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Von Clausewitz and the Politics of Debt: German War Reparations Owed Greece Re-Emerges as “Time Bomb”


Finan­cial watch­dog for the EU

Dave Emory’s entire life­time of work is avail­able on a flash dri­ve that can be obtained here. [2] (The flash dri­ve includes the anti-fas­cist books avail­able on this site.)

Joseph Goebbels, Hitler’s pro­pa­ganda chief, once said [3]: ‘In 50 years’ time nobody will think of nation states.’ 

COMMENT: In the ran­corous debate over the impo­si­tion of the dis­cred­it­ed and bru­tal “aus­ter­i­ty” doc­trine on trou­bled Euro­pean economies, an ele­ment of his­tor­i­cal real­i­ty has emerged.

We have not­ed in the past [4] that Greece’s eco­nom­ic prob­lems have been exac­er­bat­ed by Ger­many’s fail­ure to com­pen­sate Greece [5] for dam­age done dur­ing the occu­pa­tion of World War II.

Ele­ments with­in the Greek gov­ern­ment have com­piled a report doc­u­ment­ing the extent of the war com­pen­sa­tion owed Greece. Indeed, the rel­a­tive­ly lofty posi­tion of Ger­many and the dire cir­cum­stances envelop­ing the trou­bled euro­zone coun­tries can­not be prop­er­ly under­stood with­out grasp­ing the macro eco­nom­ic aspects [6] of the Sec­ond World War and the Ger­man occu­pa­tion.

(Our analy­sis should NOT be mis­un­der­stood as dis­miss­ing mis­man­age­ment of the economies of the trou­bled coun­tries. There were mis­takes aplen­ty and blame to go around, how­ev­er those mis­takes would have been much eas­i­er to rec­ti­fy had those coun­tries main­tained their own cur­ren­cies and not quaffed the Ger­man Kool-Aid.)

An impor­tant, char­ac­ter­is­ti­cal­ly inter­view from Der Spiegel (accessed by Ger­many Watch and excerpt­ed below [7]) ana­lyzes Ger­many and its self-con­scious manip­u­la­tion of the pol­i­tics of debt in the 20th cen­tu­ry. Ger­many has been the worst finan­cial trans­gres­sor of the 20th cen­tu­ry, its con­duct was absolute­ly delib­er­ate. 

As set  forth in anoth­er inci­sive post [8] from Ger­many Watch (which feeds at the right-hand side of the front page of this web­site), Ger­man manip­u­la­tion of inter­na­tion­al fis­cal mat­ters is a man­i­fes­ta­tion of the the­o­ret­i­cal prin­ci­ples advanced by Carl von Clause­witz. (This post, too, is excerpt­ed below.)

Max­i­miz­ing the dam­age to the soci­eties sub­ject­ed to Ger­man occu­pa­tion through the killing off of the edu­cat­ed class­es, the destruc­tion of eco­nom­ic and agri­cul­tur­al infra­struc­ture and, most impor­tant­ly, the delib­er­ate theft of wealth from the con­quered nations [9], Ger­many envi­sioned the bru­tal­i­ty of  World War II as part of an ongo­ing process of impe­r­i­al dom­i­na­tion.

The ongo­ing eco­nom­ic sub­ju­ga­tion of Europe is part and par­cel to that process and was long envi­sioned as such!

“Vast Greek War Claims against Ger­many Explode like a ‘Time-Bomb’ ” by Ambrose Evans-Pritchard; The Tele­graph [UK]; 4/9/2013. [10]

EXCERPT: Pre­mier Anto­nis Sama­ras held a spe­cial meet­ing with the for­eign min­is­ter Dim­itris Avramopou­los and oth­er key offi­cials this morn­ing to lim­it the diplo­mat­ic dam­age from the 80-page report.

The doc­u­ment – stamped “Apor­i­to”, or secret – was draft­ed by a pan­el of experts appoint­ed by the Greek finance min­istry and deliv­ered to offi­cials last month.

