Austerity Measures

From Barron's:

Albert Edwards, head of Societe Generale's strategy team, passes along this observation from the bank's interest-rate group:
"As an example of how long it could take to work through a massive austerity program, it was only in 2010 that Germany made the last payment required by the Treaty of Versailles from 1919, which called for reparations of what would be the equivalent of €325bn in today's currency. Back then, the treaty was not particularly popular with the German population [not unlike the current reaction of Greek citizens to Greece's austerity program]. Following the treaty, the German parliamentary republic [the so-called Weimar Republic] fell into a massive crisis and disintegrated quickly. The rest is history. One of the lessons learned is that a nation can only be pushed so far and positive incentives need to be set to guarantee cooperation. After World War II, a different strategy was applied with the Marshall Plan."


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