The economic consequences of the 1953 London Debt Agreement

Abstract

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w22557.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Austerity and the Rise of the Nazi Party

“…This placed financial demands on Germany that were very difficult to meet and that were dubbed as "cruel" by some (Keynes 1920;Temin and Vines 2014). However, Germany's war debts were never completely paid (Galofré-Vilà et al 2019). German war debts were postponed in the Hoover moratorium of 1931 or temporarily suspended in the Lausanne Conference a year later.…”

‘We can't pay’: how Italy dealt with war debts after World War I

“…As to the settlement of German reparations, in June 1951 the Allied powers began negotiating a plan that arrived at a final agreement with the London Debt Agreement (LDA) of 1953, whereby half of German external debt was wiped out while for the other half there were generous repayment conditions based on export growth. The LDA was part of the wider European Recovery Programme, better known as the Marshall Plan (1948–51), which signaled the keen US interest in European reconstruction and in containing the spread of Communism (Galofré-Vilà et al 2018). The Marshall Plan mobilized a total of $13 billion from 1948 to 1951, aimed at rebuilding and stabilizing Europe's war-ravaged economies (Eichengreen 2010).…”

Learning the Hardest Way: The Pedagogy of Sovereign Debt Crises

“…Albeit such general unrest is understandable from the authors' perspectives, a different historical, case-based, and more proactive approach would have been possible, following the spirit of the edited volume and its overarching aim of drawing concrete lessons from past experiences. For instance, when it comes to critically assessing the possibility of a debt relief in these countries, a landmark case has been that of West Germany's debt relief through the 1953 London Debt Agreement (LDA), widely analysed amongst others by Galofré-Vilà, McKee, Meissner, and Stuckler (2019). It is important to be careful, however, when extrapolating lessons from momentous past events given that, as a matter of fact, the 1953 LDA was signed after the catastrophic consequences of World War II in a context in which each country still kept their monetary policy tools in order to autonomously calibrate their public finances and economic development.…”