Germany must learn from its history and forgive Greece

French soldiers occupy the Ruhr in 1923

In 1923, French and Belgian soldiers marched over the border into the Ruhr, part of the fragile new democracy of Germany. They took control of the coal mines, iron foundries and steel mills and simply carried over the goods they were owed as part of the Versailles reparations treaty. In response, the Weimar Government was force to print money to pay its workers. The occupation turned Germany's moderate inflation into a hyperinflation; quite probably the biggest cause of resentment among the lower-middle-class "kleinbürgertum", who then elected Adolf Hitler's Nazi Party.

I bring this up because, now, the situation is reversed. Today Germany is the creditor, and the only big country in the eurozone with a state strong and trusted enough to borrow essentially unlimited amounts of money. At Cannes today, its Chancellor, Angela Merkel, and France's President Nicolas Sarkozy will be trying to bully Greece's Prime Minister into accepting an austerity package that, politically, he cannot. As I noted yesterday, austerity isn't working in Greece anywhere near as well as it is in Ireland, because the political system is simply not capable of dramatic reform. They have succeeded in cutting the primary deficit, but as the global economy slows down, we are reaching the limits of what Greece can do to pay back its debts.
That's not helpful to Angela Merkel. Understandably, German voters are annoyed to be depicted as Nazis in Greek newspapers while they work longer years, in harder jobs, for roughly the same pay they were earning 10 years ago. They don't want to sacrifice what little they have to save the feckless Greeks, who they reckon spent 10 years eating feta and relaxing in the sun on Germany's credit card (which is true, since the market reaction to the euro's introduction 12 years ago was to offer German interest rates to southern countries, despite no evidence that they'd become any more fiscally prudent.)
But then, as Martin Wolf points out in today's FT (£), creditors need debtors. Or as someone else put it: if you owe the bank a million dollars, you're in trouble; if you owe them a hundred million, they're in trouble. The Germans cannot invade Greece and take holidays on the islands without paying. They cannot take over Crete and declare it a new German state. They have to accept that Greece cannot pay its debts, and that the only alternative to Germany paying its debts for it is catastrophe. And while "schadenfreude" is a German word, they would do better to look at their own history: it does not pay to be vindictive.