Tuesday, February 3, 2015

The Germans should reflect on their own history concerning Greeks odious debt.

As in the aftermath of World War II, the Allies, remembering the disastrous consequences of German reparations after the First World War, did not insist on their pound of flesh as Germany and the EU does now with Greece. 
The entire Nazi public debt, amounting to over 600 percent of German GDP, was written off.
Further the German Federal Republic itself, after 1989, did not condemn the former East Germany to austerity as a remedy for its fictitious communist economy. Instead, Chancellor Helmut Kohl allowed the eastern states to exchange their nearly worthless Ostmarks for Deutsch Marks at the inflated rate of 1 to 1, and then poured the equivalent of more than a trillion Euros into the reconstruction of the eastern economy.
Germany lived well beyond its means during the Nazi era, plundering the rest of Europe as well. If Germany had practiced what they are now preaching for Greece, Germany today would be a much poorer country.
So now let’s couple Greek budget and tax reform with a large infusion of funds for economic modernization and public improvements in the spirit of the Marshall Plan and how it helped Germany after WW2?
Not with more funds but by writing down the Greeks EU debit by half so today and in the future Greeks young and old, instead of looking at 40 percent unemployment, could gain productive jobs. 
And the entire Greek economy would gain a big macro-economic boost and a path to greater competitiveness within the EU. 
Similar to how Germany handled the East Germany unification bailouts and relief.
Most importantly, the EU would gain the moral authority to work with Greeks on politically awkward reforms. It’s one thing to grudgingly tolerate technocrats who are bleeding you dry in order to satisfy bankers—quite another to work with development specialists who come to Greece bearing gifts.
As has been said the EU and the ECB could call it the Merkel plan, so that Chancellor Angela Merkel might be remembered not as the jackbooted German who destroyed Greece but as the wise European leader who tempered austerity with sensible mercy.

The time is here for the IMF, World Bank and ECB to immediately recognize and understand that Greece, like other poor countries or developing ones, that have enormous unsustainable odious debts, has very little capacity to repay such a debt.

Further it is morally and economically appropriate for Greek to refuse and question or recognize the legitimacy of this odious debt forced upon the Greek people and their economy.

Greece its government and citizens must not be held in this position of having to borrow more just to service a debt, and no longer be asked to service such a debt when it has little to no trade surpluses.

The one way to keep Greece and the EU economically and financially together and for Greece Greece to get out from under its debt is similar to that of how Germany got out of its debts after World War 2.

The current Greek repayable amount must be reduced by 50% and stretched out over 35 years. Also such a new agreement must state that repayments on this reduced loan are due only when Greece has a trade surplus and that repayments be limited to 5% of export earnings.

This would give the E U countries, the Euro Zone central bank and all creditors a powerful incentive to import Greek goods and thus greatly assisting Greece's new reconstruction. 

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Thanks for your thoughts, comments and opinions, will be in touch. Peter Clarke