The Greek ‘Forced Loan’ during the Second World War. Demand for Reparations or Restitution?

The ‘Forced Loan’ and the German Financing of the Occupation in Greece, 1941-1944

As a rule, German troops paid for the goods and services they received in the conquered countries using the generally accepted currency. They did so in Greece as well.^[9] In this way, minimal incentives were granted for the native producers and deliverers of services, which led to a more effective and sustainable exploitation of resources than would have been the case had brutal violence alone been employed. After the soldiers of the Wehrmacht began spending so-called Reichskreditkassenscheine during the spring and summer of 1941, the German authorities wanted this occupation currency to be replaced by regular payments from the Greek government in drachmas.^[10]

It was not until August 1941 that the two main powers of occupation, Germany and Italy, agreed on conditions for the Greek payments for the costs of occupation. Going forward, the Greek government were to make monthly payments of 1.5 billion drachmas each to Germans and Italians.^[11] These payments, called Abschlagszahlungen, were to be used for the maintenance of the occupying troops. Such benefits were legitimised in principle by international law. They encumbered the Greek government’s budget, and did not need to be paid back by the occupier. The German departments in particular spent these funds to support extensive construction and reinforcement projects (e. g. sea defence) as well as the purchase of goods. Therefore, from the beginning, the Wehrmacht’s consumption was higher than what was covered by Greek advance payments.^[12]

As the regular tax revenues of the Greek state did not nearly cover the additional monthly payments to the occupying powers, these payments could be financed only by the distribution of newly printed banknotes. The increase in the money supply collided with a situation where there was a reduced range of goods on offer, which led to a severe crisis for the already weak Greek national economy. As a result, bootleg businesses prospered, and food and goods for daily use were hard to come by, especially in urban areas.^[13]

This alarming development was accompanied by a massive rise in price levels. When, subsequently, the Germans and Italians tried to stabilise the Greek currency and thus reduce inflation, they did so not to improve the situation for the Greek population but to aid the financing of the occupiers. The Wehrmacht and the Italian army paid for the delivery of goods and services with drachmas taken from the Greek government’s advance payments. A rapid decline in the currency would be dangerous not only for the Greek national economy but also the occupiers themselves. Therefore, in November 1941, the German Ministry of Finance posed the remarkable question of whether ‘all […] obligations should be shouldered by Greece’.^[14]

Instead, Walter Eckhardt, a member of the ministry, suggested that part of the Greek payments should be given to the Axis powers in the form of a credit. This regulation, irritatingly called ‘the Reich’s financial aid’ (Kredithilfe des Reiches), primarily aimed at creating a positive psychological effect.^[15] In this way Germans and Italians pretended that they would later pay back the credit, bringing about false hopes that were used to mobilise the last of the country’s dwindling reserves. Despite these purported terms of financing, the Greeks would ultimately have to pay for the additional costs of occupation themselves.

According to this plan, the German and the Italian governments agreed on the reduction of the Abschlagszahlungen in March 1942 so that each would now receive monthly payments of 750 million drachmas from the government of Greece.^[16] This, however, did not relieve the Greeks of their financial burden, because afterwards the National Bank of Athens had to make available the cash requirements going beyond that amount (Überhang) in the form of a settlement (Anlastung), an interest-free credit.

This forced credit is not the same as an Anleihe (loan), even if research papers and media reports may have claimed so in the past.^[17] The term Anleihe suggests some kind of bond that stipulates repayment under the terms of a binding agreement. Here, in contrast, the forced credit corresponds to a settlement credit as far as its technical arrangement is concerned. Legally speaking, unlike with an Anleihe, there are no repayment instalments for a settlement credit. Instead, irregular credit entries and encumbrances are typical of a settlement credit and the Greek forced credit. In fact, the occupiers intentionally did not regulate repayments or collateral ‘to avoid even the glimpse of a German obligation of repayment’.^[18] That is why no loan undertaking had been made with the Greek government. Greek representatives had not even been consulted.^[19]

What, then, about the repayments of the ‘Forced Loan’? The assertion that the occupiers had paid for the credit in instalments (Tilgungsraten) has been one of the most significant arguments put forth by those seeking to legitimise Greek claims for repayment.^[20] The amount of the ‘Forced Loan’ came to 1,058,724 billion drachmas when the German occupation ended. In fact, in 1943 and 1944, the German occupiers repaid 760,043 billion drachmas of this total amount.^[21] The proceeds from additionally imported goods sold to the Greek population were used for only a very small part of these repayments. Moreover, the equivalent of these goods encumbered the Greek clearing account. Therefore it was not a real repayment, but a transfer to debit the Greek clearing credit and for the benefit of the forced credit. The difference between the amounts resulted from the higher proceeds of the imported goods that had been sold to the Greek population.^[22]

