Does Germany really still owe Greece for World War II?

Greece has offered a precise figure for what it claims Germany owes it from World War II: 279 billion euros, or $303 billion. That sum would also offset all of the debt Greece owes to European institutions – a debt that has Athens on the edge of crisis.

But when it comes to actually getting the money, many experts say Greece doesn’t have a legal leg to stand on.

Greek Deputy Finance Minister Dimitris Mardas said Monday that Berlinowes Athens for damages inflicted during the Nazis’ occupation of Greece during World War II, Reuters reports. The total includes war reparations and loans Greece was forced to make to the Nazi regime.

Greek Defense Minister Panos Kammenos said today that his country has obtained “stunning evidence – detailing what [happened] in every village and in every town” under the Nazi occupation that “will lead to the reopening of cases, even those that have already gone to court,” The Associated Press reports. Athens has sought restitution for decades, while Berlin has said it considers all of its war debts to Greece repaid, under both a one-time, 115-million Deutsche mark payment in 1960 and the international agreements that allowed German reunification in 1990. But the claim has received new life amid Greece’s economic crisis – and in which Germany is effectively the key arbiter.

Greece owes various European bodies a combined 240 billion euros across two bailouts extended by the International Monetary Fund, the European Commission, and the European Central Bank. Moreover, the Greek government is obligated to pay back 450 million euros to the IMF by Thursday. It also must pay pensions and salaries to Greeks come the end of the month. It is presently unclear whether it can afford to do both, as the government is almost out of money. But the Greek government has repeatedly insisted that it will meet its obligations to its creditors.

While the prospect of a massive German reparation payment is highly appealing to Athens, experts say it is also unrealistic.

Tim Worstall, a fellow at the Adam Smith Institute in London, writes in a commentary for Forbes that the Greeks are arguing that what reparations Greece did receive over the decades are implicitly unfair – essentially, that they are what would be considered inequitable were they a domestic matter. But even if they are, he says, there is “no Court of Equity in international law.”

“A court of equity is one where you can go and simply say “Look, it doesn’t matter what the law is, this is just [unfair]. We demand justice.” And the court will then consider matters on the basis of whether it really is fair or not, and propose remedies based upon fairness, not the jot and tittle of what the law says. This simply doesn’t exist at the international level. We simply do not hold sovereign nations to such standards. If we did of course then the private sector bondholders would have a claim against Greece itself for the retrospective change in the collective action clauses that enabled the massive haircuts on the debt a few years back”.

Mr. Worstall adds that Germany is correct that most of its “reparations have already, in international law, been settled. In 1960 and then again in 1990 at the time of German unification. This might not be fair: but as above the law here isn’t about fairness. So, while there might be a moral claim there isn’t that legal one.” And the one claim he says that Greece does have potential grounds for, repayment of the forced loan to the Nazis, is only about 10 billion euros – not enough to significantly affect Greece’s debts to Europe.

CNBC reports that Christian Schulz, a senior economist at Berenberg Bank, says even if Germany were to acquiesce to Greece’s demands, it still wouldn’t get Greece out of crisis.

“If the government were to support these claims, long legal battles between Germany and Greece might loom, but that would be of little help in the immediate crisis,” he said in a note Tuesday. As such, he said, “Europe’s trouble spot provides few reasons for optimism, to put it mildly …”

So why has Greece pursued this avenue, if it is both legally and practically fruitless? Politics, experts say. Worstall writes that it’s mostly “Greek domestic politics more than anything else: the more the electorate believes that it is Germany’s fault for not paying up then the stronger the support for Syriza’s no austerity ideas of how to deal with the crisis.”

Berlin-based writer Leonid Bershidsky suggests that Mr. Tsipras and his Syriza coalition likely didn’t know what they were getting into when they made their political promises to the Greek public. Tsipras’s economic plan “was based on a Syriza government’s ability to negotiate a partial debt write-off, a temporary moratorium on debt servicing and a link between economic growth and debt service,” all of which proved impossible to negotiate, Mr. Bershidsky writes for Bloomberg View. “That was the first reality check.”

“The second reality check must have been domestic: The shock of finding out how things really stood from a government’s prospective. Like any opposition party in a badly managed, non-transparent country, Syriza had only an approximate idea of the costs and benefits of its proposed measures – or, indeed, of why previous governments hadn’t done all these nice, kind, sensible things for the Greek people. It turns out it wasn’t because those governments were just evil and criminal”.

As a result, Bershidsky writes, Syriza finds itself unable either to sway its creditors or soothe its domestic supporters. “Reality is harsh, but it can’t be tuned out.”

CSM