Regling likens Greece to Germany after WWII

European Stability Mechanism chief Klaus Regling this week drew a parallel between Greece and postwar Germany, which only finished paying off its obligations from the 1953 London Agreement in 2010, while arguing that if the extension of the loans to Athens is sufficient – and the annual cost of servicing the debt does not exceed a certain amount – then they will be repaid.

Addressing a German audience in Aachen late on Monday, and wishing to banish fears of whether Greece will ever manage to pay off its huge pile of debts, Regling said, “Decades of experience in similar difficult cases have shown that economies that have been weakened due to a crisis can fully pay off their bailout loans if the servicing payments are sufficiently prolonged and do not exceed a certain ratio to economic growth of between 15 and 20 percent” of gross domestic product.

Regling also noted that if Greece implements the remaining reforms it will successfully graduate from the program this August: “If the report [of the creditors] is positive, there will be one last disbursement by the ESM. Besides that there will be decisions on the possible further easing of the debt,” he stated, clarifying that this concerns debt extensions and not a writeoff.