The main part of the German repayments had in fact been financed by speculative transactions: the selling of gold coins at the stock markets of Athens and Thessaloniki. The value of the gold coins sold amounted to 25 million Reichsmarks, which were probably taken from the reserves of the Italian National Bank and transferred to Greece beginning at the end of 1943.^[23]

Due to Greek hyperinflation, the distorted proportion of prices to goods led to a revaluation of gold prices, which were trading five or six times higher than usual.^[24] The enormous revenue generated by the gold transactions reduced the credit balance of the National Bank of Athens. Yet these repayments were deceptive, as from the very beginning the Germans had insisted on charging the nominal value of the gold coins sold to the Greek clearing account. Not only the already mentioned 25 million Reichsmarks, but also another 6.5 million Reichsmarks for gold coins sold in Albania, had been credited to the Bank of Athens.^[25]As a result of this burden and other such obligations, Greek indebtedness to Germany concerning the clearing account increased from 69 million to 262 million Reichsmarks in 1944 alone.^[26]

The Germans succeeded in executing their dubious practices via the transactions and speculations described above. Gold coins of foreign origin had been sold to the Greek government for their nominal value. The Greeks, however, could not dispose of the gold. After that, the precious metal had been sold on the Greek stock exchanges to provide German troops with drachmas.^[27]

Because the gold coins fell into the hands of individuals, never reaching the safes of the Greek National Bank, the German action did not stabilise the Greek currency. On the contrary: the drachma lost most of what remained of its purchasing power. The discrepancy between circulating money and the disposable amount of goods was largest at the end of the occupation.^[28]

Another aspect should be discussed here as well: the apparent ‘uniqueness’ of the forced credit. Hagen Fleischer claims, for example, that there was no comparable credit of occupation in any other country occupied by the Wehrmacht.^[29] Yet, the forced credit was by no means exceptional. The Third Reich accepted comparable credits by the central financial institutions in Prague, Krakow, Copenhagen, Oslo, and Zagreb.^[30]

In particular, the credits given to the Wehrmacht in Denmark and Norway are similar to the Greek example. The central banks of both countries had to make interest-free and redemption-free credits available to the German army beginning in the summer of 1940. These credits finally amounted to about 7 billion Reichsmarks at the end of the war.^[31]At times, parts of the credits were repaid. In Norway, ‘non-occupation costs’ were reimbursed, for example. These amounts debited the clearing account and credited the Wehrmacht account, a procedure similar to the repayment process in Greece.^[32]

Not only were there comparable concepts of financing in other occupied countries. It is also not tenable to assume that it was exceptional for the Germans to acknowledge the Greek forced credit as a credit in a narrower sense of the term. On the contrary: while both Scandinavian credits of occupation costs had been noted as a part of the credit granted by the Reichskreditkassen to the German government (Reichsdarlehen) in the national debt ledger (Reichsschuldenausweis),^[33] the German Ministry of Finance classified all Greek payments, both the advance payments and the forced credit, as irreversible and non-repayable income (á fonds perdu) because of incurred costs of occupation (Besatzungskosten).^[34] Even if I agree with Fleischer that several documents claim some ‘debts of the Reich to Greece’ (Reichsverschuldung gegenüber Griechenland), this phrase describes neither a singular nor a clear phenomenon.^[35] In fact, the inconsequential German classification of the forced credit reflects the original purpose of the Greek regulations. As mentioned before, the external distinction of the Greek payments as Abschlagszahlungen and Anlastungen was aimed to create a psychological effect that would placate the government in Athens and stabilise the drachma.^[36]

Postwar Regulations and the ‘Forced Loan’

Because of Greek wartime hyperinflation it is very difficult to come to a final determination of the size of the German residual debt. Siegfried Nestler tried to calculate the inflation-adjusted value of the drachma by considering the gold price on the Greek exchanges during the war. This attempt turned out to be unsuccessful because of speculative overvaluation. According to this calculation, the residual debt would have come just to 95.2 million Reichsmarks, an unrealistic estimate, as Nestler himself recognised.^[37] The final balance of the credit account named in public discussions came to 476 million Reichsmarks, a figure based on the same calculations. Nestler had arbitrarily multiplied the original result (95.2) by a factor of five, as he had considered the number to be too small.^[38]

A detailed combination of contemporary price trends in wholesale and retail trade may deliver a more reliable result than these calculations made before the end of the war. A monthly conversion of the withdrawals and repayments results in the final amount of the forced credit coming to about 720 million Reichsmarks. The sum of all the benefits extracted from the Greeks to finance German war costs, however, amounts to almost 1.2 billion Reichsmarks.^[39]

According to the Hague Regulations, the demand for a Greek contribution would not be unlawful from the point of view of international law, yet the economic productivity of the occupied country would have to be considered.y This, however, was not done in the case of Greece (as in many other cases). Rather, the German authorities enacted measures that led to a continuous overtaxing of the Greek economy so that claims for compensation were derived from this excessive burden.

