[LINK] "Germany Deserved Debt Relief, Greece Doesn't"

[rfmcdonald]

Bloomberg View's Leonid Bershidsky makes a controversial case.

It might still be argued that if Germany deserved a second chance after all it did to Europe, then surely Greece should also be granted one.

There's a technical answer to that. As [Yale's Timothy Guinnane] wrote, "The people of some countries today are working to repay international debts incurred by earlier governments that they did not elect or want. Often the debt was used either to provide luxurious lifestyles for a corrupt few, or to pay for the repression of the mass of the population. Yet under the rules of the international financial system, the people of the country are still responsible for the debt or risk loss of access to international credit markets."

[. . .]

The West German governments that benefited from the debt relief were resolutely anti-Communist and anti-Marxist. CDU, now the party of Chancellor Angela Merkel, ran West Germany for the first two decades of its existence. It was less economically liberal than it is now, and it built a sizable welfare state over the years, but it was still a center-right, capitalist force that believed that only private initiative could lead to more or less universal prosperity.

The far-left political forces were outside the London process in 1953; they were in the GDR. Now, far-left Syriza wants to be on the inside, with its plans to nationalize banks and utilities and its costly promises to voters. It will use the debt relief to provide free electricity to households, subsidize rents, restore Christmas bonuses to pensioners, raise minimum salaries -- that is, to return to the practices that led to the accumulation of Greece's debt. It is an extreme case of moral hazard, which the post-war German governments conscientiously avoided.