Photo Gallery: Schröder Calls for 'United States of Europe'

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SPIEGEL Interview with Gerhard Schröder 'Europe Needs to Wake Up'

In a SPIEGEL interview, former German Chancellor Gerhard Schröder, 67, discusses the German government's learning curve in the euro crisis and his idea of a United States of Europe. He also addresses allegations that his government helped set the stage for the current common currency woes.

SPIEGEL: Mr. Schröder, is the euro in mortal danger?

Schröder: No. If you look at the external value of the euro in relation to the dollar, we were once at 82 cents and are now at 1.40. The euro is not in danger. What is missing is a political concept.

SPIEGEL: But something is going fundamentally wrong with the euro at the moment.

Schröder: (Former French President Francois) Mitterand and (former German Chancellor Helmut) Kohl were pursuing two basic ideas in creating the euro. Mitterand wanted to contain Germany's economic power within Europe by means of a common currency. That couldn't work. If you create a common currency, the stronger economy will prevail. Kohl's mistake was to assume that the common currency would inevitably lead to political union. And the crisis we are currently experiencing makes it abundantly clear that you can't have a common currency without a common fiscal, economic and social policy.

SPIEGEL: You said the same thing before you became chancellor, and then you didn't pursue it.

Schröder: Europe is a very tough nut to crack. Everyone who has ever done it knows this. That's why I am also hesitant to criticize administrations now in power. I admit that I would like to have achieved more than I did. When I was in office, I would have liked to bring the European constitutional process to a satisfactory conclusion. But it didn't fail because of us.

SPIEGEL: Helmut Kohl blames you for the crisis, arguing that you were too quick to accept Greece into the euro zone. Does that mean that you are to blame for the euro debacle?

Schröder: Anyone who considers the issue fairly knows that this isn't true. At the time, it was the European Commission that felt that the conditions had been met. All the relevant groups in the European Parliament agreed to Greece's acceptance into the euro zone, as did the (center-right Christian Democratic Union) CDU and the (pro-business Free Democratic Party) FDP. Only the (conservative Christian Social Union) CSU was opposed.

SPIEGEL: The European Central Bank (ECB) is also leveling accusations against you, namely that your administration softened the criteria of the Maastricht Treaty -- that is, the Stability and Growth Pact.

Schröder: Now that's a criticism that should be taken more seriously. But one has to consider the context. The reform strengthened the growth aspect of the pact. Special burdens, like the costs of (German) reunification, were built in. But it was far more important that countries pursuing difficult structural reforms were given more latitude for growth programs. It was important for us in Germany, because we had launched the Agenda 2010 (program of structural reforms). We had a stagnating economy in Germany. We were also determined to implement the reforms, that is, to adjust the social security systems to the new conditions. Therefore, there was a need to emerge from stagnation with an economic stimulus program. In that situation, and because of the internal reforms, we were forced to emphasize the growth component of the pact. And it was ultimately successful. We did our homework as far as the Agenda 2010 was concerned, which is another reason we made it through the economic crisis more successfully than others. Now countries like France and Italy have to catch up under difficult conditions.

SPIEGEL: You say it's a tough nut to crack. But what Europe needs is speed and clout. Do you think that this Europe of 27 nations is capable of that?

Schröder: Germany and France issued a strong signal with the plan for a European economic government -- if they are serious about it -- and the corresponding powers, like a European finance minister. That's the right approach and the prerequisite for the right instrument, namely euro bonds -- if only for the reason that it creates a huge bond market, and no speculator can hope to divide this market.

SPIEGEL: Merkel is accused of being too hesitant and too contradictory.

Schröder: There is a difference between being the political leader of a European Union of six or even 10 countries and one of 27. When it comes to their economies, the 27 countries are even more diverse than was ever the case previously.

SPIEGEL: It sounds as if you were trying to protect the chancellor.

Schröder: No, but to those who are so quick to criticize, I would like to say: Couldn't you tone it down a little? It's hard work, making progress in a Europe of 27 countries. And I do give credit to the government for that, even if it's not the government I would like to see in power.

SPIEGEL: Does the federal government have a strategy?

Schröder: Now more than at the beginning. I'm critical of those who believed at the beginning that they could scrape by on the domestic political front by bashing Greece, without having to suffer on the European political front. They listened to the voice of the street. That was a big mistake. They apparently recognized this mistake. The decisions reached by Germany and France are moving in the right direction. It would be completely wrong to dispute that. For this reason, I assume that my party will also support it in the Bundestag (Germany's federal parliament), which I think is absolutely the right approach.

SPIEGEL: The experience made over the years in Europe is that many agreements are made, only to be broken when necessary. Why should anyone believe that this would ever change?

Schröder: The weakness of Maastricht and the Stability and Growth Pact was the lack of political control. Merkel and Sarkozy are now taking steps to correct this. But when taken to its logical conclusion, this mean that countries will have to give up some of their national sovereignty.

