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Anyone Remember What Happened When Europe Demanded Germany Repay its Debt?

Fascism in Greece is alive and well and would no doubt thrive should Greece's economic situation deteriorate further. Is this a risk Europe wants to take? If anyone should know better, it is Germany.
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Historical analogies are not always particularly useful given the enormous complexity of human behavior. One could quite easily compare the American and British Empires with, say, the Roman Empire, or draw an analogy between the war in Iraq with America's invasion of Vietnam. But while there are obvious parallels, there are many qualitative differences that make it difficult to say definitively that one event was "just like this".

However, when comparing the crisis Greece faces with that of Germany post World War I and post World War II, the parallels are important enough to make it a serious talking point - particularly given the stakes at hand. While Angela Merkel and the German government are incredibly keen to dismiss the comparisons as a distraction to mask Greece's irresponsible fiscal behavior, the reality is that Germany was forgiven far, far greater sins after World War II, and its debt written off by countries it had actually gone to war with. As economist Thomas Piketty said in an interview with Die Zeit:

When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: What a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.

The decision made by the Allies to forgive massive German war debts no doubt stemmed from the lesson learned from the previous World War, where the mantra was to "Squeeze Germany till the pips squeak." German war debt was calculated at $33 billion in 1921, a whopping  $438,411,452,513.97 if adjusted for inflation. Other than a brief period when Germany benefited from large American loans, this effectively prevented Germany from developing economically, particularly when Wall St collapsed in 1929. The German economy spiraled out of control, paving the way for extremism in the form of Adolf Hitler and the Nazi Party. We all know what happened after that.


Golden Dawn, Greece's fascist party

There is no doubt that Greece is largely responsible for the mess it has found itself in - mass corruption at every level in government, an insane taxation system and an infuriating inability to restructure itself responsibly. Nevertheless, the blame is not theirs alone - they were propped up by European lenders who knew the risks, and had billions of their debt masked with the help of  banks like Goldman Sachs. This shell game had gone of for decades, with consecutive governments leaving the mess for future generations and consigning the Greek citizens to a deeply unstable future.

But as Piketty continued in his interview:

We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s. We need to look ahead. Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.

Indeed. Germany was not allowed to recover financially after World War I and turned into the greatest pariah in human history. Its debt was forgiven after World War II, and it turned into a stable, liberal democracy with the fourth largest economy in the world. No one is suggesting Greece would go the same route as Germany did in 1933, but fascism in Greece is alive and well and would no doubt thrive should Greece's economic situation deteriorate further. Is this a risk Europe wants to take? If anyone should know better, it is Germany.