SPIEGEL: Mr. Reitzle, 2012 is viewed as a watershed year for the euro. Do you fear that the European common currency will break apart?
Reitzle: The euro will not break apart -- and certainly not in 2012, because all politicians are determined to keep the euro zone together. Greece, however, is a different story. The country is incapable of structuring itself in such a way that it can remain in the monetary union.
SPIEGEL: So Greece has to leave the euro zone?
Reitzle: Yes, in the medium term Greece must leave. And the country's debts will ultimately have to be written off at 100 percent, not at 50 or 70. In addition, we will have to pay even more money as long as Greece is in the euro zone, because it is not capable of making ends meet on its own. All in all, this is a €500-billion ($635-billion) problem.
SPIEGEL: And how is the country expected to get back on its feet?
Reitzle: It will take at least a generation to create the necessary conditions. Greece has very little to offer that the world needs. Even in the case of olive oil, revenues are not generated primarily by sales of the product, but by subsidies to growers, some of which have even been based on false data in the past.
SPIEGEL: But a Greek withdrawal from the euro zone would lead to new turbulence in the financial markets.
Reitzle: The capital markets moved away from the subject of Greece a long time ago. Italy will be the litmus test. If Italy makes it, Spain will have a role model, and then perhaps even France may be able to push through reforms, which doesn't seem likely at the moment. Italy now has a government containing leading experts. The question will be whether they manage to implement the necessary reforms in a way that has the desired effect.
SPIEGEL: What can the government do?
Reitzle: I see four problems that must be solved in Italy. First there is the bureaucracy, which paralyzes the entire country. Second, the labor market has to become more flexible. Together these two things create the conditions for growth. Third, tax evasion has to be fought and, fourth, the retirement age has to be raised gradually. But all of this takes time, which is why the crucial year for the euro is not 2012. It will actually come three or four years later.
SPIEGEL: In 2012, especially in Italy, debts in the triple-digit billions will have to be refinanced. Although the bond markets eased a little, late last week, the question remains whether the financial markets will be willing to underwrite bonds issued by countries saddled with this much debt.
Reitzle: It takes years to bring about reforms, whereas the financial markets expect quick successes …
SPIEGEL: … which is precisely the problem …
Reitzle: … and that means that the European Central Bank will still have to intervene if the bonds cannot be fully placed in the market. It won't work without the ECB.
SPIEGEL: So far, the German government and the Bundesbank have resisted such excessive purchases of government bonds by the ECB. Are they wrong?
Reitzle: No, and I too feel that the ECB's purchases are fundamentally wrong. But at the moment I see no other option, if we want to prevent the monetary union from breaking apart. That's why it's all the more important that the reforms be accelerated in the individual countries. Besides, the problem is much bigger than it's actually being portrayed: It's usually only the government debts that are taken into account. But the Target2 balances are still growing beneath the surface.
SPIEGEL: You're referring to the imbalances in payments by the central banks in the ECB system.
Reitzle: Basically, this means that the Bundesbank is guaranteeing the trade deficits. In other words, we are essentially the ones financing the German cars and machine tools that are shipped to Spain or Italy. These balances also include the roughly €100 billion that Italians have taken out of their country in the last few months and invested elsewhere -- in Berlin real estate, for example. These Target2 balances have already grown to €770 billion, with about €500 billion at the Bundesbank alone. In the worst case, we will be the ones paying for this.
SPIEGEL: For 27 percent of it, based on the Bundesbank's share of the ECB system.
Reitzle: I know, France has 20 percent, Italy 18, and so one. But that's a purely statistical view. In an emergency, these countries will be unable to pay, and solvent countries will have to assume the shares of insolvent countries. A development is unfolding here, invisible to the public, which is further exacerbating the crisis.
SPIEGEL: You describe the dramatic situation so impressively that we have to ask ourselves where you get the optimism to believe that eventually everything will somehow work out for the best.
Reitzle: I'm just describing realities. There is no pain-free solution. But if the Italian government manages to demonstrate this year that it is instituting reforms in the right places, interest rates for Italy could go down again. The sense of relief would be immediately apparent. Then Spain could also make it. And then the euro countries could sweat out the problem over time.
SPIEGEL: A highly optimistic scenario…
Reitzle: … and it's my favorite scenario. But even in this positive case, I don't believe that politicians can reduce the debts. Not even Germany is able to do this, despite extraordinary tax revenues, which is pathetic. For politicians, saving money now means incurring fewer debts than before -- which, for me is an odd definition.
SPIEGEL: So can debts only be reduced by inflation?
Reitzle: In the best case, debts are reduced through inflation, provided countries are able to finance their way to a lower interest rate. If not, in the worst case, there is the threat of currency devaluation.
SPIEGEL: The risks to the German taxpayer, which you have clearly outlined, are continuing to grow. Why should the euro be rescued at all costs?
Reitzle: I believe that the rescue can succeed, but I do not believe that the euro must be rescued at all costs. I fear that willingness to reform will fade if the ECB is to intervene in the end, anyway. Support for rescuing the euro will evaporate as soon as German citizens have to pay taxes of more than 50 percent to finance the other euro countries.
SPIEGEL: And then?
Reitzle: If we don't manage to discipline the debt-ridden countries, Germany will have to withdraw.
SPIEGEL: Excuse me? Germany is supposed to withdraw from the euro and introduce its own currency? The consequences would be tough: This currency would appreciate, and German industry would have trouble selling its products abroad.
