The whole world is closely watching the situation unfolding in Greece. This country may become a trigger to start a chain reaction leading to the collapse of united Europe. A default on public debt (exceeding 320 billion euros) will be followed by a default of Greek bonds holders. Nobody can make a forecast to predict the economic and political consequences.
There is one more aspect of the problem to take into account as it may entail long-term ramifications. Greece put the issue of reparations into the fore. Before that media reported that that Germany owes Greece nine billion euros as a compensation for the damage inflicted during the First World War.
It was widely believed that all discussions related to reparations are a thing of the past as 70 years have passed since the hostilities ended and the only reason the war could be remembered is to draw lessons from history. But Western creditors drove Greece against the wall. For Athens the memories of the tragedy are still vivid enough to make it put forward demands for financial indemnity. Witty journalists called it the monetarization of history. Far-sighted experts believe that Greece can set a bad example to be followed by those who face financial woes. (1)
The idea of putting forward demands for financial reparations is not new. The trials and tribulations the Greek people went through during the war have never been completely forgotten. Fascist Italy led by Mussolini tried to conquer Greece. Then Nazi Germany invaded the country. Greece was occupied in 1941-1944. Crete and the Aegean islands were under German yoke till the very end of WWII. The occupation years were the time of hunger and cold. The country lost 250-400 thousand people. 40 thousand more were executed. 210 thousand Greeks were transported to Germany to be subjected to forced labor. The country’s economy was in ruins with houses and infrastructure destroyed. According to official data, 1170 urban areas and 401 thousand buildings were destroyed, 906 ships sunk and 129 bridges demolished. The country was plundered. Under the Germany’s pressure the Bank of Greece had to grant a large credit that was never paid off. Greece lost thousands of tons of precious metals taken from the country by Nazis.
In 2012 the debt was restructured and situation got better. Then the clouds gathered to make the issue rise again. The government of New Democracy Party in coalition with PASOK (the Panhellenic Socialist Movement) led by Antonis Samaras did not put forward the demands for reparations to be paid by Germany. But the issue was in the focus of discussions held by parliament and government to send a message to Berlin. Back then the sum of reparations was mentioned for the first time. According to estimations, the amount was 162 billion euros to include 108 billion euros as the reparations for the damage inflicted during the years of occupation and 54 billion euros to repay the credit granted by the Bank of Greece. According to Greek experts, the sums were much lower than the initial assessments «discounted» by cautious politicians.
In January 2015 the Coalition of the Radical Left, mostly known by its acronym Syriza, came to power and the demand for reparations hit the agenda once again to become a burning issue. Greek Prime Minister Alexis Tsipras ordered the government to prepare documents for filing lawsuits in international courts. The government made its own calculations. In early April it said Germany owed Greece 279 billion euros, or 1, 7 times more than previously stated. The sum is equal to 88% of Greece’s sovereign debt. The redemption would make Greece the most well-to-do country in eurozone and the European Union as a whole. Greece has an axe to grind.
During the recent two years Germany has been saying it had no intent to pay. According to German government, the reparations have already been paid (115 million German marks). Berlin believes there is no legal ground to claim reparations anymore.
The issue of WWII reparations is very complicated. It was much easier after the First World War. Back then the total amount was defined as well as the quotas for each country to be compensated. There were mechanisms in place to collect, count and distribute the money. It was different after the Second World War. The issue was on the agenda of Yalta (February 1945) and Potsdam (July-August 1945) conferences.
There was no agreement reached on precise sums.The percentage of reparations which each country was to receive was decided at an 18-nation conference held in Paris in November and December, 1945. The conference established the Inter-Allied Reparations Agency, composed of a representative of each of the nations, to allocate German reparations payments. The reparations plan was based on the assumption that Germany would have a unified economic system despite its division into four zones of occupation. Unification, however, never occurred. It made impossible to implement the decisions of Paris conference. The emergence of two German states dotted the "i's" and crossed the "t's". The issue was off the agenda since then.
