Europe Economy

Greece, Germany Argue About WWII Reparations

As Greece scrambles to cover its burgeoning national deficit and looks to German pockets for aid, a sideswipe from Greece's Deputy Prime Minister Theodoros Pangalos over World War II reparations could be a bad move, analysts told CNBC Thursday.

Aris Messinis | AFP | Getty Images

Pangalos said that Germany still owed the debt-laden country for damages caused during WWII in an interview with the BBC World Service Wednesday.

"They took away the Greek gold that was at the Bank of Greece, they took away the Greek money and they never gave it back. This is an issue that has to be faced sometime in the future," Pangalos said, quoted by Reuters.

"I don't say they have to give back the money necessarily but they have at least to say 'thanks'," he added.

Whether the claims have any legal ground remains to be seen, but experts agree that Greece is in a delicate position to be rocking the European boat.

"The Greek government should distribute 'How to Win Friends and Influence People' because that's really what the protesters on the street need and clearly what some members of the cabinet need, too," Marshall Gittler, chief strategist – international at Deutsche Bank Private Wealth Management, told CNBC.

"Right now you just shouldn't say things like that," he said.

Germany: We've Paid

Germany rejected the Greek allegations, with Foreign Ministry spokesman Andreas Peschke telling Associated Press that his country had "made every effort to compensate."

115 million German marks were paid to Athens in 1960, while slave workers were compensated from a joint government-industry fund, Peschke said.

The Greek government plans to slash its public deficit to 8.7 percent of gross domestic product this year from the current 12.7 percent, but that would mean painful cuts for the Greek people.

Thousands of protesters took to the streets Wednesday to demonstrate against the plans. But despite the pubic display of anger, the protests are at odds with wider opinion in Greece, Gittler said citing recent opinion polls.

"The majority of the Greeks support their efforts to get their budget deficit under control," he said.

No Danger for the Euro

But Greek leaders are certainly feeling the pressure, which could have led to the outburst from Pangalos, other analysts suggested.

"Emotions show when the burden of debt is so powerful. The bottom line is I don't know why the markets think the German public is going to bail out the Greek public. It's simply not going to happen," Philippa Malmgren, president of Principalis Asset Management, told CNBC.

"There will be the marginal 100 euros here and there thrown in their direction to slow down the pace at which the market reacts to this fact, but it's a fact," she added.

Greek Prime Minister George Papandreou has shown a "level-headed approach to the problem," but the comments from his deputy are bound to reflect badly on the overall cabinet, Gittler said.

Even though the comments aggravate old wounds, they will not cause widespread turmoil within the European Union, Ulrich Rathfelder, assistant vice present at Helaba, told

"This question can be solved in the EU and I don't expect that this will really undermine the euro, these are political questions… It's not really a danger for the euro," Rathfelder said.

Gittler agrees that even though the euro may be in for a period of turbulence, Greece is not likely to leave the monetary union and adopt its former currency.

"The euro isn't just like a soccer league that you can just pull out of at any time. They're going to stay in, that means somehow it has to be made workable. So we think on a three-month basis these problems should be solved," he said.