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.
© SPIEGEL ONLINE 2011
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH
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.