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Financial Vergangenheitsbewaltigung: The 1953 London Debt Agreement

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  • Guinnane, Timothy W.

Abstract

The 1953 London Debt Agreement settled Germany's debts from the period between the two world wars, and allowed the country to re-establish its role in international capital markets. The Agreement wrote-down the overall debt by about 50 percent and gave the debtors a much longer period to repay. One interesting clause in the Agreement allowed Germany to postpone some payments until such time as re-unification. The Agreement reflects a subtle and responsible understanding of the problems associated with the reparations and debt crises of the 1920s and 1930s, as well as fears about the moral hazard problems that would arise with making any part of the Agreement contingent on events Germany could influence. Recent advocates of third-world debt relief have held up the London Debt Agreement of 1953 as a precedent for debt relief for poor countries today. That argument reflects a misunderstanding of the historical circumstances of the early 1950s, as well as the economic principles reflected in the Agreement.

Suggested Citation

  • Guinnane, Timothy W., 2004. "Financial Vergangenheitsbewaltigung: The 1953 London Debt Agreement," Center Discussion Papers 28387, Yale University, Economic Growth Center.
    • Handle: RePEc:ags:yaleeg:28387
    DOI: 10.22004/ag.econ.28387
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    References listed on IDEAS

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    Cited by:

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    3. Albrecht Ritschl, 2012. "War 2008 das neue 1929? Richtige und falsche Vergleiche zwischen der Großen Depression der 1930er Jahre und der Großen Rezession von 2008," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 13, pages 36-57, May.
    4. António Afonso & Joshua Jablonowski, 2025. "Fiscal Regimes And Sustainability: Insights From Post-War Germany," Working Papers REM 2025/0392, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    5. Jan-Otmar Hesse, 2015. "On the stability of open access orders: the Federal Republic of Germany since the 1960s," Constitutional Political Economy, Springer, vol. 26(1), pages 87-102, March.
    6. Albrecht Ritschl & Samad Sarferaz, 2014. "Currency Versus Banking In The Financial Crisis Of 1931," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(2), pages 349-373, May.
    7. Michalis Nikiforos & Dimitri B. Papadimitriou & Gennaro Zezza, 2015. "The Greek Public Debt Problem," Economics Policy Note Archive 15-2, Levy Economics Institute.
    8. Olivier Accominotti, 2019. "International banking and transmission of the 1931 financial crisis," Economic History Review, Economic History Society, vol. 72(1), pages 260-285, February.

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    Keywords

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    JEL classification:

    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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