2015-02-07

Weekend Reading: Pettis on the French Indemnity

If I can sum this up into one sentence, it is that massive transfers of wealth from Country A to Country B leads to big problems for Country B.
Within a few years of the beginning of the crisis attitudes towards the French indemnity had shifted dramatically, with economists and politicians throughout Germany and the world blaming it for the country’s economic collapse. In fact so badly was Germany affected by the indemnity inflows that it was widely believed at the time, especially in France, that Berlin was seriously contemplating their full return. The great beneficiary of French “largesse” turned out not to have benefitted any more than Spain had benefitted from German largesse 135 years later.
Pettis:Syriza and the French indemnity of 1871-73

FTAlphaville puts some numbers and charts into it here: Michael Pettis explains the euro crisis (and a lot of other things, too)

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