London Agreement on German External Debts
The London Agreement on German External Debts, also known as the London Debt Agreement (German: Londoner Schuldenabkommen), was a debt relief treaty between the Federal Republic of Germany and creditor nations. It was concluded in London during negotiations which lasted from February 27 to August 8, 1952, and implemented in 1953.
The London Debt Agreement covered a number of different types of German debt from before and after the Second World War. Some of them arose directly out of the efforts to finance the reparations system, while others reflect extensive lending, mostly by U.S. investors to German firms and governments. The parties that were involved besides West Germany included Belgium, Canada, Denmark, France, Great Britain, Greece, Iran, Ireland, Italy, Liechtenstein, Luxembourg, Norway, Pakistan, Spain, Sweden, Switzerland, South Africa, the United States, Yugoslavia and others. The states of the Eastern Bloc were not involved.
The total under negotiation was 16 billion marks of debt resulting from the Treaty of Versailles after World War I which had not been paid in the 1930s, but which Germany decided to repay to restore its reputation. This money was owed to government and private banks in the U.S., France and Britain. Another 16 billion marks represented postwar loans by the U.S. Under the London Agreement, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact. An important term of the agreement was that repayments were only due while West Germany ran a trade surplus, and that repayments were limited to 3% of export earnings. This gave Germany’s creditors a powerful incentive to import German goods, assisting reconstruction.
The agreement significantly contributed to the growth of the post-war German economy and reemergence of Germany as a world economic power. A 2016 NBER paper showed that the London Agreement "spurred economic growth in three main ways: creating fiscal space for public investment; lowering costs of borrowing; and stabilising inflation." It allowed Germany to enter international economic institutions such as the World Bank, International Monetary Fund and World Trade Organization.
Some of the agreement included debts to be paid after the reunification of Germany. Over decades it seemed unlikely to transpire, but in 1990 another 239.4 million Deutsche Mark of unpaid coupons were revived. On 3 October 2010 the last payment was made of 69.9 million euro. This is considered to be the last payment by Germany on all known debts resulting from both world wars.
- German reparations for World War II
- Marshall Plan
- World War I reparations
- Dawes Plan, 1924–29
- Young Plan, 1930–32
- Osmańczyk, Edmund Jan; Anthony Mango (2003). Encyclopedia of the United Nations and International Agreements: G to M (2003 ed.). Taylor & Francis. ISBN 978-0-415-93922-5.
- Timothy W. Guinnane, "Financial Vergangenheitsbewältigung: The 1953 London Debt Agreement" (Economic Growth Center, Yale University, 2004) online
- Ursula Rombeck-Jaschinski: Das Londoner Schuldenabkommen: die Regelung der deutschen Auslandsschulden nach dem Zweiten Weltkrieg. (German with English abstract). Oldenbourg, 2005, ISBN 9783486575804. Originally presented as the author's habilitation (Düsseldorf) under the title: Der Weg zum Londoner Schuldenabkommen. Die Regelung der deutschen Auslandsschulden nach dem Zweiten Weltkrieg.
- Osmańczyk 2003, p. 797
- Galofré-Vilà, Gregori; McKee, Martin; Meissner, Christopher M.; Stuckler, David (2016-08-01). "The Economic Consequences of the 1953 London Debt Agreement". National Bureau of Economic Research.
- Timothy W. Guinnane, "Financial Vergangenheitsbewältigung: The 1953 London Debt Agreement" (Economic Growth Center, Yale University, 2004) pp 17. 20, 21, 27-8, 30 online
- Heather Stewart (18 January 2015). "A new idea steals across Europe - should Greece's debt be forgiven?". The Observer. Retrieved 25 January 2015.
- (German) " Deutschland hat keine Kriegsschulden mehr," stern.de (3 October 2010).
- Text of the treaty
- Éric Toussaint, The Marshall Plan and the Debt Agreement on German debt
- Timothy W. Guinnane, Financial Vergangenheitsbewältigung: The 1953 London Debt Agreement