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The claim for reparations is a sign of financial frustration

24 March 2015 / 12:03:16  GRReporter
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Anastasia Balezdrova

Immediately after the start of the economic crisis in Greece, various persons and political parties began to raise the issue of war reparations, which they say Germany owes Greece for damage caused during World War II occupation of the country.

While the previous Greek government was looking at the issue from a certain distance, though it formed a committee to calculate the amount of reparations, today's cabinet is adamant that it will require Berlin to pay the price of damage inflicted during the war and in a special speech to parliament, Prime Minister Alexis Tsipras has personally committed himself to resolve the issue.

Meanwhile, Minister of Justice Nikos Paraskevopoulos said he would sign the decision of the Supreme Court, which would entitle the Greek state to seize German assets on Greek territory to satisfy the relatives of the victims of the massacre in the village of Distomo.

The discussion about German reparations has inevitably raised the question as to whether the other two occupying countries Italy and Bulgaria have paid their obligations after the end of World War II and to what extent.

GRReporter presents the complex maze of Bulgarian-Greek relations between and after the two world wars in a conversation with PhD Daniel Vachkov from the Institute for Historical Research at the Bulgarian Academy of Sciences.

Beginning of the problem of reparations after World War I

The problem of reparations became one of the most painful international issues after World War I in 1919, when the series of peace treaties concluded with the defeated countries, namely Germany, Bulgaria, Hungary, Austria, the Ottoman Empire, imposed on them various sanctions. The compensations that the defeated countries should pay the winning countries and their amounts would become one of the toughest and most controversial among those sanctions. They related to declaring the countries guilty of unleashing the war and of all further damage. Therefore, the idea of ​​peace treaties was that the defeated countries that were to blame for the war must pay for the damage.

Even then, there were several major problems in estimating the amount of reparations. The first was the perception that they were not formulated in a sufficiently precise, clear and specific manner. In many cases, their amounts were astronomical. I have looked at the Bulgarian objections against the accusations that Bulgarian troops had destroyed a number of animals or the railway network. They show that, according to the statistics of the claiming countries, they did not have so many cattle or such a railway network. That is, the first apparent thing was the feeling that the damage was over-exaggerated. The big problem actually was that, through all these claims, the defeated countries did not present clearly and properly specified damage. On the one hand, everything was quite exaggerated and on the other, it could not be proved that the damage was caused only by the countries that were accused of being the cause of the war.

Daniel Vachkov is a PhD at the Institute for Historical Research at the Bulgarian Academy of Sciences. He was born in Sofia on 4 September 1964. In 1990, he graduated in history at Sofia University "St. Kliment Ohridski" and in the period 1991-1992 specialized at the European University Centre in Nancy (France), where he graduated. In 1997, he defended a doctoral thesis on Bulgaria and the League of Nations from 1920 to 1939 (financial-economic relations). He has worked at the Institute for Historical Research at the Bulgarian Academy of Sciences since 1997 and explored the issues of Bulgaria’s economic and financial development in the 20th century. He is a co-author of 3 monographs and 5 textbooks, and the author of over 70 scientific publications.

The withdrawing troops of a country itself may have destroyed something during the war. Therefore, a major dispute started in this connection, which would hardly be able to prove the extent of the damage and who had caused it.

Another problem that would arise after World War I would be the amount of reparations that, ultimately, the winning countries would find it impossible to service. When they stopped paying due to the inability to do so, the vulnerability of the system became apparent. This was especially true for Germany, which actually collapsed financially in 1923 and the occupation of Ruhr led to an unseen in history hyperinflation, when the German mark reached exceptional levels of devaluation.

As a result, it was clear even then that the reparations were not only a tool that could not help the economic recovery of the world and Europe after the war but they would instead only exacerbate the problems and open the way for the development of national rivalries and for the rise of extreme nationalist regimes and movements. In fact, very often the rise of these extreme nationalist movements in the defeated countries was due to the fact that they felt cruelly punished by some onerous reparations.

Therefore, the problem of reparations showed how difficult it was to cover in this way any damage caused by the war. For the defeated countries, they were a political rather than an economic debt, a sanction against them, an attempt to ruin them economically and financially so that they would not be able to recover. And for the winning countries, they were false expectations. They believed that they would receive reparations, which ultimately they failed to obtain.

World War I is a very telling example. The huge reparations imposed on Germany, Bulgaria and the other defeated countries could not be paid. Eventually, several international meetings and conferences were held to find a solution to the problem.

In 1923, when the inter-allied commissions became aware that Bulgaria could not pay the reparations they allowed for deferments. In 1924, the German reparations were deferred under the so-called Dawes Plan, which was followed by another deferment of the already alleviated payments. In 1928 and 1930 the reparations were again deferred and actually the reparations due after World War I were officially "buried" because of the outbreak of the so-called Great Depression, which spread all over the world from 1929 to 1933. Then it became absolutely impossible for countries to pay any such debts.

