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05/21/2012 12:57 PM

Doubts in Brussels and Berlin

Schäuble's Plan to Head Euro Group In Question

By Andreas Macho, Christian Reiermann and Christoph Schult

German Finance Minister Wolfgang Schäuble wants to become the head of the Euro Group, but this prospect is being met with ample skepticism. In Berlin he is seen as too European, while in Brussels he is considered too German. Critics say taking on the second job would cause a conflict of interest.

The simultaneous interpreters in the European Council building in Brussels have a difficult job, especially when Wolfgang Schäuble takes the floor at meetings of the euro-zone finance ministers. Last Monday was a case in point. Schäuble said something about a referendum that would have to be held in Greece now, but the interpreters had trouble following his words.

The minister is obsessed with a fierce ambition to speak English in the Euro Group, the 17-country panel that oversees Europe's common currency. But for those present at these meetings, Schäuble sounds more like he's speaking his native southern German dialect. "I don't understand Wolfgang," current Euro Group President Jean-Claude Juncker has said privately on several occasions. The Luxembourg politician has already tried addressing the finance minister in German at the meetings, but Schäuble still insists on answering in English.

The Brussels interpreters could have an even harder time of it in the future, because Schäuble wants to be Juncker's successor in what is one of Europe's most important positions. Who else among his fellow European finance ministers should do it, he has reportedly been asking recently. Schäuble has a low opinion of most of his counterparts. Some he sees as lightweights and others as completely unqualified for their jobs. For Schäuble, a man who take his obligations seriously, there is nothing left but to accept his fate.

Schäuble, the architect of German reunification, is driven by a personal mission. He likes being characterized as the last European in Chancellor Angela Merkel's cabinet, as he was when awarded one of the Continent's most prestigious prizes, the International Charlemagne Prize of Aachen. "We must now create a political union for Europe," Schäuble said during the ceremony last Thursday, though he would have preferred not to even mention the euro crisis. "It would be fainthearted for us to reduce Europe to nothing but questions of fiscal policy."

Resistance in Brussels and Berlin

But that is precisely his problem. In the debt crisis, Schäuble has developed the reputation of being a champion of German interests, one who dictates budgetary discipline to others while carefully watching over Germany's coffers. For this reason, his bid for the presidency of the Euro Group is viewed with great skepticism in most European capitals.

After all, it was Schäuble who pushed through efforts last year to involve private creditors in the Greek debt haircut, ignoring concerns that this could scare away investors. It was also Schäuble who obstructed a further enlargement of the bailout fund and repeatedly considered a Greek withdrawal from the monetary union, which will make it especially difficult for Portugal, Spain and Italy to accept Schäuble.

Schäuble's career ambitions are also not being met with unqualified enthusiasm within Berlin's coalition government, albeit for entirely different reasons. The two small coalition partners, the pro-business Free Democratic Party (FDP) and the conservative Christian Social Union (CSU), have long believed that aid for the countries in crisis has gone too far, and view the appointment of a German as Euro Group president as a mistake. The monetary union is heading for a crossroads this year, say officials in the CSU, which is the Bavarian sister party to Merkel's Christian Democratic Union. "The European bailout policy has to be written in clear German handwriting," says one CSU politician, noting that Schäuble can do this more effectively as finance minister, without also having to play the role of a moderator.

Indeed, it is hard to imagine that Schäuble could dictate a similarly rigid approach to his counterparts as president of the Euro Group. As the leader of Europe's finance ministers, he would be condemned to play a more accommodating role.

This is why Schäuble's appointment would be bad news for the proponents of a policy based on austerity, whose numbers are already dwindling within Euro Group circles. The Netherlands, traditionally Germany's close ally, has practically switched sides. This year the Dutch will violate the deficit ceiling of 3 percent of gross domestic product (GDP), which will make them one of the euro zone's debt offenders.

Conflict of Interest?

But Schäuble himself fails to recognize a conflict of interest between his potential new role as moderator and that of the defender of German interests. He will continue to pursue his approach in the new position, he promises. Schäuble still views himself as an advocate of practical financial policy and fiscal rigor. He wants to be seen as the driving force among his counterparts, and he doesn't believe that they will have any objections. He says that he is not aware of anyone saying: "Oh God, not Schäuble."

But those words can indeed be heard in Brussels, especially from those who have felt the minister's wrath in recent months. In late March, for example, EU Commissioner for Economic and Financial Affairs Olli Rehn found himself on the receiving end of Schäuble's temper. The Finnish politician had apparently proposed further expanding the euro bailout fund. "Are you crazy?" Schäuble snarled at him on the sidelines of a meeting in Copenhagen. He was so hostile to Rehn that European Central Bank President Mario Draghi called on him to be reasonable, saying: "Wolfgang, that's going too far." Schäuble had worked himself up into such a rage that he failed to notice when Juncker gave him the floor, repeatedly saying his name.

The fact that Chancellor Merkel has revised decisions that Schäuble had previously signed off on within the Euro Group also hasn't helped his reputation among his counterparts. Recently, the German finance minister has taken to saying that he needs to discuss things with the chancellor first -- a remark that would be out of the question for the head of the Euro Group.

It is also unclear how the 69-year-old wheelchair user intends to take on the extra workload. Schäuble would have to perform his duties in Brussels in addition to his obligations as German finance minister. Current Euro Group chief Juncker, who is also the prime minister of Luxembourg, estimates that his second job takes up about three to four hours of his time every day. Many of Schäuble's fellow Christian Democrats are already complaining that Schäuble, a staunch advocate of Europe, devotes too much time to the common currency, neglecting other important issues like municipal financial reform and changes to the value-added tax.

Although the German finance minister will be able to assign a larger staff of employees at his Berlin ministry to the Euro Group than Juncker in his small country of Luxembourg, he will have to conduct the important meetings himself. No fellow finance minister will be satisfied talking to Schäuble's state secretary, Thomas Steffen, on the telephone.

Accommodating France

But Schäuble also has no intention of giving up the job of finance minister, because he believes that it would generally weaken the Euro Group. Schäuble was also opposed to appointing a full-time head of the Euro Group, fearing that this person would quickly lose his or her grip on reality. "Sheer irrationality cannot prevail in Europe," says Schäuble, referring primarily to the European Commission, some members of which he believes have been out of touch with the economic crisis and are still unable to see the big picture.

Schäuble also has a key weakness compared to Juncker: He is not the head of a government and therefore cannot automatically attend the euro summits, the meetings of the leaders of the euro-zone member states. But this would be indispensable in the execution of crisis policy, because the most important decisions are made at the top.

The new fiscal pact contains a clause stating that the head of the Euro Group "can" be invited to the summits, though. Former French President Nicolas Sarkozy, who left office last week, wanted these meetings to be attended only by the heads of state and government. It remains unclear how his successor François Hollande feels about this.

The new man in charge at the Élysée Palace could also end up blocking Schäuble's appointment. Hollande has already made it clear to leaders in Brussels that he would find it difficult to accept a German head of the Euro Group. And even if he could, the newly elected French president added, Schäuble would have to give up his job as finance minister. It is clear that if Merkel intends to back Schäuble for the Euro Group post, she will have to be very accommodating to Hollande.

If such a deal fails, Juncker could ultimately remain in his post. With his customary ambivalence, the 57-year-old recently said that another term as Euro Group president was "not within the spectrum of my ambitions at the moment." But those who know Juncker say that he would like to change his mind. Merkel would simply have to publicly ask "dear Jean-Claude" to do so.

Translated from the German by Christopher Sultan

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