A lesson unlearned…a ‘greek’ debt deal



Some historians argue that World War 2 was never a war of its own, it was an offspring of World War 1.

European nations battling over for global domination were borrowing vast sums of money to finance the First World War. The debt burden later fell on the defeated Germany which was thrust a total of $12.5 billion (100% of pre war German GDP) as part of the reparations. The German nation barely scraped its way through its worst decade in 1920’s inflicted with hyperinflation, instable governments and anti globalization protests. The nation later succumbed to the National Socialist Party of Hitler famously known as Nazis.


Hiroshima after the atom bomb blast.

Economic exploitation of the victors served as a prequel of the deadliest war on the planet, ‘World War 2’ that later saw over 60 million people killed and two cities bombed to eternal sleep because they happened to be on the wrong side of the history.


And we are here in 2012, five years into the world’s greatest economic crises since the ‘great depression’. If history could teach us anything it would teach us how to handle the crises, which have happened before. It was the dictatorial approach post World War 1 that later instilled in the Germans the sense of deprivation. It is known that during the negotiations and settlements, at some instances the German delegation were not even provided with chairs and forced to stand as discussions went on about the reparations.

The latest Greek deal reminds me vividly of this. Troika is the term used to refer to European Commission, IMF and European Central Bank which are instrumental in securing a debt deal for Greeks. While, Troika may have learnt how to sugar coat harsh unfair policies, they are still far from learning a fruitful lesson from the leaves of history. The deal already dubbed as ‘rolling a can further down the road’ is an example of political leverage in economic crises.

The private lenders are taking a loss on their Greek debt holdings to 54% of the nominal value and reducing the interest payments required from Greece to 2% gradually increasing it to more than 4% post 2020. Euro zone members on the whole don’t seem to get significantly hurt in the process because reduction in interest payments by Greece is compensated by the profits, they will realize from the earlier investments in cheep Greek debt.

The Greek Prime Minister Lucas Papademos calls the debt deal as the historic day in the Greek economic history. Who seems to be the loser than?

The people of Greece. I wish the answer was that obvious to the men in ranks in Greek parliament.

The debt deal requires a further tightening of Greek finances citing a further cut of 15,000 public jobs. Taxes are also expected to increase by around £3.4 billion in 2013. This seems unfair looking at the ongoing efforts carried out by the Greeks to already reduce the deficits since the onset of crises in 2010. When compared with other countries in modern economic crises (e.g. Russia and Thailand in late 1990’s), Greek is faring well at curbing the government expenses.

The last and most hurtful kick comes on the condition of submission to ‘enhanced and permanent’ monitoring of European Commission. This would see the austere measures put into practice by building them in the constitutional provisions, also sinking the minimum wage to a new low. The last time western lenders tried to take control of finances of a significant European nation was in Paris -1929 when at ‘Young Conference’ Germany surrendered the control of all its finances to foreign powers. Acts like these fuel the nationalistic fervor in a country, which although at times like these appear justified, hurt globalization.

In 2012, students of history expected a better solution from an already bitten nation like Germany. The words of Hjalmar Schacht, the president of German Reichsbank during the crises (1923-1930) are lost in oblivion when he shouted during the Nuremberg trials.

‘Don’t forget what desperate straits the Allies drove us into. They hemmed us in from all sides-they fairly strangled us! Just try to imagine what a cultured people like the Germans has to go through to fall for a demagogue like Hitler… All we wanted was some possibility for export, for trade, to live somehow…’

Sounds relevant even today…



5 thoughts on “A lesson unlearned…a ‘greek’ debt deal

    • I was reading the history…how Germany got sucked into nationalistic fervor before WWII and one of the reasons came out to be economic extortion from the lenders that had forced them to be left with limited options… We are again taking the same road…problem is we dont even know !

      • Fortunately, the Greek far-left is taking some 42% of the vote according to the opinion polls. The country that concerns me most of replicating Germany with a far-right turn is Hungary, a country with far-right militias that target Roma & a far-right with territorial aspirations against its neighbors.

      • Hungary … Quick observation mate
        We would like to see you pen your concerns in your blog… People here in Middle East have no idea of the heat that’s under the carpet in Europe
        Every one hears mostly about the obvious

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