Bulgarian reparations after World War I and the Mollov-Kafantaris Agreement on population exchange

A problem in the Bulgarian-Greek relations emerged again and actually, we have to say that reparations were one of the issues that seriously irritated the interstate contacts between the two countries because they led to significant differences between them. And often the disagreement on this issue was the cause of a poor overall development of bilateral relations.

Bulgarian-Greek relations between the two world wars were complicated by the fact that an agreement on voluntary exchange of populations was added to the Peace Treaty of Neuilly in 1919 at the proposal of the Greek side. Its idea was to replace Greeks from Bulgaria with Bulgarians from Greece while the states should pay them for the properties that they would leave. Ultimately, this convention developed and lasted until the end of the 1920s. It turned out that the number of Greeks who left Bulgaria was considerably lower than the number of Bulgarians who left Greece. The result was a pretty significant balance in favour of Bulgaria that the Greek state had to pay to Bulgaria to compensate the refugees from Western Thrace and Aegean Macedonia.

At one point, this problem was particularly associated with reparations. In 1931, at the height of the financial crisis, when it became clear that the payment of interstate debts was not possible, US President Hoover of the time offered a one-year moratorium on all reparation and war payments.

Bulgaria took advantage of it and suspended payments of repatriations to Greece. In response, however, Greece suspended payments under the exchange of population agreement, known as the Mollov-Kafantaris Agreement. A long dispute began that reached The Hague. Bulgaria argued that it was not an interstate debt but a debt to individuals who had left their properties in Greece and therefore it could not benefit from the Hoover moratorium.

Anyway, many financial problems between Bulgaria and Greece remained pending and unresolved, including the reparations and the Mollov-Kafantaris Agreement on population exchange.

Reparations after World War II

World War II came as a surprise and things became even more complicated. On 1 March 1941, Bulgaria joined the Tripartite Pact and the allies of Germany. Then subsequently, Germany waged war against Yugoslavia and Greece. Bulgaria was not involved in the military campaign. It did not declare war and even concluded an agreement under which the German troops passing through Bulgaria were not entitled to use the Bulgarian railways.

Anyway, Greece would claim that the Germans had carried out the attack through Bulgaria. Having defeated Greece, the same April Germany entitled Bulgaria to administer the so-called "new lands" - Vardar Macedonia in Yugoslavia and the Aegean Sea region in Greece. The Bulgarian troops entered those areas where Bulgarian administration was established. This situation lasted until September 1944, when Bulgaria left the Tripartite Pact, Soviet troops entered its territory and it joined the anti-Hitler coalition. It was even involved in direct military battles against Germany in the last year of the war.

Here the problem of reparations appeared again and once again it was clear that they were estimated absolutely arbitrary, without the presence of sufficiently clear descriptions of what exactly was destroyed - what percentage of the railway network, how many mines, what part of urban space... There were no clear and precise estimates.

Initially, the Greek side had estimated extremely high amounts. It wanted the Bulgarian side to pay $750 million for the so-called Bulgarian occupation. This was a huge amount at that time. I would say that Bulgarian responses were highly grounded, although they were provided by representatives of the communist power. In fact, it used experts from the old ministries. That is, apparently very experienced people who provided highly grounded responses and rebutted all claims for such reparations point by point. Moreover, because Bulgaria considered these lands not as a temporary commitment but as lands that would be integrated into the Bulgarian state in the future, it even claimed that it had actually invested in these areas and millions at that, supporting these arguments with figures. This clearly shows how difficult it was to determine the extent of damage, its cause and the way in which it should be paid.

Ultimately, we must admit that, when estimating the reparations after World War II, the winning countries approached the issue in a more realistic and reasonable manner. They concluded that the failure of World War I reparations should not be repeated, i.e. that estimating huge reparations did not mean that they would be paid and that they would impose tension and create conditions against the economic recovery of Europe.

Therefore, the thesis, especially of the US, was that reparations should be minimal and that the aim should be the recovery of Europe, and not trying to determine which country should pay and what it should pay. And a little later, in 1947, the Americans launched their plan for the financial and economic recovery of Europe, known as the "Marshall Plan." They believed that if the desire was for Europe to recover and become economically strong, the aim should be the recovery of all areas, and that a ruined Germany, for example, could not be required to pay reparations to other equally ruined countries, of course.

An exception was made only for the Soviet Union, which insisted on receiving reparations. Viewed objectively, the USSR had actually suffered the greatest damage and ultimately, the American and British delegations agreed that it should receive reparations, but only from its own occupation zone in Germany. Therefore, the Soviet Union actually exported hundreds of factories and other things from the East German occupation zone. The rest of the countries did not accept the thesis of reparations and this was one reason why their amounts were not so burdensome after World War II.

