It is difficult to explain why some events stay in the collective consciousness to be passed down the generations, while others, equally significant, are forgotten entirely. In 1918, 17 million Indians died of an exceptionally virulent form of influenza. The virus originated in the killing zones of World War I and infected between 10% and 20% of the world’s population. About one in every 20 people alive in January 1918 was dead of flu by the end of December that year, over 50 million individuals in all. The pandemic killed far more people, and a greater proportion of the world’s population, than any disease in history in a comparable duration.

The 1918 catastrophe has featured in the occasional newspaper article in recent years as a context-setter for the outbreaks of bird flu and swine flu. For some reason, though, it did not imprint itself into the consciousness of any nation. Perhaps the amnesia was explicable in Europe, where nations had been at war for years, and had grown habituated to the news of death. Why, though, was the pandemic erased from memory in India, which lost the most citizens to the disease?

Soon after the pandemic had passed, Germany experienced an infamous episode of hyperinflation, a debilitating economic disease. The country had a massive reparations bill to pay, and increased its money supply to buy foreign currencies in which the debt had to be settled. This led to devaluation of the German mark, which led to more marks being printed in a cycle that went on for years. The conversion rate of German to United States currency went from about four marks to a dollar to over four trillion marks to a dollar. A new political party led by Adolf Hitler made its first electoral impact by playing off hyperinflation.

Hostility in EU

Ever since then, Germans have been petrified of anything that could signal out-of-control price rise, or currency debasement. Even Germans who know nothing about the early 1920s seem to have a phobia of devaluation. This has conditioned the nation’s response to the global meltdown of 2008 and the recession that followed, and created anti-German hostility within European Union nations worst affected by the crisis.

After the financial crisis broke, the Federal Reserve of the United States used unconventional measures, known as quantitative easing, to spur bank lending to businesses and individuals. At the same time, the US government launched a massive stimulus, spending nearly a trillion dollars to reverse the economy’s free fall and spur demand. Other nations, Germany included, enacted similar measures, but pulled back before the US did. The European Central Bank, under German pressure, resisted replicating quantitative easing programmes put in place by the Fed and Bank of England, because of their potential to stoke inflation.

Within the European Union, Germany encouraged a policy of austerity rather than stimulus. Indebted nations were pressured to cut budgets in order to reduce their deficits. This caused tremendous pain, nowhere more than in Greece, which suffered six straight years of recession, and saw its economy shrink by a quarter. The Germans seemed to have logic as well as morality on their side: “We behaved as we promised in EU agreements, you guys were out of line. You overspent, concealed deficits, and allowed property bubbles to grow unchecked. The solution is for you to cut spending, rein in deficits, and generally act the way we do.”

Deepened crisis

The cure proved worse than the disease, and Germany quickly became a target of hatred within the European Union. Like Michael Douglas in Falling Down, the bewildered nation asked, “I’m the bad guy? How’d that happen?” Last week, Germany finally lost the austerity debate. The European Central Bank initiated a major quantitative easing operation, and Greece elected a far left party promising to renegotiate that nation’s debt. Whether Greece’s new Prime Minister Alexis Tsipras sticks to commitments he made in the campaign will condition the future of the Euro, and of the European Union itself.

Perhaps the Germans would have reacted differently if they remembered their history better. After 1923, Germany succeeded in stabilising its economy and ending the period of runaway inflation. In those years of growing prosperity, the appeal of Hitler’s Nazi party diminished. It received 3% of the vote in the 1924 elections, and 2.6% in 1928. Then, the Great Depression hit, and, with hyperinflation a recent memory, the German administration under Heinrich Brüning reacted with a deflationary policy of austerity in order to keep deficits in check. It made the crisis much worse.

The Nazi party increased its seat share tenfold in the next election, and in the following one Adolf Hitler came to power. The ill effects of austerity, however, did not imprint themselves on Germany’s consciousness the way hyperinflation had done. That selective amnesia has contributed to the plight of Greece, Spain, Italy and Portugal in the present day.