German Finance Minister Wolfgang Schäuble 'There Is No Unlimited Support'
Part 2: 'The Euro Is Not Going to Fail'
SPIEGEL: A year ago, could you have imagined how dangerous the situation would become?
Schäuble: I've been a politician long enough to know that every year will find us living in a situation that one couldn't have imagined a year previously. Sometimes it's better than we imagined, sometimes it's not as good.
SPIEGEL: In the euro crisis, though, reality has exceeded even the bleakest predictions.
Schäuble: I see it differently. We're experiencing developments that we didn't foresee. But we've always confronted these crisis points and found solutions. Gloomy predictions don't help much in that respect. But we have to bear in mind that it's extremely difficult to push through changes if people aren't convinced that they're really necessary.
SPIEGEL: In other words, if the euro fails, it will be for political, not economic, reasons?
Schäuble: The two are inextricably linked, but let me say it once again, very clearly: The euro is not going to fail.
SPIEGEL: It will fail if the populations of recipient countries are no longer willing to endure drastic reforms, and if people in donor countries refuse to pay an increasingly large share of support to the weaker member states.
Schäuble: It is the job of politicians, as leaders, to get people on board with this. Those in politics must have the courage to take action, but also the power to convince. I'm convinced that the vast majority of people -- and not just within Germany -- support European integration.
SPIEGEL: Do you believe people will go along with further steps, such as euro bonds and a so-called transfer union, in which the stronger members would provide funds to the weaker ones? Will people still be willing to finance the euro rescue fund even if additional countries develop problems and there are fewer and fewer donor countries left to support more and more recipient countries?
Schäuble: It won't come to that. Besides, some of the terms you mentioned only serve to frighten people. I don't think much of the phrase "transfer union," for example. Many use this phrase to mean that other people are going to squander our hard-earned money. That's absurd, of course. A community only makes sense if there's a certain amount of equalization between parties. That's why we have the EU's Structural Funds, which benefit the former East Germany, among other regions. But it's always necessary to ask: How much equalization is necessary? And under what conditions?
SPIEGEL: So you oppose euro bonds?
Schäuble: I'm ruling out euro bonds for as long as member states pursue their own financial policies and we need differing interest rates (on government bonds) as a way to provide incentives and the possibility of sanctions, in order to enforce fiscal solidity. Without this solidity, the foundations for a common currency don't exist.
SPIEGEL: Although you don't like to hear the phrase "transfer union"
Schäuble: because it's used to stoke anti-EU sentiment
SPIEGEL: there are still only two options: Either the monetary union will fall apart because of its internal tensions, or, if all else fails, we will end up with everything funded via the community, by its strong members, in the form of euro bonds and a blanket guarantee on all government debt. That might save the euro. But at what cost?
Schäuble: That option is too simple. The following remains true: There is no collectivization of debt, and there is no unlimited support. There are certain support mechanisms that we are continuing to develop, with strict conditions: Member states that need our solidarity must reduce their deficits and reform their economies with measures that are at times very tough.
SPIEGEL: And what happens if they don't carry out sufficient reforms? Will aid be withheld, even if that carries the risk that the monetary union really will collapse?
Schäuble: The governments in question have stated clearly that they will do everything they can so that this question doesn't arise, and that they will comply with the corresponding programs. On the other hand: We're not going to bail out countries at any price.
SPIEGEL: And what will happen then?
Schäuble: There's no need to speculate about that. Still, we would be a strange government if we didn't prepare ourselves for all eventualities, however unlikely they may be. But all of us in the EU aim to avoid and overcome precisely these types of crises. We should be able to achieve this.
SPIEGEL: The euro zone isn't alone in its debt problems. The United States isn't doing any better, nor are Britain or Japan. Never before in history have there been such high levels of public debt. How will the world get out of this situation?
Schäuble: The long-term sustainability of public budgets is indeed the biggest problem facing Western industrialized countries. And the problem only increases when we take into account the burden created by social-security systems and aging populations. Compared to the global population as a whole, our populations are shrinking. At the same time, we want to secure our long-term prosperity. Other parts of the world are watching closely to see if our freedom-based societies with their long-drawn-out democratic processes -- something which is at times unavoidable -- will succeed in solving this problem. After all, democratic majorities tend to spend more money than they take in. That's something many of the traditional industrialized countries, Germany included, can't afford any more. That's one of the reasons that I've been pushing so hard for us to reduce our national debt. If we don't manage that now, we're in danger of leaving future generations with an insurmountable mountain of debt.
SPIEGEL: In historical terms, there have been only two solutions to these kinds of problems: either inflation, which devalues a country's debts more or less by stealth, although it does the same to citizens' assets
Schäuble: or, in the past, a war, which is nowadays, thank God, impossible -- precisely because of the process of European unification
SPIEGEL: or at least a monetary reform.
Schäuble: You've described exactly the large historic challenge we face: to solve the problem without taking those measures, in light of the catastrophic experiences of past centuries. We must face this challenge, and we should have the self-confidence that we will succeed.
SPIEGEL: Mr. Schäuble, thank you for this interview.
Interview conducted by Armin Mahler
- Part 1: 'There Is No Unlimited Support'
- Part 2: 'The Euro Is Not Going to Fail'