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. Last Updated: 07/27/2016

A U. S. -German rift on Russia aid

When they lifted their heads from the meltdown in the European currency markets and the grim suspense of waiting for the French referendum vote, the world bankers and finance ministers who are all gathered in Washington this week gave a collective groan.

They finally reached the Russian item on their agenda, and as one of the British delegation grunted: "Here we go again -- another bloody row With the Germans".

The Russians want three things. First, they want a full payment of the $24 billion in aid and credits and ruble stabilization funds that were promised at the G7 meeting earlier this year. Second, they want a guarantee of another $18 billion for next year. and most of all, they want debt relief on the $70 billion that Russia now owes, both in the country's own name and in that of the old Soviet Union.

This is where the new row has erupted. The bulk of that debt, around 60 percent of the total, is owed to German banks and financial institutions. The Germans therefore want the interest on those loans to be paid.

The Americans, who are owed very little of the debt, are by contrast pushing for generous terms, and backing the Russian appeal for at least a five-year 'holiday' from paying the interest. The Americans, backed by the British, are saying that both precedent and the globe's strategic interest in a stable and democratic Russia argue for debt relief.

But as the British and Italian and Spanish currencies learned in last week's chaos on the currency markets, the Germans are in no mood to compromise. The Bundesbank reckoned that the stability of the deutsche mark was more important than the European Monetary System.

This week, the German Finance Ministry is being asked to recognize that Russian stability is more important than balancing German bank books this year, and for the next few years too. Whether or not the Germans agree, something new and important is happening in global affairs.

This is not the first time we have seen the old Cold War adversaries of Russia and the United States acting in unison, but it is the first time we have seen them cooperating as the world's two great debtors against the new financial superpowers of Germany and Japan, with their massive trade surpluses.

There is an unhappy historical echo here. As the world moved into the Great Depression of the 1930s, the Americans were the world's creditors.

And when Britain and France sought relief on their war debts, and as the Germans begged for relief on the debts they had built up in the peacetime 1920s, the American reply was: "They hired the money, didn't they? "

At the IMF meetings in Washington this week, unless wiser heads prevail, we may be about to learn the German and Japanese translations for that unhappy phrase.