Ex-minister: forced loan worth 13 bln euros in present values

A lot has been said recently about the size of the occupation loan forced by Germany and Italy on Greece’s collaborationist government. Some estimates have been astronomical. Former Economy Minister Nikos Christodoulakis has come up with a more accurate figure arrived at using more precise calculations.

According to Christodoulakis, whose study will be published shortly by Gutenberg, the figure is similar to Germany’s contribution to Greece’s bailout agreement. In this interview with Kathimerini, he explains the discrepancies between the different estimates and explains why Greece has a strong claim.

In Greece there has been a lot of confusion about the size of the forced occupation loan and how much it is worth today.

The confusion arises because the original amount was estimated in drachmas or occupation reichsmarks. However, both currencies suffered from hyperinflation after the war as the two countries’ economies collapsed – in Greece from 1944 to 1952 and Germany in 1948. If you base your calculations on those currencies and ignore the collapse of these economies you will come up with a mammoth figure. If you take the meltdown into account, then you end up with peanuts. That is the reason for the huge discrepancies. We need a more objective approach.

What methodology did you use?

Estimating the current value must be done on the basis of a market that has remained stable throughout this period, like the US bond market. I calculated the current value as if the loan had been issued in 1944 long-term American bonds. Every $1 million of that time equals 55 million euros today.

On what did you base your research and what is the final sum you came up with?

There are four kinds of claims and it would be good to avoid confusion. First, there is the forced occupation loan. Second, there are compensation claims by individuals that have been identified, such as former prisoners and the families of executed people. Only a few cases of compensation were paid in 1962. Third, there are casualties that have not been identified in places that suffered from Nazi atrocities like Distomo in Viotia and Kantanos on Crete. Fourth, there is the destruction of infrastructure and looting.

With regard to the occupation loan, the Bank of Greece has come up with a figure of $228 million dollars in 1944 values. This is the equivalent of 13 billion euros in 2013 values. A more reasonable figure concerning compensation for identified victims, in line with the standards of international organizations, is 54 billion euros. Other cases of compensation and reparations also hover in the triple digits. But it will take a lot of work to substantiate the claims.

What makes you think that Greece has a strong case with the occupation loan?

It has to do with the loan’s very nature. It was not a loan in German bonds so as to be included in the 1953 write-off of German debt, nor was it backed by a guarantee to be included in the 1945 reparations of which only a small fraction was paid. The authorities avoided these so that the expenditure would not show up in their budget and the loan was spared the haircut.

What should Greece do from now on?

It should try to reach a compromise solution. For example, the loan recorded by the Bank of Greece is enough to pay back the money Germany has lent to Greece with the EU-IMF memorandum.