Photo Gallery: Jean-Claude Juncker on the Euro Crisis


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

In a SPIEGEL interview, Jean-Claude Juncker, 56, the prime minister of Luxembourg and president of the Eurogroup, criticizes the German approach to tackling the European debt crisis and says that there should be "no taboos" when it comes to the idea of buying back debt-ridden states' bonds.

SPIEGEL: Mr. Prime Minister, is German Chancellor Angela Merkel a good European?

Jean-Claude Juncker: Absolutely. I cannot detect anything in the chancellor's behavior that would be anti-European.

SPIEGEL: Then let's put it differently: Is she just as good a European as former German Chancellor Helmut Kohl once was?

Juncker: Angela Merkel doesn't like being compared with Helmut Kohl on European issues. I can understand this all too well, because no one in Europe can live up to that comparison at the moment. I can't, either. Let me put it this way: Helmut Kohl was good, and Angela Merkel is not bad -- although in this case "good" and "not bad" mean the same thing.

SPIEGEL: Nevertheless, the image of an obstructionist has stuck to Merkel during the euro crisis. When European Commission President José Manuel Barroso recently proposed  beefing up the euro rescue fund, Angela Merkel promptly shot him down. Can you understand the chancellor's position?

Juncker: I see no permanent disagreement between Merkel and Barroso. I have more the impression that the two have been talking a bit at cross purposes on this issue.

SPIEGEL: That's a kind way of describing an argument that's being waged publicly. What do you mean by "talking at cross purposes?"

Juncker: Last May, the European Council decided that the bailout fund for highly indebted euro countries would consist of €440 billion ($598 billion). However, this sum is not fully available at the moment, because some of the guarantor countries do not enjoy the highest credit rating. That's why we are searching for solutions on how we can fully utilize the money that's been made available.

SPIEGEL: That's exactly what we thought Barroso meant when he said  that the European Financial Stability Facility's "effective financing capacity must be reinforced and the scope of its activities widened."

Juncker: If that was what Barroso meant with his statement, he's correct -- and in that case, there actually can't be any conflict with Merkel. After all, European leaders are in agreement on this issue. We don't want to expand the bailout fund, but we do want to make sure that it reaches its intended size.

SPIEGEL: But Germany would have to take on more risk to make that happen. Many in the German government are not willing to do so.

Juncker: I have a hard time understanding that, because Germany wouldn't be carrying this burden alone. Contrary to the impression some tabloid newspapers are creating at the moment, Germany is not the only country in Europe with an excellent credit rating. To make the fund more efficient, countries like the Netherlands, Austria, Finland and Luxembourg must also do their part.

SPIEGEL: With all due respect, Luxembourg's contribution will not save the euro zone.

Juncker: But my fellow Luxembourgers make a particularly large contribution out of solidarity (with the rest of the euro zone). People in Germany don't like to hear it, but it's a fact: On a per capita basis, Luxembourg contributes more money to the fund than Germany.

SPIEGEL: But that doesn't explain why some countries are now supposed to contribute even more money to the fund. Portugal, Spain and Italy have just successfully issued new bonds on the financial market. Doesn't that show that the current bailout fund is completely sufficient?

Juncker: It shows that European politicians have visibly reassured the financial markets. However, we shouldn't misunderstand this as an invitation to sit back and relax. On the contrary, it's imperative that we now make the €440 billion we pledged last May available in real terms. I am confident that the German government will not turn a blind eye to this common European goal.

SPIEGEL: Barroso also proposed that the bailout fund buy up the debt of ailing countries in the future. Do you agree with this?

Juncker: It's something I am happy to discuss with representatives of the euro-zone members, but not in SPIEGEL. All I can say is this: It would be wrong to create taboos, but we also can't overburden the strong (countries). There is no solidarity without stability, and without solidarity we won't get anywhere in terms of stability.

SPIEGEL: The European Central Bank, the ECB, is currently buying up government debt, to the displeasure of its president, Jean-Claude Trichet, who is worried about the ECB's independence. How much longer can this go?

Juncker: I am pleased that the central bank was prepared to take unconventional steps in this unique emergency situation. But it's also clear that we cannot continue these measures indefinitely without compromising the ECB's capacity to act.

SPIEGEL: The debt crisis in the euro zone is still unresolved, and yet the EU countries keep on arguing. Why can't the Europeans agree on a joint strategy?

Juncker: There is a joint strategy. It's just that we're having trouble conveying it in a convincing way. There are 17 governments sitting at the table in the Eurogroup, representing a total of more than 40 political parties. It's no wonder there are occasional difficulties with coordinating things.

SPIEGEL: There aren't just difficulties with coordinating things -- there is a basic lack of consensus, for example over a common European economic policy. Everyone is calling for it, but everyone seems to have a different understanding of what it is.

Juncker: It's indisputable that we in the Eurogroup have to coordinate our economic policies more closely. For example, we paid too little attention to the competitiveness of countries like Greece, which exacerbated that country's budget problems. We also have to talk more about labor market issues, which are in turn central to competitiveness. And we cannot avoid closer coordination of wage policy.

'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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