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History repeating in this German-Greek stand-off.


he stakes keep getting higher TTand higher in the poker game being played out as I write bet-tween the new anti-austerity Syriza government in Greece and the heavyweights in the Eurozone - Germany in particular.

Because we didn't join the Euro, we are not directly involved. We are sitting this one out.

Ninety years ago the boot was very much on the other foot, as far as Germany was concerned.

It was the USA which was the big creditor nation, having issued huge war loans to the World War I Allies in Europe.

When things starting going badly wrong in the mid-20s, all the European countries, victors like Great Britain and France and vanquished like Germany and Austria alike, tried to get these huge debts collectively restructured.

As the Greeks are saying right now, if the debt repayments are so high that they cripple your productive capacity, you will never be able to pay the money back.

All requests to the USA to take a "common sense" view were rebuffed by President Calvin Coolidge.

There is no proof that he actually said: "They hired the money, didn't they?" But he certainly thought it and it summed up his stony-faced attitude so perfectly that the "quote" which isn't a quote at all, has gone down in history. Now history is repeating itself.

Coolidge is generally accepted as the worst President in US history.

He was so inept and inert, that when he died, the wit Dorothy Parker opined "How could they tell?" That's a famous quote as well.

There was a strong Welsh angle to that calamitous period of world history, which eventually led to Hitler's election victory of 1933.

France was entitled to war reparations from Germany, under the terms of the Treaty of Versailles.

In 1923, France invaded the Rhineland to commandeer a big chunk of German coal production.

But Western France used to buy all its coal from South Wales.

However cheap your Welsh coal price is, nothing beats free coal, does it? So Wales lost a key export market. I'm not sure if the Welsh economy has ever really recovered from 1923.

That's when the long decline began.

That applies to the Valleys obviously, but even in Radyr, well down the Taff Valley, when I was growing up 30 years later, there were coal brokers, insurance brokers, shipping brokers and stock brokers who didn't seem to have done a proper day's work since the mid-20s because the stuffing had been knocked out of Cardiff Docks.

They were brilliant at golf and cricket though! Plenty of time to practise!

The other not-quite-so-famous quote from that period of failed international restructuring haggling was: "Sound money - and plenty of it!" American Congressmen were unsympathetic to the talks because they thought debt restructuring would undermine "sound money" and lead to inflation.

The present German Government stance is very much along those lines now.

Allowing Greece to defer its debt repayments now will undermine financial self-discipline - sound money.

The Germans tried unsuccessfully to prevent the European Central Bank from printing billions of extra euros to inject some fuel into the Eurozone's stuttering economic engine.

Again the fear of inflation. You have to hand it to the Germans, though.

They have actually done this year what George Osborne said the UK would do by this year. Their budget is balanced!

Yes, they've reached the goal. Osborne's promise to achieve the same thing by 2015 had proved to be like short-crust pastry - easily broken.

The UK is miles off target. It's no use the Germans simply thinking that if only all the other Eurozone members were more like the Germans, all would be well.

That's what the Americans all thought in the 1920s.

Nobody wants inflation and noone wants economic stagnation either. So to keep the Greeks, the Germans and ourselves happy, that's what we need.

Sound money and plenty of it!


Calvin Coolidge (1923-1929) - described as the worst President in US history - turned a deaf ear to debt restructuring pleas from Europe after the war
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Publication:Western Mail (Cardiff, Wales)
Geographic Code:4EUGE
Date:Feb 21, 2015
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