Sixty years ago – on February 27, 1953 – the London Debt Accord was signed. It was an extraordinary and historic agreement that cancelled 50% of Germany’s pre- and post-war debts to external lenders and signalled the beginning of half a century of renewal and economic development in Europe. To mark the 60th anniversary, debt campaigners across Europe are celebrating the Accord as a prime example of successful restructuring of unsustainable and illegitimate debt.
Good practice in debt restructuring
The London Debt Accord demonstrates that it is possible for multilateral stakeholders to negotiate comprehensive debt cancellation agreements, even in highly politically sensitive contexts. The Accord acknowledged the need for humane treatment of the borrower and equity between the negotiators. It did not only deal with the debt of the German state and its various predecessors, it also included all of the German economy’s external obligations. About half of the external debts owed by individuals and private companies in Germany were also cancelled.
Comprehensive and sustainable solutions
A principle of equal treatment for all debtors and creditors was agreed in the interest of an arrangement that would be comprehensive and equally binding on all debtors and creditors. All claimants had to accept equivalent cuts in interest and repayment demands. All non-public debtors benefitted from the same relief that the Federal Republic’s creditors had granted it in the interest of maintaining its capacity for economic development.
Kick-starting reconstruction and development
The agreement and its generous terms demonstrated the strong commitment of the Western Allies to avoiding the mistakes made after the First World War, namely to destabilise a defeated enemy politically and socially by imposing an unpayable debt burden. The 1953 debt deal made a significant contribution to the German economic ‘miracle’ of the 1950s and 1960s – and led to the speedy reconstruction of the devastated country.
Heed the lessons of the London Debt Accord
Debt justice campaigners concerned about the debt crises in Europe and debt injustice across the global South held actions around the world on Wednesday, February 27. They highlighted lessons from the London Debt Accord that can be applied to countries around the world that are living with unfair and unsustainable debts 60 years after the Accord was signed.
Read Jubilee Debt Campaign UK article in the Guardian written by its director, Nick Dearden.