Germany has forgotten the lessons of war reparations

By Jeremy WarnerEconomicsLast updated: February 17th, 2012
563 Comments


1920s Germany: buying vegetables with baskets of notes (Photo: Roger-Viollet)


I see that my colleague, Ambrose Evans-Pritchard, has quoted extensively from Thucydides' History of the Peloponnesian War to demonstrate how bully-boy treatment of the underdog is not just callous and inhumane, but ultimately self-defeating. The reader is rightly invited to draw a parallel between the appalling punishment which Athens meted out to the Melians back in the fourth century BC, and today's treatment of Greece by the Germans. I've no idea what translation he was citing, but would urge alternative use of the far superior version penned by my grandfather, Rex Warner.

Obviously, I'm biased, not to mention the small stipend that these translations still contribute to the Warner family estate. Go buy. But in any case, here's a link to the same dialogue, as translated by my grandfather, which has somehow mysteriously managed to get round the copyright laws.

While on the subject of historical parallels, there's another which has not yet been given sufficient an airing. This was the vexing question of German war reparations after the slaughter of the First World War, brilliantly identified by John Maynard Keynes at the time in his polemic, "Economic Consequences of the Peace", as fundamentally unfair on the Germans. Keynes branded the Treaty of Versailles a "Carthaginian Peace".

Part of Germany's purpose during interminable attempts to renegotiate these debts on less oppressive terms was to demonstrate that the German economy was in no position to pay – ergo, the creditor was at some stage going to have to take an almighty hit. Indeed, it is sometimes argued that the Weimar hyperinflation was deliberately engineered in order to demonstrate this fact beyond doubt. There can be no other explanation for the bizarrely ruinous policies of deficit financing pursued by the Bundesbank at that time. No sane central banker could possibly have sanctioned such a strategy.

A similar approach is now being pursued by Greece's prime minister Lucas Papademos. Not hyperinflation, of course – though this will no doubt come when Greece leaves the euro, further destroying the value of Greece's external indebtedness – but a similar attempt to persuade fellow Europeans that Greece simply cannot pay. The terms of the bailout are too harsh to allow Greece any kind of viable way back to economic health.

Given its history, it is quite strange that Germany has such difficulty in grasping this reality. It is sometimes said that German attitudes to the economy and the current crisis are instructed by experience of Weimar inflation and its catastrophic consequences. Yet it wasn't hyperinflation that brought Hitler to power, but rather the depression of the early 1930s, which in Germany's case was greatly exaggerated by the pro-cyclical austerity the government of the time insisted on applying to the problem. Those who who don't learn from the past are doomed to repeat it.


Germany has forgotten the lessons of war reparations – Telegraph Blogs