Author Topic: Economist Thomas Piketty believes Germany is hypocritical on Greece debt  (Read 1380 times)

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Economist Thomas Piketty believes Germany is hypocritical on Greece debt
 

 
 
By Chico Harlan WASHINGTON POST JULY 07, 2015


”Germany is the country that has never repaid its debts. It has no standing to lecture other nations,” said economist Thomas Piketty.

WASHINGTON — Thomas Piketty, who rocketed to stardom last year with his treatise on inequality, told a German newspaper that the Germans are being hypocritical in the way they’re treating Greece.
A number of prominent economists have raised concerns about Germany’s approach to the Greek debt crisis, which Germans say reflects a need to force changes in Greece’s economy so that it never again has such a crisis.

But in the interview with Die Zeit, Piketty went further, saying the Germans are in the strong economic position they are today only because they benefited from the forgiveness of their neighbors after World War II.

In the 1950s, he noted, Germany benefited from a massive — and, in those days, surprisingly common — round of debt forgiveness that catapulted it into a peaceful economic power. Greece was one of the nations forgiving Germany’s debts. In other words, Piketty said, when it comes to how to handle Greece in 2015, the best argument against Germany might be Germany circa 1953.

‘‘When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: What a huge joke!’’ Piketty said. ‘‘Germany is the country that has never repaid its debts. It has no standing to lecture other nations.’’ He continued:

  
 he Big Picture: Greece rejects austerity

“We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. 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. We need to look ahead. Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance.”

Piketty, of the Paris School of Economics, last year published the English version of his ‘‘Capital in the Twenty-First Century,’’ which sold millions of copies and documents the growth of wealth inequality in the developed world over generations. In the interview with Die Zeit, Piketty makes the argument that decisions about whether to forgive can have generational implications.

While Greece’s debt has already been trimmed, those relief efforts have been essentially canceled out by Greece’s shrinking economy — and its shrinking tax revenue. Greece lately has failed to hit budget surplus targets, and the International Monetary Fund last month said its debt burden appeared unsustainable without further relief measures. Such measures are what Greece is asking for.

Piketty referred to the period after World War II when Germany, specifically West Germany, was a defeated nation. When a new government was created, it inherited a mess. West Germans still owed reparations from World War I. They needed epic loans to fund reconstruction. By 1953, West Germany’s debt was about $7 billion, or $62 billion in today’s dollars. Bonn owed money to the United States and much of Europe — including Greece.

Those countries gathered in London in 1953 for a debt summit. Archived accounts suggest that the creditor nations seemed to believe they were helping to serve the broader goal of a stable Europe by giving West Germany far easier terms. The formal agreement said debts were being partially forgiven to help Germany ‘‘make a contribution to the development of a prosperous community of nations.’’

The creditor nations waved goodbye to roughly 50 percent of what they were owed.

There are differences between now and then. Then, the United States and much of Europe were jittery about the Cold War and wanted West Germany firmly on their side. And of course now, much of Europe is tied together by a single currency, the euro, that takes away some of the other strategies Greece might employ to deal with its debt, like devaluing its currency.

But Piketty pointed out that ultimately the handling of Greece in 2015 — not West Germany, in 1953 — qualifies as an outlier.

“There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe,’’ he said.

http://www.bostonglobe.com/business/2015/07/06/thomas-piketty-accuses-germany-forgetting-history-lectures-greece/LOL1Dv29VNDZ3Gu0Wv2lzO/story.html