Germany, Greece and the Marshall Plan, a final riposte

Hans-Werner Sinn, 29.06.2012

In the New York Times, Hans-Werner Sinn of Germany's Ifo Institute for Economic Research argued that Greece has already received far more help than Germany received under the post-war Marshall Plan. In a guest post on Free Exchange, Albrecht Ritschl of the London School of Economics argued that it had not, to which Mr Sinn responded here. In a second go-round, Mr Ritschl answered back. Mr Sinn now offers his second response.

IN HIS riposte Mr Ritschl argues that Germany’s post-war debt forgiveness amounted to 280% of GDP, a figure larger than the 214% of GDP for Greece, which he does not call into question. However, he overlooks that my figure for Greece (460billion euros) includes only foreign debt forgiveness and foreign credit given to Greece, not the forgiveness of domestic debt. Thus he is comparing apples with pears to make his figures larger. Since the lion's share of the German debt was domestic, debt forgiveness largely took the form of an internal German redistribution rather than external help from other countries. German savers who had invested their wealth in government bonds lost nearly all they possessed, because the government was bankrupt.

According to the London Debt Agreement of 1953, the external debt forgiven to Germany including the post-war aid amounted to 22% of its 1952 GDP, which is about one-tenth of the Greek figure.

If Mr Ritschl wants to make a comprehensive calculation, as he claims he does, I also wonder why he makes no attempt to deduct the value of large-scale dismantling of industrial equipment that took place in Germany right after the war. He should have alluded to this.

I do not want to be misunderstood. Germany accumulated much guilt in the Second World War, and it is grateful for not having been forced to suffer from another Versailles Treaty. It is furthermore grateful for the generous attitude of the Anglo-Saxon victors in general, including the defence against communism in the post-war era. Neither do I want to argue that no liquidity help should be given to countries in trouble. In fact, I have repeatedly advocated such help, including large-scale debt forgiveness by the creditors, which include German banks and insurance companies. My point was simply that the frequent assertion that the help provided to other European countries should match the Marshall Plan simply overlooks that it has already done so.

The Marshall Plan argument has been bandied about time and again by Greece’s creditors, who in fact do not want help for Greece but for themselves. I find that argument unconvincing and dishonest. Thus I gave a counter argument. We have to remain truthful if we want to manage the European crisis in good faith.