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.
- Part 1: 'Germans Will Have to Pay'
- Part 2: 'There's No More Place in the Euro Zone for Laxness'
- Part 3: 'There Isn't a Single Measure that Is Going to Solve All Problems'
- Part 4: 'Politicians Have Become Susceptible to Blackmail'
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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.