Where, then, is the main difference between demands for reparation and the Greek demands for restitution that may be seen as a special case? Even if there may be some overlap between both categories in individual cases, the term reparation, introduced after World War I, comprises in principle ‘compensation for […] the loss and damage inflicted by the occupier’.^[41] In contrast, restitution refers to ‘the return of objects being illegally removed from occupied areas’.^[42]

But what does ‘illegally’ mean in this case? The decisive difference lies in the context of warfare in a broader sense. Demands for reparation aim at a compensation settlement for the damages and losses suffered in the wake of war and occupation. A justifiable demand for restitution, however, results from a removal of goods of value not primarily taken for reasons of the occupier’s war requirements. Here, however, the interpretation of international law allows for a far-reaching delegation of authority to the conqueror, especially with regard to its ‘needs’:

‘A belligerent is entitled to seize not only the money and funds of the hostile state, munitions of war, depots of arms, stores and supplies, but also the rolling stock of public railways and other means of transport, and everything and anything that he can directly or indirectly make use of for military operations.’^[43]

Considering this quote, it may be concluded that a levying of excessive and far-fetched interpretations of ‘costs of occupation’ as had been done in Greece (and in many other countries) may justify demands for reparation, but not for restitution.

In fact, the Greek government filed a claim of nearly 10.5 billion US dollars against Germany during the 1946 Paris conference on reparations.^[44] The victorious powers regarding this amount as a justifiable claim, Greece benefited from the distribution of the Germans’ foreign assets, dismantled industrial plants, goods’ depots, and ships.^[45]According to Greek sources, the first phase of compensation came to an equivalent of 25 million dollars.^[46]

Although the Greeks may have been given compensation of at least 100 million dollars in the wake of the peace treaties of 1947 with Italy and Bulgaria (the latter having occupied parts of Thrace during the war),^[47] the aforementioned Agreement on German External Debts of 27 February 1953 presented a serious setback for Greece with regard to its demands on Germany. In the notorious article 5 of the agreement, the Allied powers had decided on a moratorium concerning all

‘claims arising out of the Second World War by countries which were at war or were occupied by Germany during that war […] including costs of German occupation, credits acquired during occupation on clearing accounts and claims against the Reichskreditkassen’.^[48]

A final determination of possible claims ‘shall be delayed until the final settlement of the problem of reparation’.^[49]

The Greek forced credit may be categorised in view of its utilisation as ‘costs of occupation’, considering the Wehrmacht’s exorbitant financial demands and regarding its technical character as a ‘credit acquired during occupation on clearing accounts’. In fact, these funds had not only been credited as ‘occupation costs’ in the national budget. The money set at the Germans’ disposal by

the National Bank of Athens was actually used for the purposes of the German war effort.^[50] Thus, the forced settlement credit surely does not have a special or commercial character. The question whether the contributions were too excessive was not taken into consideration in the Treaty of London. Because almost all countries occupied by the Wehrmacht had been exploited by ignoring their actual productivity, article 5 (2) of the Agreement on German External Debts would have been principally groundless in this case.

Conclusion

Many countries made claims to enormous compensation for their exploitation by the Wehrmacht and other German departments during World War II. Greece, however, has been the only country so far that has declared part of the burden of occupation as the basis not of a claim for compensation, but of a privileged demand for restitution.

The Greek forced credit did not fulfil the criteria of an Anleihe (loan). No formal repayment instalments had been made in a contractual sense. Even if the National Bank of Athens has credited money receivable to its account since 1943, these credit entries were debited from the Greek clearing account.

The differences between the amounts resulted from sales or speculative profits, which is to say German profitmaking through direct offerings on the markets. This in fact debited the Greek economy again. German assets were not invested.

Moreover, the Greek forced credit was not a singular phenomenon: the Norwegian and Danish credits for the Wehrmacht, for example, functioned according to the same principle. Nobody has ever questioned that these credits are regulated by the Treaty of 1953. Therefore, the ‘Forced Loan’ as well as the occupation costs of the countries formerly occupied by Germany provide grounds for possible demands for reparation and are regulated by the Treaty of London.

These results lead to the necessity of a new and modified discussion of repayment. To be sure, the reckless exploitation of the country for the use of German (and Italian) war expenditure was responsible for the collapse of the Greek economy and currency during the war. In addition, the Germans committed numerous war crimes. They murdered most of the Greek Jewish community and fought recklessly against the Greek resistance, resulting in horrible consequences for thousands. The current Federal Republic of Germany is morally responsible for these atrocities. This responsibility cannot be abandoned via references to treaties or by the limitation of claims. In the contemporary discussion about claims of reparation or repayments of credits, neither financial nor political reasons should play a decisive role. What is at stake is a real dialogue with Greece about how to establish a remembrance of the war that is acceptable to all sides involved. The construction of a Greek-German fund for future common initiatives may contribute to this goal.