European Parliament President Call for Political Union Now is 'Dramatic Mistake'

Leaders in Germany and elsewhere are making a big mistake by focusing on long-term EU reform when fast decisions are needed, says Martin Schulz, the president of the European Parliament. The German Social Democrat tells SPIEGEL that Europe needs to pool its debt, give the ESM a banking license and help Greece return to growth. 

SPIEGEL: Mr. President, "Frankfurt School" philosopher Jürgen Habermas has said there are only two possible strategies for Europe: a return to national currencies, or a political union. Is he correct?

Schulz: Yes, we should have introduced a political union together with the euro. That's something we failed to do, and need to catch up on. But that doesn't help us at the moment.

SPIEGEL: Why not?

Schulz: There's no point whining about missed opportunities. What we need right now is to act quickly and in the short term. I can't accept us getting lost in theoretical debate in the current situation. A restructuring of the European Union isn't pressing at the moment -- what we need instead is to solve very difficult problems in a short space of time.

SPIEGEL: You mean the crisis in southern European countries?

Schulz: Yes. We need economic growth in Europe and we need to find a solution for the excessive interest rates that are making it difficult for many countries to get their own debt under control. That is the crucial task for the coming months.

SPIEGEL: Germany is more interested in discussing the introduction of a political union.

Schulz: That's a dramatic mistake. As if a structural change would solve these short-term problems. That's the line of argument from the German chancellor, from the finance minister …

SPIEGEL: … and from the entire leadership of Germany's Social Democratic Party (SPD).

Schulz: From everyone in national-level politics, in fact, and not only in Germany. To me it seems akin to sitting in an airplane that's experiencing serious turbulence, while in the cockpit, they're debating improvements to the engines. Of course we're also dealing with a systemic political crisis, but that doesn't help us with the turbulence we're experiencing at the moment: no economic growth in Greece and interest rate speculation against Spain, Italy and Portugal.

SPIEGEL: What do you suggest?

Schulz: We need to reduce the interest burden on the affected countries in southern Europe. The best way to accomplish that would be with euro bonds. But that, too, is a theoretical debate, because the Netherlands doesn't want euro bonds, Finland doesn't want them and Germany definitely doesn't want them.

SPIEGEL: Which begs the question, why does Martin Schulz want them?

Schulz: Because we have a common economic and currency zone, and de facto this means that individual nations no longer have sovereignty over currency matters. Germany belongs to a common currency. Why, then, shouldn't we apply instruments of currency policy at this trans-national level?

SPIEGEL: Because the Maastricht Treaty established that no country would be held responsible for another country's debt -- the so-called "no bailout" clause.

Schulz: The Maastricht Treaty also stated that new debt should not exceed three percent of national economic performance. That's been taken off the table with a single stroke of a pen, by the same people who are now making the no bailout clause a sacred cow.

SPIEGEL: You're referring to the deficit rule breaches by your fellow Social Democrat, former German Chancellor Gerhard Schröder?

Schulz: Certainly Germany and France broke the rules, but if the treaty could be interpreted that flexibly back then, why couldn't the same be done now, for euro bonds? But it's no good, that's not going to happen and we need a different solution.

SPIEGEL: Do you have an idea?

Schulz: There are two options: Either we decide on a debt redemption fund, with which a portion of all EU countries' existing debt will be guaranteed and repaid bit by bit.


Schulz: Or we issue a banking license to the European Stability Mechanism (ESM), the permanent bailout fund, so it can borrow money from the ECB as any bank would.

SPIEGEL: The result of either approach would be that the affected countries immediately abandon their attempted reforms.

Schulz: I'm familiar with that argument, that so-called junkie policies get countries addicted to cheap money, but it's not true. Times are different now. In the past year, we've considerably tightened the screws on deficit offenders through a series of new regulations. Then there's the fiscal pact, which provides further possibilities for supervision. We've fulfilled the conditions we need in order to have a debt redemption fund or a banking license for the ESM.

SPIEGEL: Even your own party, the SPD, doesn't go that far.

Schulz: That may be, but I'm the president of the European Parliament. But aside from that, the SPD has behaved more responsibly on European policy than almost any other European opposition party. For German Social Democracy, Europe is vital to the national interest. And that's sensible.

SPIEGEL: Nor does the majority of the general population support pooling debt.

Schulz: Unfortunately, that statement is absolutely true, and it worries me greatly. What we need to do is explain to people what the alternatives are.

SPIEGEL: And what are they?

Schulz: Reintroducing the deutsche mark. It would be an extremely strong currency, which would make German exports much more expensive. The German automobile industry would no longer have to fear China, but rather France and Italy, Peugeot, Citroën and Fiat. Germany would end up too big for Europe, but too small for the world. That's something to think about for those demanding that Greece leave the euro zone.

SPIEGEL: So you still think, realistically, that Greece has a chance?

Schulz: If we keep going the same way we have been, it will be difficult. We won't get any growth in Greece by just imposing cuts. What I would prefer is a special economic zone for Greece.

SPIEGEL: That sounds vague.

