. Fifth, Germany reparations to all its victims is in Trillions (in current $).There may need to be more flexibility in the austerity, but Greece – which put its priests on state salary and authorized unaffordable pensions for decades, and fraudulently misrepresented their finances to obtain entry in Eurozone (Chief Statistician confessed), can not expect the Europe (and its worried taxpayers) to not now draw clear lines as to the limits of aid. A repeat in Portugal, Italy, and/or Spain will bankrupt Europe. Is Greece trying to blackmail Europe by flirting with Russia and China, just as refugees from Syria sail en mass to its (and EU) shores?