Reitzle: Of course it would lead to appreciation of the deutsche mark, the northern euro or whatever currency we would then have. But it would soon be less than we fear. Although unemployment would rise in the first few years, because of declining exports, we would come under growing pressure to become even more competitive. And within only five years, Germany could be in a stronger position relative to Asian competitors.
SPIEGEL: Are you saying that withdrawing from the monetary union would be advantageous for Germany?
'The Imbalance in the Euro System Must Be Corrected in the Long Term'
Reitzle: No, but I believe that the German economy would have weathered such a shock within a few years, and would even become more competitive in the long run. To put it clearly: I don't think this scenario is desirable, but it also shouldn't be declared a taboo. And from a personal standpoint, I don't agree with a large share of my taxes ending up in countries that don't manage their economies responsibly.
SPIEGEL: At the moment, the German economy is actually benefiting from the crisis. The weak currency and low interest rates act like an economic stimulus program.
Reitzle: And we need this prosperity, because it's inevitable that we will be presented with the bill for the euro in the end. But this imbalance in the euro system must be corrected in the long term. The debt-ridden countries don't just have to reduce their debts. They also have to revamp their economies…
SPIEGEL: …which is difficult, if not impossible, because they lack their own currency to devalue.
Reitzle: And that's why the lack of competitiveness in the euro zone has become practically set in stone. If Italy still had the lira, it would have been devalued long ago to make the country competitive again, because wages there, as in Spain and France, have risen far too quickly -- in sharp contrast to Germany, by the way.
SPIEGEL: But all of this shows that the euro brought together things that don't belong together: highly developed, industrialized nations and agricultural countries…
Reitzle: …as well as different mentalities. And, most of all, countries that are dissimilar in terms of efficiency. It is evident that the euro was introduced far too soon. In retrospect, anyone can come up with the perfect explanation for why all of this couldn't possibly work. But that doesn't do us any good. Now we have to see where we stand and what steps to take so that everything doesn't fall apart. There's more to it than just muddling through. Germany is being given the leading role here, whether we like it or not. Not everyone ticks the way the Germans do, but sloppy economic management will no longer be tolerated. There will still be substantial differences, just as there are in the United States of America.
SPIEGEL: Do you see the United States of Europe as a goal?
Reitzle: Yes, in the long term. In 2050, the United States will still be a global power and China will probably be the dominant economic power. Europe will only be able to keep up if it manages to achieve a political unification process in addition to the monetary union, and if it includes Russia. However, if we even mess up the monetary union, Germany will be an attractive island, just as Switzerland is. But will we be relevant in the world anymore? Probably not. That's why it's worth doing everything we can.
SPIEGEL: Whichever scenario materializes, how are you preparing your company for this uncertain future?
Reitzle: We will have to react even more quickly and flexibly to changes, and keep our fixed costs as low as possible. We have experienced a decade in which, mainly as a result of cheap money, things went reliably upward without any significant fluctuations. But the crisis in the financial markets marked a turning point. Since then, we have seen a trend toward less growth, coupled with greater fluctuations.
SPIEGEL: Do you have a plan B on hand in case the euro collapses?
Reitzle: No, but even if all of Europe were stuck in a recession for years, it would affect only 30 percent of our revenues. If we lost those revenues completely, which is totally unrealistic, we would have revenues of €9 billion instead of €13 billion, and we would be a company that operates primarily in Asia. Linde would survive in any event.
SPIEGEL: The banks no longer trust each other and are parking their money with the ECB and restricting their lending activities. Is Linde having problems getting money?
Reitzle: Not at all. Our credit rating is better than that of most countries, except Germany. We just launched a €750-million bond, at 3.1-percent interest for seven years. The bond issue was oversubscribed by a factor of six within a few hours.
SPIEGEL: Ever since banks worldwide have had to be bailed out with taxpayer money, the public's confidence in the market economy has waned. Can you understand this?
Reitzle: Of course. I don't accept many of the things that were done. The loss of confidence that arose as a result is harmful to our society, if not dangerous. Companies should take responsibility for what they do. If we make a bad decision, we can't just shove the consequences into a bad bank, otherwise Daimler could simply have handed over Chrysler to the German taxpayer.
SPIEGEL: Under the motto "We are the 99 percent," the Occupy movement sharply criticizes growing inequality. Do you have sympathy for this, too?
Reitzle: Yes, in principle, but I fear that it will lead to the wrong conclusions. In the coming years, the West's problems will be high debt, low growth and an aging population. There will be a push to distribute existing wealth and bring about more equality, even as assets are being accumulated in Asia.
SPIEGEL: So far, however, the redistribution has tended to move in the other direction. A small number of people have profited from the excesses of the financial markets, and now the majority must pay the bill. Isn't it logical to expect the beneficiaries of the crisis to finance some of the costs?
Reitzle: I can understand this logic if profits are made at the expense of the population and the risks are socialized. I only fear that money will also be taken away from people who have earned it honestly and paid their share of taxes. This reduces the motivation for people to perform and accomplish things -- an important engine of the economy.
SPIEGEL: With an annual salary of about €7 million, you are one of the top earners among the CEOs of DAX companies, which makes you part of the 1 percent that the Occupy movement is directed against. Would you be willing to make a contribution through higher taxes?
Reitzle: I am willing to pay 50 percent. But 50.1 percent is already too much. If I had to pay more than half of what I earn in taxes, I would have a very hard time perceiving that as fair. In this respect, I'm on the same page as the Occupy movement.
SPIEGEL: Mr. Reitzle, thank you for this interview.