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

In a SPIEGEL interview, former German finance minister Peer Steinbrück, 64, now a prominent member of the opposition Social Democratic Party, argues for a complete overhaul of Europe's currency union -- one that would include euro bonds, strict rules and harsh sanctions.

SPIEGEL: Mr. Steinbrück, all efforts to end the euro crisis have so far failed. So why aren't any politicians saying that the common currency just can't be saved, at least as the euro was once conceived and sold to the populace?

Steinbrück: What makes you think the euro can't be saved?

SPIEGEL: Because it has become clear that the national economies that were welded together into the currency union were too different and that the euro has increased rather than decreased these disparities.

Steinbrück: No one will argue with that. Indebtedness and competitiveness have drifted apart. But that's not going to make the euro disappear. We could argue for a long time over how many and which member states will still be in the euro zone at the end of the decade if we don't get this drifting under control. But I would bet that the euro continues to exist and that its importance as a global currency will likely increase.

SPIEGEL: The only question is: In what form? In any case, it's not going to survive in the way it's defined in the European Union treaties.

Steinbrück: If you mean that the euro system will change, and the way it's anchored in the EU's body of rules and regulations, I would agree with you.

SPIEGEL: It will be a union of shared liability and transfers -- that is, something completely different than what was originally agreed to. As they are now, the EU treaties stipulate that no member country should be held liable for the debts of another.

Steinbrück: That was an error that became evident during the crisis. This long-held delusion should have already been acknowledged and explained a year and a half ago.

SPIEGEL: Was it a necessary lie? Did politicians believe they wouldn't be able to push through the currency union without it?

Steinbrück: At the time, too much consideration was given to domestic sentiments and resentments. They were acting according to the sentiment that Germans shouldn't become the paymaster of Europe.

SPIEGEL: Are they supposed to be that in the future?

Steinbrück: One has to explain to people that the EU in this form is the answer both to 1945 and to the 21st century, in a dramatically altered world with new heavyweights, and that Germany benefits from the continued integration of Europe in political, economic and societal ways. And, of course, that means the Germans will have to pay. But the money is well invested in both our future and Europe's, in peace and prosperity. This is the kind of explanation that's missing. German politicians should have come up with a new narrative for Europe -- and especially one that justifies the country's financial contribution to its own people.

SPIEGEL: What should the future design of the currency union look like?

Steinbrück: A country that wants to benefit from euro bonds, for example, ...

SPIEGEL: … that is, from bonds guaranteed by the euro zone as a whole ...

Steinbrück: … will have to yield part of its budgetary sovereignty to independent institutions. It will have to have drafts of its national budgets approved and submit to macroeconomic monitoring.

SPIEGEL: In other words, the rights of particular countries to devise their own budgets will be severely curtailed.

Steinbrück: Yes, but that's not any different from what the International Monetary Fund (IMF) also does with countries in crisis.

SPIEGEL: But what happens if the respective governments refuse to subject themselves to this regime, for example, because strict belt-tightening measures trigger unrest among their populations?

Steinbrück: Then they won't get any euro bonds.

SPIEGEL: And then what?

Steinbrück: Then these countries will be forced to go it alone and fend for themselves. One can't threaten sanctions without being prepared to implement them, too.

SPIEGEL: Wouldn't this ultimately result in the bankruptcy of a euro-zone member?

Steinbrück: In an extreme case, it would involve orderly insolvency proceedings for the state.

SPIEGEL: If I correctly understand what you are saying, you believe there's going to be a sort of "currency union 2.0" with new, stricter rules. Why should people believe this one will be any different from the old one, that countries are going to honor the new regulations and keep their new promises?

Steinbrück: The bang was really pretty loud; everyone heard it. If we weren't convinced that there are also political learning curves, we would be forced to stay in bed in the morning and pull the covers over our heads.

SPIEGEL: Even so, how do you intend to ensure that history doesn't repeat itself?

Steinbrück: The EU institutions that dictate conditions and monitor compliance with them need to be independent. They also can't be trumped by politics.

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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