Photo Gallery: 'We Are Still at the Epicenter of a Global Crisis'


Interview with Euro Group President Juncker 'Athens Is Not Broke'

In a SPIEGEL interview, Jean-Claude Juncker, the prime minister of Luxembourg and president of the Euro Group, argues that Athens isn't bankrupt and that it is still possible for Greece to emerge from the crisis. He also states that the "nervousness" of financial markets makes it difficult to adequately and correctly inform the public.

SPIEGEL: Mr. Prime Minister, you are a Christian Democrat and a Catholic, which is why we want to talk to you about the Ten Commandments.

Juncker: I already have an idea of what you are getting at.

SPIEGEL: Are you familiar with the Eighth Commandment?

Juncker: Of course. Thou shalt not bear false witness against thy neighbour.

SPIEGEL: Apparently you don't take it very seriously. More than two weeks ago, you denied a report  by SPIEGEL ONLINE about a secret meeting of several European Union finance ministers to discuss the situation in Greece, even though the official limousines were already pulling up in Luxembourg.

Juncker: The most important commandment is not to inflict harm on others. Although it isn't stated quite that way in the Ten Commandments, it follows from them. The finance ministers of several Euro Group nations had agreed to meet on Friday with the president of the European Central Bank (ECB), Jean-Claude Trichet. Because the financial markets in Europe were still open and trading was still underway on Wall Street, we had to deny the existence of the meeting. Otherwise the course of the euro against the dollar, which had already fallen as a result of your report, would have plunged disastrously.

SPIEGEL: With this false denial, you not only harmed your own credibility, but that of European financial policy as well.

Juncker: And it didn't exactly enhance the credibility of SPIEGEL ONLINE to disseminate the false report that we were meeting in Luxembourg to discuss Greece's withdrawal from the monetary union.

SPIEGEL: Forgive us for saying so, but SPIEGEL ONLINE had obtained information to that effect from government sources, as well as a working document prepared specifically for this meeting for the German finance minister.

Juncker: It is not unusual for finance ministers to have documents with them that contain all of the issues being discussed in public. And the question of Greece's withdrawal from the monetary union is certainly being discussed in public. But that's a far cry from saying that the issue is on the agenda of a meeting. As a result, I had to be all the more careful to ensure that no unnecessary turbulence would occur in the markets.

SPIEGEL: Are you saying that, as a finance minister in the age of global capital markets, you cannot tell people the truth?

Juncker: I do not have a ready answer to your question. My main concern is to protect people from detriment. That's why I feel practically compelled to make sure that no dangerous rumors begin to circulate. I'm certainly not going to go to confession because of a false denial. God understands more about the financial markets than many who write about them.

SPIEGEL: Former German President Horst Köhler described the financial markets as a "monster." Has this monster changed the way in which politicians can communicate?

Juncker: Without a doubt. When I do not confirm a course of events even though I ought to, I know exactly why I am doing so. In light of the nervousness of the financial markets, it is difficult for us to keep the public adequately and correctly informed all the time. This is regrettable, but unfortunately it's also unavoidable.

SPIEGEL: When secret meetings are held and the truth isn't always being told, people gain the impression that there must be something wrong with this Europe.

Juncker: People understand perfectly well that politicians have to discuss sensitive issues behind closed doors. I had 10 seconds to decide how to react to the report in SPIEGEL ONLINE. Let us say, hypothetically, that I had said: "Okay, we are having a meeting, but I'm not going to tell you what we intend to talk about." That would have triggered a tsunami in the financial markets. Instead, I chose to produce a small wave of outrage over a white lie.

SPIEGEL: Nevertheless, we'd like to try aiming for the truth: How bad is the situation for Greece really?

Juncker: Greece has not adequately implemented the consolidation program to which it had agreed. Revenues are 9 percent below the target, the reform of the tax system is not proceeding as agreed and the planned privatization efforts haven't even been initiated. We were very direct in trying to explain these failings to our Greek friends at the last meeting of the European Union finance ministers.

SPIEGEL: What does Athens have to change?

Juncker: There are quite a few things Greece can do to clean up its budget. The government bureaucracy is bloated and needs to be reduced in size. Besides, the country has significant assets that the government owns.

SPIEGEL: Experts estimate the value of these public assets at about €300 billion ($426 billion).

Juncker: I can't confirm that number. However, I do assume that with privatizations, the Greek government will be able to generate far more revenue over the years than the €50 billion it actually proposed.

SPIEGEL: But the Greek government will hardly achieve that of its own accord. Don't you have to apply more pressure to Athens?

Juncker: In the future, the European Union will monitor the privatization program as tightly as if we were implementing it ourselves. For example, I would welcome it if our Greek friends were to establish a privatization agency independent of the government, based on the model of Germany's Treuhandanstalt privatization agency (which managed the privatization of East German enterprises after reunification), one that would also be staffed with foreign experts. In addition, the European community of nations expects the two major political groups in the country to settle their petty differences when it comes to this critical political issue. The government and the opposition should jointly declare their commitment to the reform agreements with the EU.

SPIEGEL: The country's debt burden is so large that even tough austerity programs and loans are not enough to pull it out of the crisis. Why don't you finally admit that Greece is broke?

Juncker: Greece is not broke. That is what the experienced experts with the International Monetary Fund and the European Central Bank tell us. I am firmly convinced that, in a joint effort, we can lead Greece out of the crisis.

SPIEGEL: The total debt amounts to almost 160 percent of Greece's economic output. With such a debt burden, how is the country ever supposed to make any headway?