Schulz: But it's not. Businesses will only invest in Greece if three conditions are fulfilled. First, there must be a clear commitment to the euro. No businesses will invest if they have to fear that Greece will leave the euro zone at some point. Second, the Greek government must be prepared to work together with European institutions in order to restructure the country.

SPIEGEL: And how will that look in practice?

Schulz: We need a growth agency in which European and Greek officials together identify projects to be supported by the EU. That provides a measure of control, but also a way of developing mutual trust. It would be a challenge for the Greek government, which would have to accept carrying out reforms together with officials representing the community to which it belongs. But these are not a hostile occupying force, they're instruments for providing help.

SPIEGEL: We're still missing the third of the three points you mentioned.

Schulz: Investment grants for businesses that go to Greece, for tourism, infrastructure or renewable energy.

SPIEGEL: The situation in Italy is hardly any better. The country is groaning under the weight of its debt.

Schulz: There you see how absurd the reactions of the so-called markets are. For a long time, Italy was run by one of the most unprofessional politicians anywhere. But there wasn't much pressure in terms of speculation. Now, in Mario Monti, Italy has the kind of leader you usually only get in Hollywood movies, a distinguished professor who won't even accept a cook at his residence, the Palazzo Chigi. Instead Monti's wife cooks their pasta herself -- and this is the man the markets don't trust.

SPIEGEL: It's not that the markets don't trust Monti, but rather that they fear when he leaves office, the usual sort of Italian politicians will return.

Schulz: That's politically motivated speculation. Monti is making cuts, but everything he manages to save goes toward covering rising interest rates. Then he says, My God, people, help me out here. And what do we answer? We say, you should make more cuts, Italy should figure out itself how to get by. That's not going to work. Let's be plain here.

SPIEGEL: Please do.

Schulz: Italy is one of the eight major industrial nations. What will happen if a G-8 country within the European Union goes bankrupt? Does anyone think Germany wouldn't be affected? Italy is one of our key markets. No, we're not going to get anywhere this way. We need a banking license for the ESM, to bring interest rates back down.

SPIEGEL: Ultimately, all of your suggestions boil down to the same thing: Germany should pay.

Schulz: Well, then let's talk numbers. The ESM, the European Stability Mechanism, is not funded by Germany alone. Twenty-seven percent of the bailout package comes from Germany. Italy and France together cover a total of 38 percent. That's reality. It makes no sense to say that everyone wants to get at Germany's money. You're paying too much attention to renationalized rhetoric in Germany.

SPIEGEL: But you can't deny that there are many people here on this continent who don't want more Europe.

Schulz: The vast majority of people support the idea of an enlightened, modern union of countries demonstrating solidarity. Film director Wim Wenders recently summed up the problem to me very well. He said the idea of Europe has become an administration, and now people think that the administration is the idea. But that doesn't mean we should give up on the idea -- it means we should change the administration.

SPIEGEL: If more and more national responsibilities are transferred to Brussels, at some point there will have to be a referendum in Germany too. Is that a danger or an opportunity for the EU?

Schulz: Unlike other countries, Germany has no experience with referendums. But when the German Constitutional Court reaches its decision on the ESM on September 12, the people may have to be asked. And that's a good thing. You have to let the people vote when it comes to a new constitution. I find it surprising, however, that many German politicians generally oppose referendums, but then when it's an EU matter, they immediately scream for a plebiscite.

SPIEGEL: As is the case with SPD leader Sigmar Gabriel. He too is determined to let the people vote on the EU.

Schulz: That's a risk. Referendums have always posed a threat when it comes to EU policy, because EU policy is complicated. They're an opportunity for those from all political camps who like to oversimplify things. European policy is always an interplay of rationality and emotion. The problem with us EU politicians is that we approach everything with cool rationality, and then wonder why we don't win people over emotionally.

SPIEGEL: You don't trust the people?

Schulz: No, I do, but it's not undemocratic to be skeptical. Referendums are a democratic instrument, but so are decisions reached in a parliamentary democracy. I advise extreme caution when it comes to referendums. In Germany too.

SPIEGEL: How can Europe become more democratic?

Schulz: Starting in 2014, there will be no Commission president without a majority in parliament. Government leaders will have to be guided by the outcome of EU elections. That's what the Lisbon Treaty says.

SPIEGEL: That means they would have to field candidates at the EU level.

Schulz: Correct, parties will field EU candidates. There will no longer be nationally-focused campaigns for EU elections.

SPIEGEL: German Finance Minister Wolfgang Schäuble and others suggest having the president elected directly by the people.

Schulz: I think that would be wrong. If parliament doesn't elect the president, who controls that president? Out of 27 member states, only France uses such a model. I'm opposed to introducing such a system at the European level. Imagine a German as president of the European Commission. If he or she goes to some particular country and says do this or that, it won't be very well received. The president quickly ends up being the evil German. But if the president is elected by and controlled by 700 representatives from all EU countries, that legitimizes him or her in a very different way.

SPIEGEL: Mr. President, thank you for this interview.

Interview conducted by Konstantin von Hammerstein and Gordon Repinski. Translated from the German by Ella Ornstein.