Euro Zone: Greece Asks Germany for WWII Reparations


As if there weren’t enough drama in the euro zone, Greece now plans to seek wartime damage claims from Germany in an attempt to raise some much-needed cash. Though Berlin says the issue was resolved 70 years ago, Athens insists that Germany should pay 162 billion euros for damages suffered after the Axis occupation of Greece that began in 1941.

This latest development in the euro zone crisis once again forces us to wonder whether Germany is for asking for too much austerity and not enough growth. It is becoming increasingly clear that the euro zone will not be resolved with austerity alone, a reality confirmed by recent events and one that is putting the European project in peril.

Policies spearheaded by Germany that stress austerity and put growth in second place have created a dismal economic environment. Unemployment has reached record levels across the euro zone. All of the countries that have received a bailout package are battling with high unemployment: Ireland (14.2%), Cyprus (14.5%), Portugal (17.5%), Spain (26.3%), and Greece (26.4%).  The crisis has even affected the euro zone’s second largest economy, France, as its unemployment rate has risen for 22 consecutive months, now reaching 10.8 percent. Though Germany has fared relatively well throughout the euro zone crisis, it seems like it has now hit home for them as well.

Adding to this barrage of bleak economic news, German business activity unexpectedly dropped in April for the first time in five months. This is particularly troubling since up until now Germany had escaped economic troubles while other countries, as seen above, were the ones to suffer. Nevertheless, it was only a matter of time that in a Europe where 70.6% of all exports stay within Europe, and in a Germany that sells 40% of its exports to the euro zone and 60% to the rest of the European Union, the continent's largest economy would hit a rough patch as well. Some economists believe that the continuing economic crises in Southern European countries have scared firms enough to invest less, thus explaining this unexpected German contraction in business activity.

The adverse economic effects of austerity are fueling skepticism about the future of the European Union in general. Although Great Britain has always been the most skeptical member state of the EU, British Prime Minister David Cameron announced that the British would decide in a 2016 referendum whether it would stay in the union. But what is most troubling is that the economic conditions in the euro zone are deteriorating to such a point that euroskeptic parties are taking root in France and most recently Germany—the core of the European Union. In 2012, Marine Le Pen, the candidate of the far-right political party known as the Front National, took about 20% of the vote in the French presidential elections. In January 2013, a new euroskeptic party called the Alternative for Germany was founded in Germany.

Europe's economic condition isn't just making Europeans more skeptical of the EU, it's shaking the foundation of the entire European project. Ravaged by two world wars, Europeans sought to make another fratricidal war impossible. So on May 9, 1950, former French Foreign Minister Robert Schuman announced a plan that would internationalize the management of coal and steel — the very ingredients of traditional war. This plan would give birth to the European Coal and Steel Community, and 63 years and eight later, it would evolve into the European Union. Recalling these pacific roots of the European project, Greece’s decision to pursue wartime damage claims from Germany is particularly disconcerting. Rather than promoting a perpetual peace among European states, the German-favored but euro-zone-wide policy stressing austerity and undervaluing growth seems to be reviving old antagonisms.

In the end, a lot depends on German Chancellor Angela Merkel’s leadership. Surely Merkel is reluctant to let a crisis go to waste. Thus far, she successfully used the bailout packages to push through structural reforms and promote more fiscal responsibility. And although these reforms are necessary, as some economists stress, others argue that expansionist policies are also necessary. This debate boils down to a competition between long-term and short-term necessities. Though fiscal responsibility is necessary for sustainable, long-term growth, underestimating the importance of economic growth in the short term will foster more of the current adverse economic conditions, conditions that are leaving people jobless and in turn hopeless. It is this hopelessness that is driving Greece and other members of the EU to revive the specter of old wartime rivalries and that is jeopardizing the European project itself.