– It was done for Germany in 1953, should be done for Greece in 2015.
It is the slogan opposition leader Alexis Tsipras used in a campaign speech in Greece at the weekend. Tsipras heads the leftist party Syriza who leads in the polls before the election on January 25.
The requirement, which he hopes will give the country a new government after the elections on 25 January, is that Most of the Greek national debt is forgiven so that it becomes sustainable.
The request was made in an election campaign speech this weekend as Bloomberg refers.
And it is no small debt restructuring Tsipras asks for Greece, whose debt agreement Germany had in 1953 to be used as a template.
Greece and Norway forgave debt
When Tsipras referring to what Germany did in 1953, referring London Agreement, or “The London Agreement on German External Debts” where the federation Germany, or West Germany, got erase much of the country’s debt.
The driving forces to get the agreement in place was United States, Britain and France. But Greece and Norway were among the countries that agreed to waive Germany’s debt.
The agreement which was signed in February 1953, covered all debt Germany had taken up before and after the Second World War. It included war reparations from the First World War as Germany defaulted in the 1930s.
Overall it was about debt of 30 billion German marks to banks and states in approximately 70 countries.
debt halved
In all debt halved as a result of the agreement, while it was given very favorable repayment terms for the remaining debt.
Among other repayment of part of the debt made dependent on the East and West Germany were reunited. It was also placed mechanisms in the agreement that led to the repayment was made dependent on the economic development in Germany, so that debt burden would reinforce an eventual economic downturn.
West Germany repaid all during the 1960s.
When East Germany collapsed and was reunited with West Germany ii 1990 had the new Germany begin to repay the portion of the debt that was conditional of a reunion.
3. October 2010 was the last installment of 69.9 million euros paid.
Many believe that debt clean-up, which many believe Germans most tend to forget, was an important contributor to the economic miracle as West Germany and later Germany have experienced.
From being bombed and indebted after the war, Germany is now the strongest economic power in Europe .
– Ga economy respite
The historian Ursula Rombeck-Jaschinski at the University of Stuttgart said to Deutsche Welle in 2013 that the debt agreement gave the German economy room to breathe again.
– One can even argue that the economic miracle would have been impossible without debt agreement, she said.
Greece has a national debt of nearly 400 billion euros. A large part of the debt of the other countries in the eurozone and the International Monetary Fund (IMF).
It would therefore not lead to a banking crisis if the debt is defaulted or are remitted .
– Solidarity unmatched
A significant portion of the debt is administered by the EU permanent crisis fund European Stability Mechanism (ESM).
ESM boss Klaus Regling opened in an interview just before Christmas with the Greek newspaper Kathimerini door a tiny bit ajar for a new restructuring of the Greek debt.
But while he reminded that the Greeks already have good conditions for its debt.
He points out that the loans have over 30 years maturity and interest of around 1.5 percent, and that the part of the debt will not have to pay interest until 2022.
– These highly favorable conditions attached to loans from us provides savings in the order 8.6 billion euros in the Greek budget for 2013. This corresponds to 4.7 percent of the Greek value creation and this benefit is repeated every year in the predictable future, says Regling, before retiring to:
– This is a solidarity unparalleled shown from euro countries Greece and goes far beyond what was expected in November 2012, said Regling.
After Greece had to get emergency assistance from abroad in 2010, landed in two rounds forced forward debt restructuring from private lenders with around 120 billion euros.
Sources on Debt Agreement from 1953: Deusche Welle, Network for fair debt policy, Committee for the Abolition of Third World Debt, Stern and Wikipedia.
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