By Lucy Komisar
April 18, 2015

German Finance Minister Wolfgang Schäuble spoke at the Council on Foreign Relations on Wednesday. With a politician‘s practiced spin, he declared that Germany didn‘t owe any money from billions it had extorted from Greece during its World War II occupation, because for a period after the war, it had no sovereign government. WHAT!

 Lucy asks Schäuble to explain difference in morality of Germans and Greeks repaying debts.

According to Forbes, the amount owed to Greece, without interest, in today‘s money, would amount to $14 billion. With interest at 3% over 66 years, that would come to at least $95 billion.

The Greek debt is $341 billion. The latest cliff-hanger debt repayment to the IMF was $486 million. Done with money that could have gone to health care, pensions, jobs. Do the math.

I asked Schäuble: “What is the moral distinction between the obligation of Greece to pay back loans that were negotiated by previous corrupt governments and Germany‘s obligation to pay back the loan that the Nazi government extorted from Greece?”

GOVTS HAVE TO PAY PAST GOVT DEBTS, EXCEPT IF THEY ARE NAZIS

On Greece paying its debts, he said: “The problem of Greece is not the problem of whether former Greek governments have been a better legitimization than the given government. That is always in democracies. The people elect in a parliament or a president and then this is a given government, and the next government has to take liability from the former government. Otherwise, you can‘t”it‘s difficult to get the world in a”in a civilized”(inaudible).

“Whether Greek governments have been corrupt or not, it‘s not the subject to be judged by others. And of course, we know fighting corruption is not only in Greece a problem, but in a lot of member states.

“But having said this, the problem of Greek is not the loans given. The problem of Greece is the lack of competitiveness. And the problem of Greece is that Greece has enjoyed, since having joined the Eurozone, low interest rates. And they didn‘t use this opportunity to increase their competitiveness, what has been the assumption in joining the Eurozone.

Wolfgang Schäuble answers Lucy’s question.

But on Germany paying its debts, everything was reversed. “So what is the German, you can‘t”would you really compare a former Greek government with the Nazi”with the Nazi times? It makes no sense.

Does he mean that if a government is really bad, criminal, murderous, genocidal, it doesn’t have to pay its debts?

Schäuble: And having said, I would like”I have been born in 1942. I have the memory that in”since 1945, Germany had not any sovereignty. We had”it was”in some way it was something like”(chuckles)”the end of German history as a state. And we only regained our full sovereignty in 1990”in 1990”on the start of October, 1990.

“And what we have to”what we have”how we had to deal with our ongoing responsibility for our past. And I feel strongly responsible for the heritage of German history, to be very clear. But you can‘t mix it, the one with the other. And we have international rules. We have international law. We have international courts. We accept all decisions of international courts, even the criminal court.

“Not any well-admired member state does accept membership in the International Criminal Court, by the way. For example, we do”of course, we do, German. But having said this, it‘s nothing to be compared. I‘m sorry. I have no idea to compare this.”

I have been reading and rereading his answer. And I am dizzy. Are you dizzy yet?

The idea is that because Germany was defeated in 1945 and was no longer a state, its debts until 1990 don‘t count. So what happened about the part that a government takes liability from the former government? Except for Germany? Remember that the Nazis were elected. Not to mention that now the Germans are very rich and one of its victim countries, which suffered massive destruction by the Nazis, is very poor.

GET OUT OF DEBT FREE CARD

And there are “international law” and “international courts” — which have conveniently been used to absolve Germany of its debts. The best explanation of the get out of debt free card I‘ve seen is by Albrecht Ritschl, professor of economic history at the London School of Economics. He says this in an interview with Michael Nevradakis, a U.S. Fulbright Scholar in Athens.

Albrecht Ritschl, professor of economic history at the London School of Economics.

After WWII: “The first thing the occupation authorities did was to block all kinds of claims by and against the German government, under the legal fiction that that the German government and the German state didn’t exist anymore.

The U.S. blocked claims on the German war debt “through an ingenious and slightly malicious device: Whichever country wanted to receive Marshall aid from the Americans under the Marshall Plan had to sign a waiver waiving all kinds of financial claims against Germany from World War II against Marshall aid.

This means that it would not be entirely blocked, but it would have to [be] put on hold until postwar Germany had paid off its Marshall aid from the United States.

In technical terms what that did was to make reparation and credit claims against Germany from World War II junior, second rank, lower in rank to Marshall assistance to Germany. And since everybody wanted to get Marshall aid from America, everybody grudgingly signed these waivers. So the situation during the Marshall Plan period was that all these debts still existed on paper, but they were worthless in the sense that the debt was blocked.

The London Agreement on German Debt continued to block claims. “In the early 1950s, negotiations were started between West Germany and the creditor countries about what to do with all of this. A solution was found – basically imposed again by the Americans and to some extent by the British – that did two things. First, it lumped together the war debts with the reparations – which is not an innocuous step to take. Second, it used slightly fuzzy language, which is open to interpretations, which said that settlement of these issues would be postponed until after future German reunification.”

Reunification happened in 1990. But still no payment. Circle back to the first point. The Germany that incurred the debt no longer existed. And forget the part about countries being liable for the debts of former governments.

The money Germany would owe is huge. Ritschl said, “If we accept that Germany’s national product is somewhere to the tune of over 2 trillion euros, which is beyond 2.5 trillion U.S. dollars, we would be talking about a default and debt forgiveness of somewhere in the range of 10 trillion dollars. I would tend to think that this is probably unrivaled in 20th century history.

GOVTS HAVE TO PAY PAST GOVT DEBTS, EXCEPT IF THEY WERE NAZIS

At reunification, Germany got another get out of debt free card. Ritschl says, “In 1990. Germany received this kind of baptism certificate for a unified Germany which is incredibly subtly worded and whose only purpose was, apparently, to prevent reparation or restitution claims against unified Germany being raised on the grounds of the fact that there is a unified German state now and that something like article 5 of the London debt agreement could all of a sudden be reactivated.

The German point of view is essentially that the so-called 2+4 treaty of 1990 is not making any mention of any reparations or wartime debts of Nazi Germany, and given the fact that this issue is not covered by the treaty, the issue is essentially dead. This has consistently been the position of the German government. The German position has so far been quite successful . . . several attempts to challenge it in the European court have been unsuccessful, and it seems to me that from a legal standpoint, there is relatively little chance that this will be successfully challenged.”

Power trumps morality every time.

Ritschl interview.

CFR transcript. CFR audio. CFR video. Lucy‘s question from about 32 minutes in.