Piketty Says Europe Should Yield on Greek Debt Forgiveness

At the same time, Piketty told Die Zeit about the importance of forgiveness, something that Germany seems to lack. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. The Empire repaid its debts through strict budgetary discipline. After ransacking their way through Europe and causing the deadliest war in the history of mankind, Germany had to pay billions to the rest of the world, on top of their outstanding reparations from World War I. Think about the London Debt Agreement of 1953, where 60 percent of German foreign debt was cancelled and its internal debts were restructured.

Greece’s financial future is increasingly uncertain after voters rejected proposed austerity measures, raising the specter of Greece possibly leaving the eurozone.

Piketty explains the Germans could turn around so fast because they adopted inflation control steps, taxed the super rich and most important of all – bagged a huge debt relief.

As Germany is all over Greece, trying to make the little Mediterranean nation repay its huge government debt by forcing the country’s top officials to come up with new measures time and again, Berlin is forgetting one very important point – the Germans have never repaid their own debts. “The French state suffered for decades under this debt”, the economist said. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. “It rarely follows our ideas of order or justice”. In 1960, Greece accepted 115 millionMarks as compensation for Nazi crimes but Greece has been insisting that Germany still owe them reparations.

Thomas Piketty, the French economist whose book “Capital in the Twenty-First Century” took the world by storm previous year, is back in the spotlight as Greece teeters on the edge of bankruptcy’s abyss. One was demonstrated by the British Empire in the 19th century after its expensive wars with Napoleon.

“For over 100 years, the British gave up two to three percent of their economy to repay its debts, which was more than they spent on schools and education”, Piketty said.

“Nonsense!” Piketty replied. “This had nothing to do with moral clarity; it was a rational political and economic decision”.

With curious timing, the global Monetary Fund released a report on Greece’s debt sustainability on Thursday, just before Greece’s weekend referendum. “We can not demand that new generations must pay for decades for the mistakes of their parents”, Piketty said. “If the Chancellor wants to secure her place in the history books, just like [Helmut] Kohl did during reunification, then she must forge a solution to the Greek question, including a debt conference where we can start with a clean slate”. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s.

In the 1950s, Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to post-war economic growth and peace.