Research Paper on Greece Draws Correct Lessons from London Debt Conference

There is a new policy note by three fellows of the Levy Economics Institute of Bard College, the first by the three authors which draws the lessons of the London Debt Conference on Germany’s debt in 1953. The authors, who also head up the Levy Institute Model for Greece (LIMG), are Levy Institute research scholars Michalis Nikiforos and Gennaro Zezza, and Levy Institute President President Dimitri B. Papadimitriou (whose wife is a Syriza Deputy and a Levy Institute Senior Scholar). Here are two noteworthy points from the February 2015 paper, the first of their research on Greece since Syriza’s accession to power:

Their calculation of the total debt cancelled for Germany at the time is a staggering 455 billion deutschmarks (DM). This includes DM15 billion in debt reduction after the conference, plus DM350 billion in domestic debt (cancelled through monetary reform), and DM90 billion in wartime debt that was never repaid. This comprised four times the GDP of the then-German Federal Republic.

Cancelling the debt is only a precondition for growth. It must be accompanied by active measures.

“The postwar German economic miracle and the robust development of the rest of the European economies was not the result of abstract market forces. Instead, they were based on very specific and detailed planning….

“The post-World War II developments … show that debt restructuring is a necessary but definitely not sufficient condition for the solution of the crisis in Greece and the rest of Europe. As happened in the early postwar period, the restructuring needs to be part of a wider plan to deal with the malaise of the Greek economy and, most important, with the structural problems of the Eurozone as a whole.”