The second reason was that during the peace conference in Paris in 1946, Europe was already largely divided into spheres of influence. What Churchill would call the "Iron Curtain" had already formed. It had fallen over Eastern Europe, making it clear that the USSR would somehow dominate these countries.

This changed the attitudes to the sanctions imposed on the defeated countries. Henceforth, the Soviet delegation too was very opposed to demanding large reparations from those countries that were formerly allies of Germany and that already were in its area. It was not in its interest for Bulgaria to pay reparations to Greece that had remained on the other side of the Iron Curtain.

This created an entirely new situation. At one point, the winning countries favoured some of the defeated countries for the simple reason that they were already in their sphere of influence.

Therefore, the Soviet delegation was clear that no large sums should be demanded from Bulgaria. On the other hand, we have to admit that the US delegation very clearly showed that it was against reparations by estimating a relatively small amount of reparations due by Italy, about $320 million. I emphasize that this country, unlike Bulgaria, waged war on Greece.

Bulgarian war reparations and Greece

The amounts discussed in Paris were reasonable and Bulgaria was required to pay reparations to Yugoslavia and Greece. It is interesting to see how things developed after the two countries had fallen into different spheres of influence. By 1946, the conflict between Tito and Stalin had not exploded and Yugoslavia had been moving with the common Soviet bloc. In this situation, the Yugoslavs said that they had no claims for large reparations to be paid on the part of Bulgaria, but only for symbolic ones, thus significantly weakening the Greek position.

Therefore, the Greeks remained in isolation. Initially it was considered that Bulgaria should pay a sum of $125 million but after Yugoslavia and the Western war winning countries announced their position, the final contract determined that Bulgaria should pay reparations to the amount of $70 million, as follows: $25 million to Yugoslavia and $45 million to Greece.

Another favourable factor, a result of the failures after World War I, was the decision that reparations would not be paid in hard currency, such as US dollars or Swiss francs, as it was considered that this type of payment would take the defeated countries to a financial collapse. It was decided that reparations be paid in goods, which was a better option.

The problem of Bulgarian-Greek reparations remained over time. It was not immediately solved, as it followed the political relations between the two countries, which significantly deteriorated in the period 1947-1948. Greece was in the grip of a civil war, Bulgaria and Yugoslavia were accused of secretly supporting the communist resistance. In practice, once the royalist forces took power in Greece there were no diplomatic relations between Bulgaria and Greece for years. This was why no reparations were paid. Bulgaria refused to pay any reparations to a country with which it had no diplomatic relations.

This was the time of the Cold War. Contacts between the countries from the two blocs were generally very limited, they were mostly hostile. Bulgaria was almost fully under Soviet influence and virtually none of the decisions related to foreign policy were taken by the Bulgarian government. From this perspective, reparations were not a problem of immediate importance.

After Stalin's death in 1953 and especially after 1956, when Nikita Khrushchev started to send detente signals to the international community, changes occurred in the satellites of the USSR. They also began to "open" and Bulgarian-Greek relations very slowly started to recover. Of course, they had accumulated a lot of problems that had to be solved over time.

Bulgaria took the first steps to thaw the ice in 1956 when the two countries exchanged diplomatic representatives, but only at the level of attaches. For many years, Greece raised many problems, including reparations. After all, having attained convergence of positions, in 1964 they signed agreements that settled the controversial issues and reparations among them and having committed to solve them, the two countries restored their full diplomatic relations and exchanged embassies.

The amount of reparations was again significantly reduced. Things settled by binding them to the Mollov-Kafantaris Agreement and by attempting to see the obligations due after presenting all financial claims. At the end of this process, Bulgaria had to pay a not so large sum of $7 million and it pledged to pay it in goods for a period of 12 years. It made all the payments by the end of the 1970s. Thus, in practice Bulgaria has settled the issue, because no claims, even formal claims, have been left unsettled. The sooner the countries settle their financial issues, the better for their bilateral relations.

Greece and German war reparations

Now, 75 years after the war, is not the proper time to raise the issue of reparations which indicates a kind of lack of opportunites to make financial decisions, nor to start looking for a solution to temporarily "manage somehow". These are populist demands that do not sound very convincing.
Moreover, we must admit that raising the issue of reparations is totally inadequate in view of the fact that ultimately, all countries outside the socialist camp used huge financial flows during the post-war reconstruction of the world and Greece was one of the biggest beneficiaries. My personal opinion is that this is a sign of financial frustration.

However, I must stress that I have not dealt in detail with the issue of world reparations, including those between Germany and Greece. I consider them through the prism of reparations that were requested from Bulgaria, through the way in which they were claimed. And from this point of view, I could say that basically, reparations are not a convincing and grounded debt.

What we need to understand is that every war brings total financial chaos and obligations. But for me personally, returning to it is not a solution.

Tags: HistoryWorld War IIWar reparationsBulgarian-Greek relationsMollov-Kafantaris exchange of populations agreementGermany
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