DOI: / Germany s War Debt to Greece

Transcription

1 DOI: / Germany s War Debt to Greece

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3 Germany s War Debt to Greece: A Burden Unsettled Nicos Christodoulakis Athens University of Economics and Business, Greece DOI: /

4 Nicos Christodoulakis 2014 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act First published 2014 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: PDF ISBN: A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. doi: /

5 Contents List of Figures List of Tables Preface viii Acknowledgements x 1 Infliction: Resource Expropriation as an Axis Policy 1 2 The Fruitless Claim: German Obstinacy and Greek Unpreparedness 10 3 The Impasse Continues: The Occupation Loan after German Reunification 18 4 The Valuation Mess: From Underestimating to the Overblown Claims 23 5 A Realistic Valuation: Alternative Estimates of the Loan s Present Value 41 6 Negotiation: The Occupation Loan and the Greek Bailout 49 Appendices 57 References 62 Index 65 vi vii DOI: / v

6 List of Figures 1.1 Credits and Occupation Costs (OC) Real long-term returns on the US and German bonds Price of Greek Treasury Bills Nominal returns of the US and German bonds The Mark s exchange rate versus the US dollar Real prices of German securities Alternative valuations of the FOLG 47 A.1 Human losses in Western Europe due to WW2 58 vi DOI: /

7 List of Tables 2.1 The Bank of Greece Valuation Valuating a concessionary loan History of Drachma collapses Valuation based on the Greek market Valuation as a fixed share of German GDP Return rates of alternative valuation methods Comparison of alternative valuation methods 47 DOI: / vii

8 Preface The main objective of this short monograph is to estimate the present value of the Loan that the Bank of Greece was forced to provide to the German Occupation Forces during The legitimacy of the Greek claim is based on undisputable documentation and is supported by a multitude of expert studies by Greek and foreign legal scholars. However, there is no consensus on the present value of the Loan. The efforts made so far to evaluate the Loan range from deplorably low to absurdly high values; the latter fostering the populist illusion that if Germany accepted to pay back the loan it would not only vindicate Greece but also absolve the country from its current excessive debt. The absence of a reliable valuation not only perpetuates confusion but also helps Germany to continue its stalling tactics, resulting in the paradox that the higher Greek expectations grow the less likely their gratification becomes. Therefore, a reliable valuation of the present value of the Occupation Loan seems to be a key precondition for settling the issue once and for all. An opportunity to settle the issue presented itself in 2010, when the Greek government signed the Loan Facility Agreement and the accompanying Memorandum with the so-called Troika of creditors, consisting of the European Union (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF). Germany s contribution to the Greek bailout was pivotal and all the more interesting the amount of the German loans is close to a reasonable valuation of the Occupation Loan at current prices. viii DOI: /

9 Preface ix An agreement to offset the obligations arising from the two loans would immediately resolve a major economic dispute between Greece and Germany, ending an issue that has been souring bilateral relations for decades. Today, the dispute is fueling negative stereotypes in both countries, undermining the principles of solidarity and cooperation that should have been the major tenets in dealing with the debt crisis and recession that have devastated Greece. The monograph proposes a feasible and mutually admissible way in which this longstanding dispute between Greece and Germany can be settled for good. At the outset, it should be clarified that the purpose of this study is not to provide a historical or legal analysis of the issues connected to the Occupation Loan or the war reparation claims at large. The Greek and foreign literature on these matters is extensive and, in my opinion, two important studies stand out: The book written by Tassos Iliadakis (Reparations and the German Occupation Loan, 2002) is perhaps the most comprehensive account on the subject and presents a valuable narration of the events leading to, and following, the loan agreement. A more recent study by Law Professor Antonis Bredimas (Legal and Diplomatic Aspects of the Occupation Loan Claim, 2012) presents a concise, yet dense and convincing, argument substantiating Greek claims. The present monograph refers extensively to these two works. It should be also noted that I am dealing exclusively with the issue of the Occupation Loan granted to Germany, without attempting to analyze the wider issue of war reparations. Therefore, the estimates derived in the present context apply to the specific German war debt and do not include the much larger Greek demands for compensation arising from the severe human, material and institutional destitution caused by the Axis occupation forces during Nevertheless, the proposed valuation method could be extrapolated to other reparation cases, and an indicative example is described in Appendix A. In this way, the present monograph could potentially assist the effort of reliably estimating the rest of the reparation claims against Germany, either by Greece or any other country. The present study unavoidably contains many financial data and statistical figures that the reader may find tiring or abstruse. To facilitate reading, a glossary of the main terminology used in the valuation is given in Appendix B. DOI: /

10 Acknowledgements I wish to thank, for their suggestions on an earlier version of the manuscript, Vassilis Manesiotis, former head of the research division in the Bank of Greece, and Theodore Fortsakis, Law Professor at the University of Athens. However, solely the author is responsible for the analysis and evaluation of the data, and for any remaining mistakes or omissions. x DOI: /