The alleged claim against Ger­many reach­es a grand total of €162bn, includ­ing €108bn for rebuild­ing the country’s infra­struc­ture after the Nazi occu­pa­tion from 1941 to 1944. This is 80pc of Greek GDP.

The probe was chaired by Pana­gi­o­tis Karak­ousis, direc­tor-gen­er­al of the Gen­er­al Account­ing Office at the Finance Min­istry, and relied on 190,000 pages of doc­u­ments scat­tered through the country’s min­istries and archives. . . .

. . . . The Greek for­eign min­istry said this morn­ing that the report would be sent to the State Legal Ser­vice “so that legal elab­o­ra­tion, assess­ment and set­ting out of the claims of the Greek State can be car­ried out and a rel­e­vant opin­ion sub­mit­ted.”

The report was first leaked to the Greek news­pa­per To Vima over the week­end in a sto­ry enti­tled “What Ger­many Owes Us”.

The pan­el con­clud­ed that Athens has legit­i­mate grounds to press claims. “Greece nev­er received any com­pen­sa­tion, either for the loans it was forced to pro­vide to Ger­many or for the dam­ages it suf­fered dur­ing the war,” it said.

The news­pa­per said the issue has “det­o­nat­ed like a bomb” at a crit­i­cal junc­ture when Greece is under intense pres­sure from cred­i­tors. “The gov­ern­ment should pub­lish all the find­ings and deter­mine its posi­tion on this sen­si­tive issue,” it said. . . .

. . . . There has long been a vocif­er­ous lob­by call­ing for war repa­ra­tions from Ger­many, with the so-called “Nation­al Coun­cil” call­ing for as much €500bn to cov­er stolen art work and the loss of 50pc of eco­nom­ic out­put over almost four years.

They claim that Germany’s debts were for­giv­en after the war at the Lon­don Con­fer­ence in 1953 – includ­ing its debts to Greece – and that Berlin should remem­ber that Germany’s Wirtschaftwun­der was built with US Mar­shal aid and Amer­i­can help. Some 300,000 Greeks died under the Axis occu­pa­tion, most­ly from star­va­tion.

Yet this report is an offi­cial doc­u­ment and car­ries the impri­matur of the finance min­istry. It is unclear what Athens hopes to gain by stir­ring up a high­ly emo­tion­al issue.

The report is cer­tain to be viewed by Ger­man offi­cials as a form of moral black­mail as tough talks con­tin­ue over each stage of Greece’s EU-IMF Troi­ka pro­gramme.

Sources in Greece say the doc­u­ment was pre­pared as a bar­gain­ing chip to be put away in a draw and used only if Ger­many and oth­er EU cred­i­tor pow­ers over­play their the hand, though the cir­cum­stances are murky. . . .

“Ger­many: the Biggest Debt Trans­gres­sor in His­to­ry”; Ger­many Watch; 11/8/2013. [7]

EXCERPT: . . . .SPIEGEL ONLINE: Mr. Ritschl, Ger­many is com­ing across like a know-it-all in the debate over aid for Greece. Berlin is intran­si­gent and is demand­ing obe­di­ence from Athens. Is this atti­tude jus­ti­fied?

Ritschl: No, there is no basis for it.

SPIEGEL ONLINE: Most Ger­mans would like­ly dis­agree.

Ritschl: That may be, but dur­ing the 20th cen­tu­ry, Ger­many was respon­si­ble for what were the biggest nation­al bank­rupt­cies in recent his­to­ry. It is only thanks to the Unit­ed States, which sac­ri­ficed vast amounts of mon­ey after both World War I and World War II, that Ger­many is finan­cial­ly sta­ble today and holds the sta­tus of Europe’s head­mas­ter. That fact, unfor­tu­nate­ly, often seems to be for­got­ten.

SPIEGEL ONLINE: What hap­pened back then exact­ly?

Ritschl: From 1924 to 1929, the Weimar Repub­lic lived on cred­it and even bor­rowed the mon­ey it need­ed for its World War I repa­ra­tions pay­ments from Amer­i­ca. This cred­it pyra­mid col­lapsed dur­ing the eco­nom­ic cri­sis of 1931. The mon­ey was gone, the dam­age to the Unit­ed States enor­mous, the effect on the glob­al econ­o­my dev­as­tat­ing.

