20.6 billion marks, which was about 40% of what the Allies had originally expected them to pay.
To put that number into context, the German government had borrowed somewhere between 110 and 150 billion marks between 1914 and 1918 to finance its war effort. They had planned to impose a massive war indemnity on Britain and France after victory in order to recover that money. Instead, they found that they were the ones expected to pay reparations, while still owing their creditors the 12-figure sum they’d just borrowed. It was this, rather than reparations alone, that led to Germany’s financial difficulties in the early 1920s.
The loser being forced to hand over money to the winner was a well-established custom of war. In 1871, Germany had demanded 5 billion francs from a defeated France, as well as annexing the provinces of Alsace-Lorraine.
.. The French were not only interested in compensation; they also hoped that laying a heavy, long-term indemnity payment on Germany would make it impossible for Germany to raise a new army and come back for revenge in a few years’ time.
.. Germany was obliged to pay 50 billion marks, at a rate (agreed in 1923) of 2.5 billion per year. However, rather than raise taxes to cover the payments, they borrowed the money, mostly from the United States.
In short, during the 1920s a financial merry-go-round was in operation. US bankers lent money to Germany. The German government used that money to pay reparations to Britain and France. The British and French used that money to repay their war loans to the US bankers. The US banks made huge profits, and lent even more money to Germany. Everything was going well, until the bubble burst.
..However, these payments were not reparations; they didn’t go to the victims of the war. They went to the banks which had lent money to Weimar Germany in the 1920s.
Germany’s Failure of Vision
It is in Germany’s paramount interest to keep the eastern frontier of Europe as far east as possible. The United States is already overextended in the Middle East and in East Asia. If Germany is to deter Russia effectively, it must gain the continuing cooperation of Greece and other NATO allies, like the Baltic countries, that because of proximity are potentially in the line of fire. But instead of heeding Mr. Obama, Ms. Merkel chose the path of humiliation.
.. If Prime Minister Alexis Tsipras was considering backtracking from key campaign promises, it was only right for him to consult voters at this crucial turning point. To encourage sober deliberation, Ms. Merkel should have urged theEuropean Central Bank to keep Greek banks open during the run-up to the referendum. But the Eurocrats did the opposite, using brute force — choking off the flow of cash — to impress Greece’s vulnerability on its voters.
.. But Ms. Merkel instead gave the I.M.F. the silent treatment, allowing Syriza to convince Greeks that a “no” vote was the only way to break out of the austerity trap. They rejected Europe’s bullying.
.. she should encourage the I.M.F. to mediate the increasingly bitter dispute.
.. It represents Germany’s last, best hope for avoiding a catastrophic re-entry as the unquestioned power on the Continent. Preventing the consolidation of such power in a single country (and in a single leader) was one aim of the European Union’s architects.
Franco-Prussian War: both France and Germany wanted war
The conflict centered on Prussian ambitions to extend German unification. Prussian chancellor Otto von Bismarck planned to provoke a French attack in order to draw the southern German states—Baden, Württemberg, Bavaria and Hesse-Darmstadt—into an alliance with the Prussian-dominated North German Confederation.
Bismarck adroitly created a diplomatic crisis over the succession to the Spanish throne, then rewrote a dispatch about a meeting between King William of Prussia and the French foreign minister, to make it appear that the French had been insulted. The French press and parliament demanded a war, which the generals of Napoleon III assured him that France would win.
.. French determination to regain Alsace-Lorraine and fear of another Franco-German war, along with British concern over the balance of power, became factors in the causes of World War I.
Thomas Piketty: ‘Germany Has Never Repaid its Debts. It Has No Right to Lecture Greece’
ZEIT: So you’re telling us that the German Wirtschaftswunder [“economic miracle”] was based on the same kind of debt relief that we deny Greece today?
Piketty: Exactly. After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed the second method with the three components that I mentioned, including debt relief. Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured.
.. ZEIT: Do you believe that we Germans aren’t generous enough?
Piketty: What are you talking about? Generous? Currently, Germany is profiting from Greece as it extends loans at comparatively high interest rates.
.. Piketty: Those who want to chase Greece out of the Eurozone today will end up on the trash heap of history. If the Chancellor wants to secure her place in the history books, just like [Helmut] Kohl did during reunification, then she must forge a solution to the Greek question, including a debt conference where we can start with a clean slate. But with renewed, much stronger fiscal discipline.