German Finance Minister Wolfgang Schäuble: 'We Cannot Allow Greece to Turn into a Second Lehman Brothers'

German Finance Minister Wolfgang Schäuble talks to SPIEGEL about efforts to save Greece from bankruptcy, plans to reform the euro zone and the need to further regulate the financial sector.

Photo Gallery: 'Assistance as a Last Resort' Photos
DPA

SPIEGEL: Mr. Schäuble, we are conducting this interview at your bedside in a Berlin hospital, where you have spent the past two months, with a short interruption. How do you feel?

Wolfgang Schäuble: Better. The wound I was left with after a routine operation has almost healed. However, I'm unable to sit up, which is a problem for a paraplegic. (Editor's note: Schäuble has been confined to a wheelchair since a 1990 assassination attempt.) I have to stay in bed so that the scar doesn't open up again.

SPIEGEL: Why is the healing process taking so long?

Schäuble: I left the hospital too early, against the advice of my doctors. I wanted to travel to Brussels to attend a meeting on the crisis in Greece. Now I prefer to listen to the doctors' advice and will stay in the hospital for as long as it takes. However, I do hope that I'll be sitting at my desk again by Monday, when this interview appears in print.

SPIEGEL: Let's talk about Greece and the euro crisis. In 1992, a prominent member of Germany's center-right Christian Democratic Union, to which you belong, made the following promise to German citizens: "If a country accumulates high deficits as a result of its own behavior, neither the (European) Community nor a member state is obligated to help that country." Do you know who said that?

Schäuble: A lot of people could have said that.

SPIEGEL: It was the current German president, Horst Köhler, who negotiated the terms of the European Monetary Union (EMU) at the time, in his capacity as a senior official in the German Finance Ministry. Does the sentence still apply today?

Schäuble: I'm a firm believer in the monetary union. At the time, I felt exactly the same way as the current president. The only problem is that the world has changed. The capital market has become globalized to a degree that we couldn't have imagined at the time. And we have experienced a financial crisis from which we in Europe must draw a clear lesson: We cannot allow the bankruptcy of a euro member state like Greece to turn into a second Lehman Brothers.

SPIEGEL: You are exaggerating. In past years, it's happened again and again that a country couldn't pay its debts, and yet that hasn't led to a collapse of the global financial system. Why should this be different in Greece's case?

Schäuble: Because Greece is a member of the European monetary union. Greece's debts are all denominated in euros, but it isn't clear who holds how much of those debts. For that reason, the consequences of a national bankruptcy would be incalculable. Greece is just as systemically important as a major bank.

SPIEGEL: But in a bid to prevent a national bankruptcy, you are accepting the breach of European agreements. Those agreements expressly exclude the possibility of bailout payments to other countries.

Schäuble: That's not quite correct. It is true that no member state can be required to make payments to others. But if countries want to offer voluntary assistance, as in the Greek case, this isn't only allowed, but it's also in Germany's interest. We all benefit by ensuring the stability of the euro zone.

SPIEGEL: That's not how German citizens have understood the monetary union. They were assured that the euro would be as stable as the German mark. Now their tax money is going to a country in which a quarter of the population works in the public sector and pensions are often higher than salaries. Is this the way to boost confidence in the euro?

Schäuble: I would caution against fueling cheap populism. First of all, every German who has spent a vacation in Greece knows that the standard of living there isn't higher than it is in Germany. Second, Greece is paying a high price for European assistance.

SPIEGEL: Nevertheless, for months the German government was vehemently opposed to government bailouts for Greece. Why did you give in and agree to the EU rescue plan that was recently hammered out and which will involve Germany forking out €8 billion ($10.7 billion) if Greece goes belly up?

Schäuble: We didn't give in. We have always said that before we talk about assistance, Greece has to do its homework first. Meanwhile, the Greek government has approved a credible austerity program that involves serious cutbacks for its citizens, and it even had to step up those measures recently. This is why the German government is now prepared to take on responsibility at the European level.

SPIEGEL: We understood the chancellor's words differently at the time.

Schäuble: That must be your interpretation.

SPIEGEL: But we weren't the only ones. Merkel was referred to as "Madame Non" throughout Europe, because in Brussels she was fundamentally opposed to German aid for Greece.

Schäuble: That description was completely erroneous. The chancellor has consistently said that we are willing to provide assistance as a last resort, and that was how we went about it.

SPIEGEL: In other words, you were playing poker.

Schäuble: Playing poker is the wrong expression. The situation is too serious for that. Germany has embraced its leading role in Europe. We will help Greece in the event that its government, despite a comprehensive restructuring program, falls victim to international currency speculation once again.

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Graphic: Germany's budget deficit and economic growth Zoom
DER SPIEGEL

Graphic: Germany's budget deficit and economic growth


Graphic: National debts of euro zone members in 2010 Zoom
DER SPIEGEL

Graphic: National debts of euro zone members in 2010


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