SPIEGEL ONLINE: The sit­u­a­tion after World War II was sim­i­lar.

Ritschl: But right after­wards, Amer­i­ca imme­di­ate­ly took steps to ensure there would­n’t be a repeat of high repa­ra­tions demands made on Ger­many. With only a few excep­tions, all such demands were put on the back­burn­er until Ger­many’s future reuni­fi­ca­tion. For Ger­many, that was a life-sav­ing ges­ture, and it was the actu­al finan­cial basis of the Wirtschaftswun­der, or eco­nom­ic mir­a­cle (that began in the 1950s). But it also meant that the vic­tims of the Ger­man occu­pa­tion in Europe also had to for­go repa­ra­tions, includ­ing the Greeks.

SPIEGEL ONLINE: In the cur­rent cri­sis, Greece was ini­tial­ly pledged €110 bil­lion from the euro-zone and the Inter­na­tion­al Mon­e­tary Fund. Now a fur­ther res­cue pack­age of sim­i­lar dimen­sions has become nec­es­sary. How big were Ger­many’s pre­vi­ous defaults?

Ritschl: Mea­sured in each case against the eco­nom­ic per­for­mance of the USA, the Ger­man debt default in the 1930s alone was as sig­nif­i­cant as the costs of the 2008 finan­cial cri­sis. Com­pared to that default, today’s Greek pay­ment prob­lems are actu­al­ly insignif­i­cant.

SPIEGEL ONLINE: If there was a list of the worst glob­al bank­rupt­cies in his­to­ry, where would Ger­many rank?

Ritschl: Ger­many is king when it comes to debt. Cal­cu­lat­ed based on the amount of loss­es com­pared to eco­nom­ic per­for­mance, Ger­many was the biggest debt trans­gres­sor of the 20th cen­tu­ry.

SPIEGEL ONLINE: Greece can’t com­pare?

Ritschl: No, the coun­try has played a minor role. It is only the con­ta­gion dan­ger for oth­er euro-zone coun­tries that is the prob­lem.

SPIEGEL ONLINE: The Ger­many of today is con­sid­ered the embod­i­ment of sta­bil­i­ty. How many times has Ger­many become insol­vent in the past?

Ritschl: That depends on how you do the math. Dur­ing the past cen­tu­ry alone, though, at least three times. After the first default dur­ing the 1930s, the US gave Ger­many a “hair­cut” in 1953, reduc­ing its debt prob­lem to prac­ti­cal­ly noth­ing. Ger­many has been in a very good posi­tion ever since, even as oth­er Euro­peans were forced to endure the bur­dens of World War II and the con­se­quences of the Ger­man occu­pa­tion. Ger­many even had a peri­od of non-pay­ment in 1990.

SPIEGEL ONLINE: Real­ly? A default?

Ritschl: Yes, then-Chan­cel­lor Hel­mut Kohl refused at the time to imple­ment changes to the Lon­don Agree­ment on Ger­man Exter­nal Debts of 1953. Under the terms of the agree­ment, in the event of a reuni­fi­ca­tion, the issue of Ger­man repa­ra­tions pay­ments from World War II would be new­ly reg­u­lat­ed. The only demand made was that a small remain­ing sum be paid, but we’re talk­ing about min­i­mal sums here. With the excep­tion of com­pen­sa­tion paid out to forced labor­ers, Ger­many did not pay any repa­ra­tions after 1990 — and nei­ther did it pay off the loans and occu­pa­tion costs it pressed out of the coun­tries it had occu­pied dur­ing World War II. Not to the Greeks, either. . . .

