Compensation nation: Greek demands over wartime atrocities do not remove the obligation to fix its economy

It is an unavoidable, and extremely painful, irony that the European Union, embodying a fine objective that Europe should never again go to war, should now be reviving so many painful memories of the Second World War. The Greek government, desperate for anything that will deliver it from debt, has seized on the moral and financial obligations the Germans owe the country for the Nazi occupation from 1941-44. In particular, the Greeks have raised the massacre of 218 civilians in the Greek village of Distomo on 10 June 1944. In 2000, the Greek Supreme Court ruled that the Germans should pay €28m to the relatives of those killed. Justice Minister Nikos Paraskevopoulos seems determined to get his hands on the money, and more. The decision has not, so far, been endorsed by an international court. It has been rejected by Germany; and some general compensation was paid in 1960.

The Greek cause is a just one, it is as well to say, and Germany should atone for war crimes, just as the liberally-minded Federal Republic would demand contemporary murderous regimes should. And yet now is not the moment to provoke yet more Greco-German bitterness, and exacting compensation for such war crimes will not go very far towards alleviating Greece’s mountain of debt. The Greeks could go for a much more ambitious target for compensation that would cover the entire occupation, and might make a bigger dent in the current national debt. Yet exacting vast “reparations” from an unwilling Germany also has an unfortunate echo of 1919 about it. Applied more widely, to the Soviet occupations of Eastern Europe, and Western colonisation of much of the rest of the world, the whole concept of generalised financial compensation for occupation quickly loses credibility.

So this is all something of a distraction. Greece remains a fundamentally uncompetitive economy. Even if the entire debt was “forgiven”, Greece would still find itself in the same difficulties as it does now, for as long as the nation consumes, and imports, more than it produces; in other words fails to pay its way in the world. Sooner or later, its private and public debts would mount up again, and the same problem of funding them would also soon arise.

The dirty secret of the Greek euro crisis is that the debt cannot be written off or discounted because it is about the only significant lever in the hands of creditors to force economic reform. In a hypothetical world, the EU, European Central Bank and International Monetary Fund might be more than willing to swap an indebted, deeply uncompetitive Greece for a debt-free “New Greece” with an economy ready to take on the world. There is, unfortunately, little chance of that happening while Syriza is running the country.

Inside or outside the euro, in a war of words with the Germans or not, Greece still has to face up to the reality that it cannot live beyond its means. Through no fault of Greece’s, and because of the inherent flaws in the design of the euro, it was able to do so for far too long, until the financial crisis forced reality upon Athens.

The international community needs to stay calm and patient as the world works its way through these problems. In the meantime, don’t mention the war.