Long ago Keynes comment on the German debt after WW1 by saying that the one thing that could be said with certainty was that these were debts that would not be repaid.
Well that was not quite true as to the situation. The winning powers in WW1 like the Brits refused to allow all the debts to be repaid in German paper – the Papiermark – they wanted much of the debt to be paid in gold – indeed 100,000 tons of gold over more than 60 years, via repayment in the German “gold-mark”, and the German government’s political response was hyper-inflation as it tried to buy other nations’ “gold back currency” with the non-gold backed German currency, the Papiermark, rather than selling off German assets. So the Papiermark’s hyperinflation led to the introduction in 1924 of the Reichsmark with the new Reichmark worth 10 to the 12th (1 trillion) papiermarks. Now that is a rather large devaluation! The Deutsche Mark was introduced in 1948, and of course today Germany uses the Euro.
But the Papiermark’s devaluation by Germany did nothing to the repayment required in gold – that was changed over the years by many treaties – with the demand as to amount of gold reduced each time – but the Germans defaulted often – stopping payment in the 30?s, and indeed we in the US school system were told the final (to a much lower total than 100,000 ton) payment occurred when I was in school around the late 1950?s, but that was just the 1953 agreement to restart the payoff of the debt, with principal repayment completed in the 80’s and in 2010 the final payment on accrued interest being made (the Brits still owe us on the lend/lease war loans and are not making payments).
Keynes main point – that the repayment demand led to an unstable world economy and an unstable world – was spot on.
Now the Germans could have gone down the path asked of the Greeks by the Germans now – the Germans had the assets to sell off – exports for no payment were possible – screwing their population so as to please another nation and never defaulting. Of course the Germans defaulted – long before the NAZI folks were in charge – and did not in 1923 follow their 2011 advice to the Greeks. And they renegotiated year after year, extending and lowering the amount to be repaid, when they were not defaulting on the debt.
German demands on the Greeks – Irony – or just German logic?