The Treaty on the Final Settlement With Respect to Germany (or the Two Plus Four Agreement) was negotiated in 1990 between the Federal Republic of Germany and the German Democratic Republic (the eponymous "Two"), and the Four Powers which occupied Germany at the end of World War II in Europe: the Soviet Union, France, the United Kingdom, and the United States of America. In the treaty the Four Powers renounced all rights they held in Germany, allowing a united Germany to become fully sovereign the following year. The issue of reparations was not mentioned. That’s what Berlin uses as an argument.
There are many legal and political nuances here to be studied by Greece and the Russian Federation. Even according to Western estimates, the reparations received by the USSR accounted for no more than 3-4% of real damage inflicted during the war. The 2+4 agreement was necessary but it did not cover all the issues.
Only a comprehensive multilateral treaty could finally solve all the problems related to the Second World War. In a way, the Helsinki 1975 Act was a treaty addressing these problems. But today its provisions are violated (especially the clauses on inviolability of national borders) by the West. For instance, a war was unleashed in Yugoslavia followed by the partition of the country. The current Greek government says Greece was not part of the 2+4 treaty and the document is not an obstacle on the way of putting forward claims for reparations to be paid by Germany.
Athens remembers the both world wars. After the First World War Germany was to pay off credits and loans that had been granted to it before 1914. Besides, in 1919 the Paris conference resulted in theTreaty of Versailles which had a provision setting the stage for very high reparations Germany was supposed to pay. The West was soft enough. It displayed «understanding» on many occasions and agreed to put off payments and write off some of the debt. In 1933 Hitler came to power to stop all payments. The «tolerant’ West had to put up with the fact. This dubious policy continued after the Second World War. The last debt that had to be paid in the XX century was finally redeemed only in 2010.
Today Athens remembers the London 1953 Agreement on German External Debts, also known as the London Debt Agreement, which actually was a debt relief treaty between the Federal Republic of Germany and creditor nations. The London Debt Agreement covered a number of different types of German debt from before and after the Second World War. Some of them arose directly out of the efforts to finance the reparations system, while others reflect extensive lending, mostly by U.S. investors to German firms and governments. Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact. The Germany’s yearly debt burden after 1953 never exceeded 5% of the income the country received from exports. (2)
Today experts have no doubts there would have been no German economic miracle, if it were not for the London 1953 agreement. Germany would be in the same plight as Greece. Athens sends a message that Germany could be magnanimous enough to offer Greece the conditions comparable to the ones offered to Germany in 1953.
Greek and the experts of other countries realize that the Western creditors change their policy on case to case basis. They tacitly pursue political aims. In the 1920s-1930s the Entente was tough on Germany to bring Hitler to power. Back then they stuck to «the worse, the better» policy. The London 1953 agreement was reached under the conditions of Cold War to create a counterbalance to the Soviet Union in Europe.
Looks like some circles under the certain are purposefully provoking the default of Greece to shake Europe. But Greece remembers the First World War for other purposes than making Germany recall its own history and be generous and reasonable. Athens continues its offensive on the reparations front. Last week the Greek State General Accounting Office came up with a report stating that Germany owes Greece 9 billion euros in reparations from the First World War. The report states that Greece was due to receive 0.4 percent of the total reparations due to be paid after the First World War. Berlin was due to pay in 37 installments but Greece only received 1.5 percent of the total (47 million marks according to the prices of 1952) by the time the Lausanne Conference was held in the summer of 1932, when Great Britain and France decided to suspend demands for reparations payments from Germany (90%) due to the onset of the Great Depression. However, Greece was not a signatory to the agreement so the claims still stand and are now the equivalent of 9 billion euros, the report stated. The decisions were taken by «great powers» to pave the way for Hitler (the would-be messiah) rising to the top. (3) Nobody took into account the opinion of small countries like Greece.
Today Greece does its best to avoid default. The issue of reparations for the damage inflicted in the First and Second World Wars is very problematic. But the possibility exists that the sovereign debt may be restructured taking into account the reparation demands. Berlin is ready for a fierce fight. It is afraid of setting a precedent to be used by other states, including Russia.
At all events, the reparation initiatives launched by Athens are not useless. They make remember the tragic events of the XX century and the lessons to be drawn.