Germany’s chance to show economic mercy

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. The entire Nazi public debt, amounting to over 600 percent of German GDP, was written off.

The pre-existing unpaid debt from the Weimar period was written down to a fraction of its original cost. Claims on old debt were strictly segregated from German reconstruction funds. The German Federal Republic finally paid off the last bit only in 2010.

Germany surely lived well beyond its means during the Nazi era, plundering the rest of Europe as well. The allies would have been within their rights to demand that Germany pay for its sins by reducing its consumption, but this time wiser heads prevailed. The Americans not only agreed to write off old debts, but gave the Germans billions of dollars in Marshall Aid.

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 Ossies to exchange their nearly worthless ostmarks for deutsche 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.

If the Allies, and later the government of Germany itself, had practiced what the Germans are now preaching, Germany today would be a much poorer country.

One recalls Edmund Burke’s sage 1775 oration addressed to George III on the perversity of the British government’s harsh policy towards its restive North American colonies. Burke averred, ‘‘The question with me is not whether you have a right to render your people miserable, but whether it is not your interest to make them happy.’’

Germany gains little and Europe stands to lose much by condemning the Greeks to misery as punishment for past profligacy. The Germans are also playing with fire. Greece is a nation that had a military dictatorship as recently as the 1974. No democracy can sustain this kind of economic punishment. What, then, to do?