The core of the Marshall Plan was “an enormous sovereign debt relief programme,” writes Albrecht Ritschl, professor of economic history at the London School of Economics, in The Economist (“Germany, Greece and the Marshall Plan“).
The Marshall Plan had an outer shell, the European Recovery Programme, and an inner core, the economic reconstruction of Europe on the basis of debt forgiveness to and trade integration with Germany. The effects of its implementation were huge. While Western Europe in the 1950s struggled with debt/GDP ratios close to 200%, the new West German state enjoyed debt/ GDP ratios of less than 20%. This and its forced re-entry into Europe’s markets was Germany’s true benefit from the Marshall Plan, not just the 2-4% pump priming effect of Marshall Aid. …
Europe should learn from history. But it needs to learn fast. There might be no recovery unless debts are reduced to manageable proportions. That is what ended the Great Depression in Europe in the 1930s, and that is what in all likelihood is needed again.
H/t: Merijn Knibbe in Real World Economics Review Blog