I AM sitting outside a lovely bar called De Prins in Amsterdam, looking out over the canal, past the cyclists, toward Anne Frank’s house beyond.
The crowds are lined up again, as they are every day, to bear witness to the most unspeakable crime and the most magnificent courage. We know that the effervescence of a lively young girl was snuffed out by evil, but we also know that Anne Frank’s legacy eclipses those individuals who betrayed her — those cowards who pushed her on to the train; the sadists who shaved her head, starved her and who eventually whimpered like children, implicated each other and sang like canaries when real men came to liberate the camps.
The story of Anne Frank is well known, but what is often overlooked is the attitude of the victors. I don’t mean the attitude to the Nazis, but the attitude to Germany in general.
Having driven through Germany twice this summer, it is not hard to marvel at the wealth, placidity and friendliness of the country. But it could have been so different.
Imagine if the World War Two victors had applied the traditional economic and financial sanctions to defeated Germany. What would have happened if the Allies had penalised Germany with reparations? How soon would the German economy have collapsed again, leading to yet more political chaos?
The far-sighted generation of American public servants and politicians who negotiated the Marshall Plan realised that they were in a new era and that the idea of collective punishment of a nation would not serve any purpose.
Instead, the Americans in 1945 did something no one could have predicted: they rewarded the average German with cash. They subsidised the recovery of Germany and Europe, thus ensuring a recovery and the emergence of the EU as a peaceful political project. Without US money and the US military umbrella, there would be no EU.
Of course, after World War One, it was the Versailles Treaty — rooted in French and British thinking that Germany should remain economically subservient — which catapulted Hitler into power. In fact, his rants about international Jewry being behind Versailles resonated right up to the war.
The only economist who foresaw the disastrous implications of reparations was Keynes. He warned that reparations would force the Germans to become so competitive that far from securing the French and British economies, they would undermine those countries through the mechanism of free trade.
He also twigged that Germany would become a huge debtor because maintaining the German mark on the Gold Standard would mean that Germany would have to borrow from tomorrow in order to pay for yesterday. As a result, Germany would either become a huge borrower or it would leave the Gold Standard. In the intervening period, Keynes predicted that Germany would destabilise the system because the system was destabilising Germany.
It is clear now that reparations led to disaster. The key difference between the Marshall Plan and the Versailles Treaty is forgiveness. The architects of the Marshall Plan did not encumber the Germans with any more financial hardships.
This was the price the Allies were prepared to pay in order to buy stability and loyalty in Europe. The thinking behind the Versailles Treaty was precisely the opposite and ultimately ruinous.
NOW keep the idea of reparations in your head and let us switch to the thinking behind our Government’s banking and economic policy. Consider the bailing out of the banks and encumbering the citizens of the country with a massive bill as a modern-day, peacetime equivalent of reparations.
However, our Irish bank reparations dwarf those of Versailles. The Treaty of Versailles demanded that Germany pay â‚¬318bn in today’s money. From a German population at the time of 58 million, this equates to â‚¬5,482 per person in today’s money. If bank bailout costs are â‚¬50bn, then this will work out at â‚¬11,235 per head — or more than twice the cost per head of the Treaty of Versailles to the average German.
Let that sink in a bit. Remember what we know about how reparations destroyed democratic Germany and just imagine what our bank reparations will do to us.
Now consider the other factor, which rankled with the average German after the Treaty of Versailles. One of the most contentious issues was the fact that Germany and the average German had to take sole responsibility for the war (despite the immediate cause of the war being the Austrians declaring war on Serbia).
In a similar sense, the way our Government has given us the bill to bail out foreign creditors is akin to telling the Irish people — many of whom didn’t borrow a farthing and have nothing to do with the banks — that we the people are solely responsible for the Irish banks, rather than the banks’ creditors, who actively lent to them.
Not only is the economic cost too much for any nation to shoulder, but the Irish people are not responsible for the behaviour of private banks licensed in Ireland by the European Central Bank.
The Irish bank reparations are financial lunacy and they are politically unacceptable. Anglo’s results yesterday only substantiate this view.
Is there any way that Irish society can cope with the bank reparations?
Ireland’s bank reparations will cost us â‚¬26,315 per worker in the economy. Is there any way that social peace and cohesion can be maintained when the average worker — who is entirely blameless — is being asked to cough up â‚¬26,315, while every foreign creditor, who is (in large part) to blame, is being subsidised by the average worker?
The financial implications of reparations are straightforward. Countries lumbered with excessive costs will default. This is what eventually happened to Germany. Furthermore, countries with excessive debts tend to leave whatever currency arrangement they are in, as Germany eventually did when it left the Gold Standard.
This is the lesson from financial history when excessive and unfair reparations are imposed on a nation. The endgame doesn’t have to be terrorising schoolchildren in Amsterdam, as it did with Hitler’s Germany — but the negative implications for economic and social stability are blindingly obvious.