Jean-Claude Juncker on Saving the Euro 'It Would Be Wrong to Create Taboos'


Part 2: 'Euro Bonds Have a Totally Inaccurate Image in Germany'

SPIEGEL: German citizens fear that they are expected to become paymasters for all of Europe. They don't want to answer for mistakes that are the responsibility of politicians in Athens or Dublin.

Juncker: We could criticize the Greeks, Portuguese and others more credibly if Germany and France hadn't intentionally violated the Stability Pact in 2003. And besides, we mustn't forget that Germany's export-oriented economy benefited from strong demand in Southern Europe for years. We need a stronger balance in Europe in terms of economic policy.

SPIEGEL: You recently proposed that the countries of the European Union issue joint bonds, known as euro bonds, to combat the debt crisis. Chancellor Merkel, on the other hand, saw this as an attempt to introduce a European "transfer union" through the back door. Have you abandoned your idea in the meantime?

Juncker: I had to accept that there is no majority support for my proposal at the moment. But I am confident that this will change one day. Euro bonds have a totally inaccurate image in Germany. If properly designed, they would be a tool to encourage countries with unsound finances to practice stronger budgetary discipline.

SPIEGEL: You can't possibly believe that. If governments like the Greek government can go into significant debt at the expense of the bloc, they'll have no incentive whatsoever to practice austerity.

Juncker: The opposite is true. Under our proposal, only those who commit themselves to strict fiscal discipline will have access to euro bonds.

SPIEGEL: Until now, the problem in Europe had less to do with making commitments and more to do with keeping to them.

Juncker: Those who deviate from the (budget) consolidation route would also be excluded from the euro bond market. This would create a far more effective incentive to engage in virtuous behavior than any stability pact.

SPIEGEL: But it would mean that the interest burden would rise considerably in Germany.

Juncker: Not at all. Euro bonds would create a large, homogenous market for European government bonds. For the first time, Europe could compete with the American bond market as equals. As a result, German interest rates could even fall.

SPIEGEL: If countries with excellent credit ratings and bankruptcy candidates are lumped together, a top rating can no longer apply to the whole. Would you seriously deny that?

Juncker: I would. Look at the development of interest rates on those EU bonds that already exist today. When the EU issues the corresponding bonds on the international financial markets, the interest rates are often lower than in the individual countries.

SPIEGEL: The development of German interest rates shows that the opposite is true. They have gone up by more than a percentage point since last August. And what's the reason for that?

Juncker: Now I'm curious.

SPIEGEL: Investors are concerned that Germany, as the principal financier of the various European bailout funds, could be overburdened.

Juncker: I see it differently. Regardless of the question of the euro bonds, we should keep in mind that not even 10 percent of the funds (in the European Financial Stability Facility) have been utilized to date.

SPIEGEL: But the risk that taxpayers will eventually have to foot the bill is growing from month to month. When the common currency was originally introduced, politicians told German citizens that it was impossible that Germany would ever be liable for the debts of other countries. Now we're seeing the amounts being guaranteed constantly getting bigger.

Juncker: You talk about the Germans as if they were special beings. The bailout fund is a European institution, and Germany is by no means the only contributing country.

SPIEGEL: But Germany is the only country where a constitutional issue is at stake. In its ruling on the Maastricht Treaty, the Federal Constitutional Court concluded that German tax funds could not simply be used to protect the euro zone.

Juncker: Similar constitutional discussions are also taking place in other European Union member states. Once again, Germany isn't a special case. And I can say categorically that I am a great admirer of the rulings of the Federal Constitutional Court.

SPIEGEL: In Germany, it is primarily the Free Democratic Party (FDP) that opposes additional burdens on taxpayers.

Juncker: I am appalled by how some German liberals are compromising their European political heritage. Next to Helmut Kohl, no one promoted European integration more than the long-serving former German Foreign Minister Hans-Dietrich Genscher (who was a prominent member of the FDP). It is deeply painful for me to see that some in the FDP are now flirting with a populist course regarding Europe.

SPIEGEL: Hardly anyone believes anymore that a country like Greece will be able to fully service its debts. Some people in the markets and in European politics are thinking about ways to convince lenders to voluntarily relinquish some of their claims. What could such a restructuring look like?

Juncker: It doesn't make any sense to discuss this question publicly at this time.

SPIEGEL: In two years, Greece's debts will have risen to 160 percent of the country's gross domestic product, despite all the country's austerity measures. Isn't it time to admit that there is no way to avoid a debt restructuring?

Juncker: I'm not downplaying this problem. But we have to consider that Greece is making considerable efforts to scale back its debt in the medium term. And we should also keep in mind that debt ratios in other parts of the world are much worse than in the euro zone. Just think of the United States.

SPIEGEL: In the past, you were in demand as an intermediary when Berlin and Paris disagreed over European policy. Does it bother you that Chancellor Merkel and French President Nicolas Sarkozy now prefer to resolve their issues face-to-face?

Juncker: No. In the past, I struggled to prevent German-French friction from expanding into European conflicts. The German-French motor is essential if we hope to deepen the EU. But it isn't enough by itself. Berlin and Paris have to make sure that they include the other member states.

SPIEGEL: You're referring to the famous walk on the beach in Deauville, France, last October, where Merkel and Sarkozy discussed imposing their approach to the euro crisis on the whole of Europe.

Juncker: I wouldn't exactly call the walk on the beach at Deauville a model approach for resolving European conflicts.

SPIEGEL: Would you like to have been there?

Juncker: No. The outcome was not so convincing that I would have wanted to be part of it.

SPIEGEL: In 2009, you wanted to become president of the European Council. Merkel and Sarkozy prevented that from happening, and Herman Van Rompuy was chosen instead. Do you hold that against them?

Juncker: It was never explained to me why I shouldn't assume the position, even though that was what most governments in Europe wanted. At the time, I would have been pleased to take on that role. Nowadays, however, I'm no longer sad that things turned out differently.


Juncker: If I had become president of the European Council, it might have exacerbated the conflict within the EU. I wouldn't have been content merely summarizing the views of the other heads of state and government. Although I come from a small member state, I like to say what I think. I see myself as a driving force rather than a follower.

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

Interview conducted by Christoph Schult and Michael Sauga

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