A Debtor Remembers : In acting to pay old debt, Germany again faces consequences of its history

Germany said recently it will pay interest on a World War I debt that most of the West had forgotten about. This announcement deserves comment.

After World War I, defeated Germany was burdened with astronomical war reparation payments by (and to) victorious Britain and France. The devastated nation was unable to make the payments. The strain and humiliation, many experts on European history say, eventually produced horrific results.

After defeating Germany again in World War II, the Allies did not repeat their mistake. This time, a far more ravaged Germany was not saddled with crushing reparation payments. The remaining principal on the World War I debt was to be repaid (and has been), but the interest was forgiven unless and until Germany was reunified. In 1953 when the agreement was made, that postponement seemed likely to be eternal. Eternity, however, lasted only 36 years, and Germany has now issued $70 million in new 15-year government bonds to the original lenders. Once again, leaders of post-World War II Germany have acted responsibly in facing consequences brought about by their predecessors.

This German story is also an American story, for the old debt will be paid to U.S. lenders. In the 1920s, when Germany couldn’t make its reparation payments to Britain and France, they in turn couldn’t make their loan payments to the United States. Reluctantly, Washington concluded that Wall Street would have to lend to Germany if America was ever to collect from Britain and France. Ironically, Germany is now repaying its entire debt--and France and Britain are not expected to pay theirs.

Note that historians agree that if the United States had not refused to join the League of Nations, it would almost certainly have chaired the post-World War I Reparations Commission and German reparations would have been set lower. Conceivably, Hitler’s rise to power could have been prevented. Thus did a foolish determination to avoid international involvement eventually contribute to that intervention to end all interventions--World War II.

For those who would like the United States to pull out of the United Nations in this post-Cold War period, it’s something to think about.