Juncker: The United States and Japan also have high debt levels, and yet no one would claim that those countries are bankrupt.

SPIEGEL: But Japan and the United States have their own currencies, which they can devalue, if necessary.

Juncker: That option is not open to Greece -- I'll acknowledge that. Nevertheless, it doesn't mean that the government is powerless. On the contrary, Greece can bolster its competitiveness, and it can pursue a reasonable economic policy and generate more growth.

SPIEGEL: Hope springs eternal.

Juncker: No, I am just considering the alternatives. If Greece were to declare a national bankruptcy tomorrow, the country would have no access to the international financial market for years to come, and its most important creditors, the banks in Germany and Europe, would have an enormous problem -- with incalculable consequences for the financial market.

SPIEGEL: But you exaggerate. The European lenders are in a better position than two years ago, and now many countries have established their own bailout instruments to protect against bank crashes.

Juncker: I would be cautious in that regard. We are still at the epicenter of a global crisis. We are dealing with largely irrational markets, nervous investors and rating agencies whose conclusions don't always make complete sense. I'll stick to my argument: In the case of a national bankruptcy with a subsequent debt restructuring, we would be letting a genie out of the bottle without knowing in which direction it would be flying.

SPIEGEL: The banks, which are you so quick to criticize, are the ones that stand to benefit. They can rake in high profits for their Greece investments and be sure that German or Dutch taxpayers will carry the risks in the end. How do you intend to convey this to people?

Juncker: An economic system in which the profits are privatized and the risks socialized goes against my basic convictions. However, we must be careful that we do not blow up the global financial system by insisting on regulatory principles. That is why I advise exercising as much restraint as possible when it comes to the notion, which is certainly justified, of asking private lenders to participate in the costs of the crisis.

'So Far, No European Taxpayer Has Had to Pay a Cent for the Rescue'

SPIEGEL: That's why you have argued for a "soft restructuring." What exactly do you mean by that?

Juncker: First Greece will have to fulfill its consolidation program, as promised. Once that has happened, we can think about extending the terms of public and private loans and reducing interest rates. That is what I mean by a "soft restructuring." It would be the very last step in a very long process.

SPIEGEL: European Central Bank President Trichet doesn't even want to consider that. Can you understand why he is strictly against any form of debt restructuring?

Juncker: Trichet is very cautious when it comes to debt restructuring, because he is afraid, and rightfully so, that the crisis could then spread to other countries. That is why a soft restructuring can only be an option in specific cases and only under certain conditions.

SPIEGEL: Could you be more specific, please?

Juncker: It has to be ensured that the rating agencies will not treat a soft restructuring as a default. Otherwise the banks would have to write off billions in claims, with incalculable consequences for the capital market.

SPIEGEL: With all due respect to your restraint on the question of restructuring, what happens if we're sitting here again next year and conclude that Greece is still not on a stabilization course?

Juncker: If the donkey were a cat it could climb a tree. But it is not a cat. Nevertheless, this is a question that worries many people. My answer to it is almost a little theological: I do not believe that this question will ever be asked.

SPIEGEL: Many people are not as firm in their convictions as you are. They fear that billions in tax revenues will soon be sent to other countries, which is why there is growing resistance across Europe against further aid programs and the planned European Stability Mechanism  (ESM, which is intended to go into effect in mid-2013 as a permanent bailout fund for the common currency if it heads into troubled waters).

Juncker: So far, no European taxpayer has had to pay a cent for the rescue of debt-ridden euro countries. On the contrary, Greece is currently paying a substantial amount of interest to the donor countries, whose tax revenues have not been needed yet.

SPIEGEL: But it could happen. German essayist Kurt Tucholsky once said that the man on the street cannot understand the truth, but he can often sense it very well.

Juncker: It is true that people usually have a healthy gut feeling, and that also applies to the risks of the bailout packages. I just thing it is wrong to completely indulge one's gut feeling.

SPIEGEL: There are growing demands within the parliamentary groups of Germany's ruling parties to consult the parliament before a euro country receives assistance from the ESM. Could you accept this?

Juncker: There are few central bankers who are troubled by the notion that we need unanimity on central issues in Europe. But even in times of crisis, we cannot undermine democracy. I completely understand that parliamentarians want to be part of the decision-making process in cases that affect the parliament's budgetary authority.

SPIEGEL: Europe isn't just in a financial crisis. Governments in many places, spurred on by populists, are dialing back European integration. Italy, France and Denmark are challenging the freedom to travel. How do you explain this return to small state regionalism?

Juncker: As a Luxembourger, I do not like to hear that word. After all, we are confirmed regionalists. But it is true that the achievements of European integration are being questioned for short-term political reasons. People have been asked to accept quite a few changes in the last 20 years, from globalization to the reorganization of Europe. If we do not structure the European project in such a way that people can accept it, we run the risk that it will fail.

SPIEGEL: Skepticism about Europe pays off at the polls, as the example of the "True Finns" shows.

Juncker: We should not confuse politics with opinion polls. I have noted with concern that there is a growing sense, even within Europe's major parties, of having to yield to these moods. I warn against imitating populists. In politics, you have to be willing to accept criticism from time to time. If you want to have a discussion with people, sometimes you have to stand in their path and say: "Stop. It does not work this way." Those who simply run after voters can never see them from the front.

SPIEGEL: Mr. Prime Minister, we thank you for this interview.

Interview conducted by Michael Sauga and Christoph Schult. Translated from the German by Christopher Sultan
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