One Made it Out of the Debt Trap

Added 08 Nov 2013

On the occasion of the 60th Anniversary of the London Debt Accord, Eurodad member and the Friedrich Ebert Foundation have published the new report: “One Made it Out of the Debt Trap. Lessons from the London Debt Agreement of 1953 for Current Debt Crises.

The report describes one of the most generous and successful sovereign debt restructuring processes ever, the one for post-war Germany that lead to a massive reduction in Germany’s external debt, paved the way for its economic boom in the following decades and restored its debt sustainability in the immediate years that followed, and up to the present day.  The report describes the unique features of the London Debt Agreement and puts into context the current debt crises.

Download the report here

Read the report’s summary here:

  • Among modern sovereign debt restructurings, the little-known London Debt Agreement for Germany is an early and important example – not least, because it was so successful in restoring West Germany’s debt sustainability.
  • Beyond the sheer level of relief it provided, the London Debt Agreement shows some »qualitative« dimensions, the lack of which makes present-day restructurings so protracted and painful. They include a conditioning of debt service upon trade surpluses, the possible recourse to arbitration, and the comprehensive character of the negotiation, which included most types of claims on the German economy.
  • Comparing the London Debt Agreement to recent restructurings in Greece, Iraq, and Burundi demonstrates how overall, and in important details, a »London-style« process would have delivered – or still could deliver – faster and more sustainable debt restructuring.