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Financial Vergangenheitsbewältigung: The 1953 London Debt Agreement

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  • Timothy W. Guinnane

    (Economic Growth Center, Yale University)

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

  • Timothy W. Guinnane, 2004. "Financial Vergangenheitsbewältigung: The 1953 London Debt Agreement," Working Papers 880, Economic Growth Center, Yale University.
    • Handle: RePEc:egc:wpaper:880
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    File URL: http://www.econ.yale.edu/growth_pdf/cdp880.pdf
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    References listed on IDEAS

    as
    1. Arslanalp, Serkan & Henry, Peter B., 2006. "Debt Relief," Research Papers 1931, Stanford University, Graduate School of Business.
    2. Klug, A., 1993. "The German Buybacks, 1932-1939: A Cure for Overhang?," Princeton Studies in International Economics 75, International Economics Section, Departement of Economics Princeton University,.
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    Cited by:

    1. 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.
    2. Accominotti, Olivier, 2012. "London Merchant Banks, the Central European Panic, and the Sterling Crisis of 1931," The Journal of Economic History, Cambridge University Press, vol. 72(1), pages 1-43, March.
    3. Michalis Nikiforos & Dimitri B. Papadimitriou & Gennaro Zezza, 2015. "The Greek Public Debt Problem," Economics Policy Note Archive 15-2, Levy Economics Institute.
    4. Schioppa, Claudio A. & Papadia, Andrea, 2015. "Foreign Debt and Secondary Markets: The Case of Interwar Germany," MPRA Paper 102863, University Library of Munich, Germany, revised 2016.
    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. Andrea Papadia & Claudio Schioppa, 2020. "Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany," Working Papers ECARES 2020-36, ULB -- Universite Libre de Bruxelles.
    7. 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.
    8. 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.

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    More about this item

    Keywords

    Germany; London Debt Agreement; sovereign debt; debt overhang; HIPC initiative;
    All these keywords.

    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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