Eurozone crisis: Greece mentions the war

The Greek prime minister has stepped up demands for World War Two reparations from Germany, and has even floated the idea of seizing assets. Political posturing or does he have a point? 

What’s happening?

The Greek president, Alexander Tsipras, has demanded that Germany pay Greece an additional €160bn in reparations from World War Two. This would amount to roughly half of Greece’s total government debt. At the same time, justice minister Nikos Paraskevopoulos threatened to enforce a 15-year-old Greek Supreme Court judgment that allows Athens to seize German-owned property.

Such seizures would include cultural institutes, which are owned by the German state. In the 2000 case, the Supreme Court awarded €28m to the relatives of 218 people massacred by the Germans in 1944.

Why should Germany pay more reparations?

Between 1941 and 1944, German forces occupied Greece, along with other Axis countries including Italy and Bulgaria. The combination of war damage, expropriation of food and raw materials, a forced loan and the cost of occupation (which Greece was forced to pay) wrecked the Greek economy and led to widespread famine.

As a result, an estimated 300,000 Greeks died of famine. As well as the deportation and extermination of Greece’s Jewish population, a further 130,000 were killed for either directly opposing the new regime, or as reprisals for resistance.

Will Germany pay up?

Germany has made it clear that Greece will not get any more money. Berlin argues that it settled all its reparations claims with Greece when it paid 115m deutsche marks in 1960. Furthermore, they point out that due to treaties signed between Germany and a large number of European countries (including Greece) in the 1950s, the situation was finally settled when Germany reunified in 1990.

Even if Germany was inclined to give in to Greece, it is fearful that doing so would encourage other countries to make similar claims. Overall, The Guardian’s Helena Smith thinks that “the row is not likely to warm MPs in Merkel’s conservative ranks who are already wavering over extending Greece’s rescue programme”.

How are the talks between Greece and the EU going?

Last month, Greece agreed a temporary rescue package with the rest of the eurozone. However, Brussels made it clear that this depended on Greece coming up with a satisfactory list of reforms.

What’s more, they are clear that the proposals that have been made so far by Athens are not ambitious enough. Indeed, Germany has threatened to hold up the money that Greece will receive as part of the deal unless it makes more concession. There is also a big query whether, even if the agreement holds up, Greece has enough money to get it through the next few months.

Will another bailout be needed?

Capital Economics thinks that Greece’s level of government debt is so high, at around 170% of GDP, “that the only thing that would get Greece’s debt ratio down significantly is a major debt write-down or default”. However, it thinks that “the chances of Germany allowing Greece to take such action inside the eurozone are slim to non-existent”.

This means that there is a good chance that “Greece will leave at some point. And given the extreme difficulties of the current situation, it certainly could be soon”.

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