What They Are Reading in Greece

Editorial: Iconic Photos has been first and foremost a history blog and here it looks back at millennia of messy defaults. 

The EU was supposed to heal scars from the last continental war. It is a wonder how fast the Euro undid all that comity.

History of sovereign defaults tends to begin with Dionysius, the ruler of Syracuse in Greece during the fourth century B.C., who had an entertaining habit of stamping two-drachma mark on one-drachma coins to pay of his debts. Around the same time, thirteen Greek city states defaulted on their loans from the Temple of Delos — the first recorded default in history. In the modern era too, Greece never enjoyed sound finances; it defaulted at least five times (1826, 1843, 1860, 1894 and 1932), and the messiest default in 1826 shut it out of international capital markets for 53 years.

However, it’s a more recent nightmare that haunts the Greek psyche today — that of German domination. The country which suffered mightily under the Nazi rule seems to be invoking those painful memories this November as northern european countries demand austerity measures from their floundering government. A giant swastika looms over the Acropolis on the cover of fittingly-named Crash magazine. Horst Reichenbech, the German head of the European Task Force on Greece, has been portrayed as a Wehrmacht officer on the cover of another, and called a gauleiter, a Nazi term for a regional governor. On my last visit to Athens, a favored phrase there seems to be “The Germans are coming” a title of an influential post-war Greek film, where a former partisan often wakes up from his nightmares uttering just that.

Despite deep positive relations over the last five decades — which included the German government shielding political dissidents from the Greek junta — the Second World War casts a long and grim shadow over the Greek psyche. The German tabloid Bild’s pointed suggestion that the Greeks sell the islands and the Acropolis did not help assuage the rumors that German banks are waiting to liquidate the Greek state’s assets.

Their fears may be irrational, but are not without precedents. Newfoundland lost nothing less than its sovereignty in 1936 when it messily defaulted after falling fish prices. The oldest parliament in the British Empire after Westminster was quietly abolished and a trusteeship was imposed on 280,000 people who had known 78 years of direct democracy. A la Occupy Wall Street, the islanders stormed their defunct parliament and tried to lynch their prime minister, who only narrowly escaped this fate by running down an alleyway ignominiously.

Although not quite to the same extreme as Newfoundland, Egypt, Greece, and Turkey sacrificed partial sovereignty as regards government finance to England following their nineteenth century defaults. The United States established a fiscal protectorate in the dominican republic in 1907 in order to control the customs house, before occupying the entire country in 1917. The US also intervened in Haiti and Nicaragua to control the customs houses and obtain revenue for debt servicing. Such were the halcyon days of gunboat diplomacy.

This blog believes that Germany and her investors has profited deeply from the euro at the expense of their Mediterranean neighbors. Without the euro, Italy and Greece could have indulged their workers with higher and higher bonuses while sporadically devaluing their currencies and making their countries more competitive. The euro prevented that. The only benefits from the euro went to Germany, where a low performing periphery weakened the currency, which made German exports extremely attractive abroad. Like China, Germany’s competitive edge had currency manipulation at its heart. Therefore, it is both hypocritical and pusillanimous for the Bundesbank and the German Chancellery to shriek their responsibilities now. After all,  they partially concocted this ungodly brew and time has come for Berlin to taste its own medicine.

 

Hyperinflation (1921 – 1923)

By its financial obduracy, Germany proves that it has exceedingly falling memory.

A well-known photo shows children playing with worthless Germany money. At inflation's peak, 1 dollar traded at 4.2 trillion Deutsche Marks.

While it is often said that the German attitude to fiscal responsibility could be traced back to hyperinflation of 1921-3, it appears that Berlin has missed the big picture that emerged from that national nightmare. There are many differences, of course, but the parallels are also uncanny.

War reparations saddled Germany with huge external debt, just as the Euro has done today in southern European countries. Exporting was the only way out, although Germany had to do it without its main industrial centres in the east and the west, and the southern countries without a flexible exchange rate.

Like Germany today, France was reluctant to help; in Britain, a German bailout was political unpopular. Instead, international creditors demanded public sector cuts; they directed at the military rather than the civil service, but the deflationary effect was no different. The Weimar Government’s later tax increases were as unrealistic as those imposed upon many debtor nations by Germany currently.

The percentage of government spending covered by taxes rapidly decreased from not-too-spectacular 15% in 1914 to just 0.8% in 1923. This disastrous fall had two causes, both familiar to a modern reader.

Firstly, there was a rampant tax avoidance. Germans evaded taxes in the 1920s, as much as Greeks do today. And as with America today, the war was financed not through tax hikes, but through increased borrowing from international creditors. Therefore, in Germany it almost become a patriotic duty to avoid taxes, which would have gone straight out of the country.

Secondly, successive socialist governments in Germany created a runaway welfare state. Like Greeks, Germans were paid even when they were not working. Although reparations never accounted for more than a third of Germany’s deficit, the government pointed it out as a convenient scapegoat. As always, social ills were blamed on external bogeymen: creditors, speculators and bankers, mostly foreign, mostly Jewish.

By the time the inflation was stalled in November 1923 with an introduction of a new Mark, the trends were inexorably leading to two seminal events. The German hyper-inflation and the European governments’ inability to deter it was almost a dress rehearsal for the Great Depression. And anxieties and uncertainties these twin disasters unleashed made it easier for the National Socialists to seize power.