“The Con­tin­u­a­tion of War by Oth­er Means”; Ger­many Watch; 8/30/2011. [8]

EXCERPT: Gen­er­al Otto von Stuelp­nagel who ruled France for Hitler from 1940 to 1944:

“What does a pro­vi­sion­al defeat mat­ter to us if because of the destruc­tion of man­pow­er and mate­r­i­al which we will have been able to inflict on our ene­mies and neigh­bour­ing ter­ri­to­ries, we have obtained a mar­gin of eco­nom­ic and demo­graph­ic supe­ri­or­i­ty greater than before 1939? The con­quest of the world will require numer­ous stages, but the essen­tial is that the end of each stage brings us an eco­nom­ic and indus­tri­al essen­tial greater than that of our ene­mies.”

“With the war booty which we have accu­mu­lat­ed, the enfee­bling of two gen­er­a­tions of the man­pow­er, the destruc­tion of the indus­tries of our neigh­bours and that which we can save of our own, we shall be bet­ter placed to con­quer in twen­ty-five or even fifty years than we were in 1939. The inter­val of twen­ty-five years is a lim­it­ed inter­val, for that is the time which will be required for Rus­sia to repair the destruc­tion we have vis­it­ed on her.”

The mem­o­ran­dum men­tioned some of the elab­o­rate devices by which the rulers of Ger­many would seek to evade a Just peace; “We do not have to fear peace con­di­tions anal­o­gous to those which we would have imposed because our adver­saries will always be divid­ed and dis­unit­ed. Our ene­mies rec­og­nize already that the 1919 for­mu­la, ‘Ger­many will pay,’ lacked sense and worth. We will fur­nish them some brigades of work­ers, we will restore some art objects or out-of-date machines, and we can always say that those which we do not restore were destroyed by ene­my bom­bard­ments.
We should imme­di­ate­ly pre­pare as cam­ou­flage a list of such objects destroyed by Anglo-Amer­i­can bombs.”

The basic aim of the Ger­man plan, in 1945 as in 1918, was to secure a final peace set­tle­ment, no mat­ter how severe it may appear on the sur­face, or how hard on the Ger­man peo­ple, which would leave Ger­man eco­nom­ic pow­er intact.

In 1915 a man called William Bain­bridge wrote a detailed report about Germany’s Polit­i­cal class for the US gov­ern­ment. It is Doc­u­ment 26, First Ses­sion of the 68th Con­gress of the Unit­ed States. The doc­u­ment was writ­ten from tran­scripts of a con­ver­sa­tion with a supe­ri­or Ger­man Offi­cer in Berlin about their plans for a post-war cam­paign.

Dur­ing the con­ver­sa­tion, the Ger­man offi­cer revealed; “The imme­di­ate com­peti­tors in the eco­nom­ic and com­mer­cial world will be so crip­pled that, when it is all over, the Ger­mans will be out­selling them in the mar­kets of the world long before they can get on their feet. Fol­low­ing the war, there will be eco­nom­ic hell. We will set class against class, indi­vid­ual against indi­vid­ual, until the nations will have pret­ty much all they can cope with at home, and not both­er with us.” Ref­er­ence this with the great depres­sion, and Ger­many’s appar­ent manip­u­la­tion of mar­kets — Ger­manys Long Game?

The rea­son this Ger­man Offi­cer could be so con­fi­dent about this, is that he knew the Ger­man polit­i­cal class and heads of indus­try, had always accept­ed that to achieve their aims of a Ger­man empire could take 100 years. They knew it would take both mil­i­tary and covert peace oper­a­tions using ter­ror­ism and finan­cial chaos to achieve their Pan-Ger­man dream. As ear­ly as 1922, Ger­many was already re-arm­ing, and had moved its air­craft pro­duc­tion to oth­er Euro­pean states using ‘front’ com­pa­nies. It also had vast sums of wealth hid­den in neu­tral coun­tries, includ­ing (accord­ing to the Neue Zeuch­er Zeitung, June 1919) ‘emi­grat­ed cap­i­tal’ in Switzer­land of 35 bil­lion Marks! The manip­u­la­tion of finan­cial mar­kets in the 1920s was just one of many Ger­man post-war cam­paigns using non-offi­cial Ger­man funds. . . .