Renowned German «efficiency» is opening up a grievous rift within the European Union in the wake of the Greek No vote to EU-imposed bailout austerity. Not only that. The famed Germanic mechanical methodology is threatening to tear Europe asunder from runaway financial debts – the very Europe that Berlin claims to be upholding.
The German government’s steely insistence on Greek debt obligations without any financial relief is in marked contrast to a new softer, more accommodating attitude from France, Italy and Spain. No doubt the latter group are only too fearful that Greece’s economic catastrophe is but a prelude for their own and a wider European social and political meltdown.
The day after Greece’s landmark referendum, which saw a resounding No vote cast by over 61 per cent of the participating electorate, German Chancellor Angela Merkel held an emergency summit in Paris with French President Francois Hollande. Britain’s Daily Telegraph reported that the two main principals of the EU bloc «clashed» over their differing response to the Greek people’s mandate for an end to economic austerity.
Merkel, as with other German government officials, remains adamant, saying that Greece must continue to implement swingeing budget cuts and deep economic «reforms» such as wholesale privatisation of industries and other publicly owned assets. For Berlin, any talk of debt cancellation, or even partial relief, is out of the question.
By contrast, the French leader emphasised a more sympathetic attitude for European «solidarity» with the Greek population who have been ravaged by nearly five years of draconian economic cuts. The more nuanced view in Paris, compared with Berlin’s, is that doctrinaire austerity policy dictated to Athens is simply not working. Moreover, it is positively damaging and counterproductive. The hair-shirt approach of financial probity favoured by Berlin in particular has only served to wreck the Greek economy, driving up unemployment, poverty and – paradoxically – compounding more and more national debt. Even the International Monetary Fund (IMF) has belatedly acknowledged that Greece’s arrears have become un-payable and that the country faces decades of economic doldrums if the present arrangement prevails.
‘Germany refuses to let Greece off the hook’, was how the British Daily Telegraph’s headlined put the clash between Merkel and Hollande. It noted: «The crisis in the eurozone was set to escalate on Monday night after the Germans said they could not write off Greek debts without offering financial assistance to Ireland, Spain and Portugal».
Britain’s Guardian newspaper also reported: «Heads of government at odds as Germany and European Commission let Greece stew while France, Italy and Spain are impatient for a [debt] deal».
The central contentious issue is one of debt relief. Following the referendum, Greek Prime Minister Alexis Tsipras convened with his nation’s opposition parties and produced a rare consensus between Greece’s Left and Right politicians. «All Greek main parties want negotiations to include a discussion of relief from the country’s debt load – a key sticking point with creditors», according to the New York Times.
While France and some other EU member states realise that a viable solution to the Greek crisis must involve a degree of debt forgiveness, Berlin is trenchant in its demands for austerity in order that Athens fulfils all outstanding repayments. Germany is Greece’s biggest creditor to the tune of $60 billion, with France second at around $40 billion. Between them that constitutes about a third of Athens’ total debt.
Germanic ironclad logic – while a formidable attribute in other realms of human endeavour – appears to be barring the only sensible and democratic solution to overcome the Greek crisis. Berlin’s domineering mindset is also blinding Germany to what should be a chastening historical fact. No other European nation has benefited so much from debt cancellation in the past than Germany itself.
Back in 1953, Western governments gathered in London and took the far-reaching decision then that Germany’s Second World War debts had to be written off – as a matter of necessity. Both Washington and London knew that such financial relief was essential if the then newly formed West Germany was to have any chance of achieving national and economic reconstruction. The Western allies were also motivated by a desire to ward off the Soviet Union as a competing geopolitical rival.
As Nick Dearden further explains, the Western allies were acutely mindful, too, that onerous World War I reparations had partly fuelled the rise of Nazism in Germany during the 1920s and 30s leading to another more deadly international conflict. Therefore, given the parlous state of Germany following the Second World War, there were real concerns that history may once again repeat if measures were not taken to alleviate Germany of its onerous debts. Financial accounting was sidelined.
To that end, Germany’s total war debt was slashed 50 per cent by international creditors including the US, Britain, France and Spain. Also among the international creditors forgiving German debt was Greece, even though the country had suffered enormously from brutal Nazi occupation.
«Following the London deal [in 1953], West Germany experienced a ‘economic miracle’, with the debt problem resolved and years of economic growth», writes Dearden.
It is a cruel irony that today’s economic powerhouse of the European Union – Germany – only gained its prestigious position because other European countries acquiesced to the exigency of debt relief for the German people. Post-war Greece, among others countries, took the political decision that strictly applied financial obligations are sometimes best obviated. Painful as the decision may be, sometimes a higher purpose of collective reconstruction and reconciliation is altogether more efficacious and ethical than narrowly adhered-to accounting measures.
One contemporary estimate, according to the Washington Post, is that Germany is liable for up to $170 billion in World War II reparations to Greece. During Nazi occupation from 1941-44, hundreds of thousands of Greeks were starved to death and more than 50,000 people were executed by the German SS and their collaborators, under a heinous policy of collective punishment and reprisals.
Earlier this year, Greece’s anti-austerity Syriza government raised the issue of German war reparations, only to later drop it, for some unknown reason. Perhaps, Prime Minister Tsipras should think about revisiting the subject. Not for the purpose of recrimination and dwelling in the past to re-open old wounds. Rather, the pertinent point is reciprocation. Also, a profound reminder that financial debt can often become a numerical monster dictated by insentient logic, to which rigid obedience only acts as a disservice to bigger collective humanitarian and social needs.
In any case, there are sound economic and legal reasons for why Greece’s current debt should be relieved – if not cancelled altogether. Creditor profligacy in lending vast sums of capital to unaccountable and corrupt former Greek governments has now become a millstone around the Greek people’s neck. The population is suffocating from grinding poverty and hardship. Food and medical supplies are in danger of running out as the country’s banks teeter on collapse.
Nevertheless, like the Shakespearian character Shylock in The Merchant of Venice, Berlin keeps demanding that the debt must be repaid and the austerity regime maintained. Germany’s Deputy Chancellor Sigmar Gabriel has coldly said that rather than further financial bailouts, the EU must instead make preparations to send Greece humanitarian aid.
Using bizarre logic, Gabriel accused Greek premier Tsipras of «tearing down the bridges between Europe and Greece» by his giving the go-ahead to hold a popular referendum on EU austerity.
The truth is that it is the unbending dogmatism of German leaders in their neo-liberal economic «orthodoxy» that is tearing down bridges and the social fabric all over Europe, where more countries are facing a Greek-style meltdown. The entire 28-member EU as a political entity is in danger of drowning and crashing like flotsam from the economic water boarding that the Berlin-led creditors are demanding of Athens.
No country more than Germany should appreciate the crucial importance of cancelling debts, especially when the blind pursuit of those debts has come to pulverise all other considerations.