 

The End of the Thousand-Year Reich

As the Second World War came to a close, a wave of suicides swept Berlin and other parts of Germany. Hitler was a lifelong admirer of Wagner and his climatic opera, Götterdämmerung (“Twilight of the Gods”) where the heroine Brünnhilde returns the stolen cursed ring to the River Rhine and hurls herself onto her dead lover Siegfried’s funeral pyre. This immolation unleashes a fiery conflagration that topples the stronghold of the gods, Valhalla. According to a dispatch from a Japanese diplomat in Berlin, Hitler initially planned “to embark alone in a plane carrying bombs and blow himself up in the air somewhere over the Baltic” if the Allies enter Berlin. His motive was to suggest to his supporters “that he had become a god and was dwelling in heaven” — a Brünnhildean self-sacrifice, in a Messerschmitt.

In the end, his suicide was less grandiose and ignominious — although it didn’t stop some of his fervent followers from believing that Hitler had escaped unharmed from the wreckage of his 1000-year Reich. But Hitler was not the only Nazi to follow Brünnhilde’s example. Goebbels, Bormann and Himmler all committed suicide, as did Justice Minister Otto-Georg Thierack and Culture Minister Bernhard Rust. Eight out of 41 regional party leaders, seven out of 47 senior SS and police chiefs, fifty-three out of 553 army generals, fourteen out of 98 Luftwaffe generals and eleven out of 53 admirals killed themselves. Housing Commissar Robert Ley strangled himself awaiting trial at Nuremberg. Goering would follow him when the Nuremberg judges denied him the firing squad he requested.

This suicidal impulse was not confined to the Nazi elite. Ordinary Germans in untold numbers responded to the prospect of defeat in the same way. At the Berlin Philharmonic’s last performance, which coincidentally but not too surprisingly was Götterdämmerung, the audience was given potassium cyanide pills. In April 1945 there were 3,881 recorded suicides in Berlin, nearly twenty times the figure for March. Untold numbers of victims of rape by the Soviet Red Army also committed suicide, and news of violence and rape further propelled mass suicides in villages all over Germany. Although the motives was widely explained as the “fear of the Russian invasion”, the suicides also happened in the areas liberated by the British and American troops.

Mass suicides that created a sensation were those of Leipzig burgomaster’s family, that was captured by Margaret Bourke-White and Lee Miller. The photos showed a different approach between this two great female war-photographers. Bourke-White, a meticulous observer as always, kept her distance from the tragedy, even taking photos from the gallery above. Miller moved in closer; a fashion photographer covering the war for Vogue, Miller’s photo of the body of burgomaster’s daughter was almost a fashion shoot of a wax mannequin — her Nazi armband immaculately displayed, her lips parted as if waiting for a true love’s kiss that would revive her.

Bourke-White's pictures are on the left, and Miller's on the right.

 

Dora Concentration Camp

Although many of his photos and film have been shown repeatedly on television across the world, the name Walter Frentz remains unknown. Hitler’s photographer, Frentz had been there all along — from the beginning of Hitler’s dictatorship to those hectic final days in the Fuhrerbunker. In between, he took photos of Hitler and his dog, the private lives of top Nazi leaders, party rallies in Nuremberg, the 1936 Olympics, von Ribbentrop’s historic mission to Moscow and Hitler’s triumphant entries to Warsaw and Paris.

Yet, notably absent were the atrocities; Frentz reportedly witnessed a massacre of Jews in Minsk while traveling with SS leader Heinrich Himmler. There is no photographic evidence of this incident, and Frentz himself was sworn to secrecy. In taking photos of forced labor in the construction of the V–2 missiles at the Dora concentration camp and Mittelwerk underground factory near Nordhausen, Frentz came closest to the harsh realities of Second World War but they too were sanitized versions of history — a history Nazi leaders wanted to see.

Today, the slave labor behind V2 rockets is almost forgotten — in fact, 2,000 prisoners, worked on it and almost half of them didn’t survive. When the first V2 rocket hit Britain in 1944, it was one of the most complex weapons ever employed. However, after 15 years and huge sums of money, it did not prove to be the decisive weapon that Hitler had hoped would force Britain out of the war. The prisoners working on the missiles sabotaged some of them that around 20% of rockets that left Dora had flaws.

Frentz’s close friend, Armaments Minister Albert Speer sent him to film the Dora mines in the summer of 1944. Speer hoped the photos would persuade Hitler to maintain support for the V2 program. In an early use of Agfa color film, Frentz took staged photographs to showcase the efficiency of forced labor. Instead of stick-wielding kapos, back–breaking excavation and construction work, piles of emaciated dead bodies, corpses burning on open pyres, and public hangings, the Nazi leadership were instead shown skilled assembly work and healthy prisoners in clean clothing. The photographs also omit the presence of the SS and Wehrmacht in the factory. These Dora photographs lay forgotten in an attic for more than 50 years until February 1998, when Frentz’s son discovered them in a suitcase.

Signing the Armistice

On November 8th 1918, the German delegation crossed the frontlines to negotiate an armistice to end the First World War. Instead of directly driving them to where the Supreme Commander of the Allied Forces, Marshal Ferdinand Foch was waiting, the French gave them a 10-hour tour of the ruined countryside. The talk took three days and the terms from the United States included the abdication of Kaiser Wilhelm II. This was agreed and Wilhem abdicated on Novemeber 10th while Germany slowly descended into riots and unrest.

Foch appeared only twice in the three days of negotiations: on the first day, to ask the German delegation what they wanted, and on the last day, to see to the signatures. The armistice was formally signed in Foch’s carriage on 11 November. Above is the only picture of the signing ceremony. The armistice initially ran for 30 days but was regularly renewed until the formal peace treaty was signed at Versailles the following year. Before the Treaty of Verseilles, the Allies kept their armies ready to begin hostilities back again within 48 hours.

In 1940, Hitler exacted revenge by forcing the French to sign an armistice in the same railway carriage. The Nazis destroyed the building housing it, the Clairiere de l’Armistice and took the carriage to Berlin. With the Allied advance into Germany, the carriage was removed to Ohrdruf, where it was destroyed.

More information about armistice, see here.