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Interview with Former German Finance Minister: 'Germans Will Have to Pay'

Part 3: 'There Isn't a Single Measure that Is Going to Solve All Problems'

SPIEGEL: There also seems to be a lack of political will in Italy to put its budget in order. Will Italy become the new Greece?

Steinbrück: Italy is fully capable of tackling its difficulties. Its problem is purely political -- and it has a well-known name.

SPIEGEL: Bigger bailout funds, euro bonds, purchasing sovereign bonds and whatever else may come: Is it possible that the price Germany will have to pay for Europe will be too great in the end?

Steinbrück: Nobody knows. We have yet to pay a single cent; we've only given guarantees. In these conditions of extremely high insecurity, we must act in a way that is politically responsible -- for the sake of both Germany and Europe. It's just that the government needs to explain that to the Germans. Over a period of 20 years, German reunification has cost €2 trillion, or an average of €100 billion a year. So, we have to ask ourselves: Aren't we willing to pay a tenth of that over several years for Europe's unity?

SPIEGEL: A tenth just won't get us there.

Steinbrück: How do you know? It annoys me that some economic institutes claim that introducing euro bonds would cost Germany between €20 billion and €25 billion over 10 years ...

SPIEGEL: … the Munich-based Ifo Institute for Economic Research says it might even cost €47 billion over the long-term -- and that's per year.

Steinbrück: That is just nonsense. Throw those studies in the trash can! They fail to take into account how demand structures change. A euro-bond market would be the second-largest one and the most liquid market for sovereign bonds after the dollar. It would be attractive to the Chinese, for example, who really could diversify their investment strategy. That would push down interest rates.

SPIEGEL: Would that put the speculators out of business?

Steinbrück: There isn't a single measure that's going to solve all problems. Even with euro bonds and all the other measures, the markets won't calm down unless Europe tackles the key problem of state indebtedness.

SPIEGEL: Is it realistic to expect that the things you advocate will be done?

Steinbrück: I think it's realistic because the pressure to solve the problem has become so great and it's become clear to many of those involved that muddling through things isn't going to bring the situation under control. We've lost a lot of time, and that's also because the chancellor has done a lot of pirouettes along the way, beginning with the statement: "The Greeks won't get a single cent."

SPIEGEL: Those around Chancellor Merkel justify their hesitant stance toward providing aid to Greece by saying that it has been the only way to force the Greeks to make concessions.

Steinbrück: That's just looking back on scheming and stumbling and calling it a strategy.

SPIEGEL: What would you have done differently?

Steinbrück: There should have been a very early signal that the community of European states wouldn't allow the common currency to be shot down. It really surprised me that (Germany's) government didn't stage an appearance at that time like the one that Ms. Merkel and I made in October 2008 to guarantee private German bank deposits. Germany's chancellor, France's president, the president of the ECB, the head of the euro group, the president of the European Commission -- all of them should have stood up and declared: "We won't let the euro zone be attacked. The sovereign bonds that have been issued are safe." And then they should have provided a framework for how these commitments would be underpinned.

SPIEGEL: You mean a general guarantee for government bonds?

Steinbrück: Yes, but this guarantee would naturally be tied to strict conditions for the affected countries.

SPIEGEL: Do you have any explanation for why the government's crisis management in the second part of the financial crisis has been so much worse that it was in the first part?

Steinbrück: One explanation -- and one that's admittedly flattering to the SPD -- is that the personnel in place at the time were better. Unlike today's makeup, there were several strong members in the cabinet of the grand coalition. (Ed's note: The Grand Coalition was the coalition government that ruled Germany between 2005 and 2009 with Chancellor Merkel's center-right Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), as the senior partners and the center-left Social Democratic Party (SPD) as the junior partner. Following the 2009 elections, the CDU/CSU formed a new coalition with the business-friendly Free Democratic Party (FDP).)

SPIEGEL: Can we really blame the sovereign debt crisis on the financial crisis?

Steinbrück: No, but it aggravated it; it was like a catalyst.

Discuss this issue with other readers!
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1. Arrogance and Denial
Eleos 09/13/2011
It should not astonish coming from politician, but it does. Not a word of apology or regret for his part in endangering his country and betraying her interests. The Euro Project was ill-conceived and badly managed by those who would have us believe in their vision and idealism, but who jostled and connived for the spotlight, never missing an opportunity to grab a page in the history books; appeasement and denial at every minor setback, until the inevitable debacle that is playing out now. At best history will judge them naive and shallow, at worst stupid and arrogant.
2. United States of Europe old idea
lol1232 09/18/2011
If I were a German these days, I would be very worried about the agenda and reforms that are being pushed through the Government in response to the crisis. The idea proposed by social democrat former Chancellor Gerhard Schroder of a United States of Europe is an old idea embedded in Marxism, a Europe united over a capital base. Lenin, Rosa and Marx rejected the idea because they knew that Europe is not a sovereign Nation-State because capitalism is a WORLD system and unless you have a ONE WORLD government it won't work because of the competition between the various nation-states. Europe is not a self sufficient economic unity within the world economy and therefor they (Social Democrats) are asking for reforms which would help propel this ideology into the next generation and future. The Slogan of a Soviet United States of Europe was adopted in 1923 as Germany was ripe for revolution. With the new contract and agreement signed recently with Russia (Nord stream and South stream) Germany will economically, politically and gas dependent upon Russia. Still think a United States of Europe is a good idea? The communists and socialist of old days didn't think so. The Germans will have to pay for sure for the gas and the bail out of Greece (wasn't Schroder who let Greece in to begin with?), but then so will all the other countries including United States of America tied to IMF (trust me I'm not crazy about belonging to this economic web of profit for the few either). It's all a manipulation by bankers in the end and who ever controls the money controls the politicians, both sides of the pond.
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Votes in the German parliament relating to euro rescue measures
May 7, 2010 - First bailout for Greece
In April 2010, a faltering Greece asks for financial assistance. The euro-zone countries and the International Monetary Fund promise loans amounting to €110 million. In return, Greece must implement strict austerity measures. Germany’s share: €22.4 billion.
May 21, 2010 - Euro rescue fund
The temporary stability mechanism, which will exist until 2013, has a capacity of €750 billion. The IMF makes €250 billion available while €60 billion is taken from the EU budget.

Some €440 billion come from a special purpose vehicle -- the European Financial Stability Facility (EFSF) -- that finances itself by issuing bonds on the market. Liability for the EFSF is jointly shared among EU countries. In November 2010, Ireland applies for a bailout from the rescue fund. In April 2011, Portugal follows suit.

Germany's share: €123 billion.
Sept. 29, 2011 - Expanding the EFSF
The effective lending capacity of the EFSF will be increased. In addition, the fund will receive new powers. In the future, it will be able to buy up sovereign bonds from faltering euro-zone countries and it will also be able to make loans to countries to help stabilize their banking sectors. Germany’s share: €88 billion.
Expected in October 2011 - Second bailout for Greece
Greece will receive additional loans through mid-2014 in the amount of €109 billion. Some €54 billion will go directly to the Greek government, while the remaining €55 billion will serve to guarantee the voluntary participation of private-sector investors. The funds will come from the EFSF and IMF.
Expected before the end of 2011 - European Stability Mechanism (ESM)
The euro rescue fund will become a permanent institution as of July 2013. Euro-zone countries will provide €80 billion in initial capital, of which Germany will contribute €22 billion. This capital stock will be gradually built up over the coming years.
Photo Gallery
Graphics Gallery: The Most Important Facts about the Global Debt Crisis

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