SPIEGEL: How exactly?

Schröder: The Commission or a European finance minister will have to retain the right of initiative, but the control mechanisms will have to be democratized. National parliaments cannot be expected to accept a loss of sovereignty on budgetary matters without parliamentary control mechanisms being implemented elsewhere. The decisions reached by the national parliaments must end up in the European Parliament, as the ultimate authority. A possible approach would be for the parliament to form a special committee, which would consist of the members of the euro zone and assume this control function. The transfer of such parliamentary rights to any expert committees would pose a serious risk, because it would be associated with the curtailment of democracy.

SPIEGEL: Would you entrust the European Parliament to perform this task?

Schröder: Yes, of course. This sort of parliamentary control mechanism is needed, and if the crisis results in the problems we have discussed being corrected, there is a good side to the crisis.

'Great Britain Is Causing the Greatest Problem'

SPIEGEL: And what happens after that?

Schröder: The Commission will have to be turned into a government that is controlled, in parliamentary terms, by the European Parliament. That translates into a United States of Europe. (German Labor Minister Ursula) Von der Leyen is entirely correct in this regard. Conservative politicians and members of the administration are also calling for the same thing now.

SPIEGEL: But that's a Europe modeled after German ideas of fiscal, economic and social policy, which horrifies the other countries.

Schröder: It's a reasonable concept, not a German concept. I'm a member of a European think thank founded by Nicolas Berggruen , along with conservative colleagues from other European countries. If there is one thing we agree on, it is that we need a reasonable, transnational mix between stimulating growth, on the one hand, and austerity, on the other. This is not a German concept. Look at Scandinavia, where you see good Europeans, and look at the Netherlands and Austria. They're all good Europeans.

SPIEGEL: But that's more of a northern European and not a southern European idea.

Schröder: I don't know about that. The Greeks are currently forced to pursue an austerity policy at least as strict as what others are doing.

SPIEGEL: And if it isn't enough, the rich countries, especially Germany, will be footing the bill.

Schröder: If you look at the economic data, Germany, as an exporting and industrialized nation, has benefited immensely from the euro. That's just the way it is. We will have to explain to people the benefits we have derived from the euro, economically, socially and politically. We will have to explain that in a common currency zone, you accept a joint responsibility for this currency and relinquish sovereignty rights.

SPIEGEL: That's not what the Lisbon Treaty says.

Schröder: These treaties are relevant to specific historic situations. And when they change, the treaties have to be modified.

SPIEGEL: Lisbon has to be revised?

Schröder: Yes. Lisbon was a compromise. Our original goal was to create a political union with the European constitution, which was defeated in the referendums. We didn't get it right. But it's important to say that it wasn't Germany's fault. Now that the crisis has emphasized that the things that could not be done until now are necessary to overcome the crisis, we have to take advantage of the opportunity.

SPIEGEL: How is that supposed to work? The constitutional treaty failed because of referendums in France and the Netherlands -- that is, in EU founding members considered to be part of core Europe.

Schröder: The situation has changed. This crisis presents a great opportunity to create a real political union in Europe. I'm convinced that this has majority appeal in the member states. But the pro-European politicians also have to fight for it.

SPIEGEL: You and the euro -- it wasn't love at first sight. What turned you into a European when you were in office?

Schröder: I once referred to the euro as a sickly premature baby, because I felt that political union was needed. When I was in office, it became clear to me that the euro had created a new situation that, if terminated, would have catastrophic economic and political consequences. So while in office I had to learn that my assessment was untenable. Add to that the 2004 EU expansion to include 10 additional countries. It would certainly have been preferable to achieve deeper integration first. But this wasn't historically possible.

SPIEGEL: Why not? Why couldn't someone have said: You'll have to wait a moment. The house has to be stabilized first, before we build an addition?

Schröder: That would have been an untenable position vis-à-vis the Eastern Europeans, who suffered for almost five decades under the division of Europe and oppression. A German position of this sort would have been unthinkable, especially toward Poland. These are European countries, just as the Western Balkans are part of Europe. But we can't say to the Serbs today: Just wait a while. And the real problems aren't even coming from these new member states.

SPIEGEL: Then where are they coming from?

Schröder: Great Britain is causing the biggest problem. Great Britain is not part of the euro, and yet the British always want to have their say in the design of an economic zone. This is inconsistent. And besides, the British have been very skeptical about every integration step, and that's putting it very diplomatically.

SPIEGEL: In reality they've been obstructionists?

Schröder: Yes. I was originally of the opinion that Great Britain could be treated like France. But what was overlooked, also by myself, is that Great Britain still sees itself in a sort of middle position between the United States on one side and Europe on the other. In other words, it's in an "in-between" position. And that is unacceptable.

SPIEGEL: But if nothing works with Great Britain, what role can the British play in the future?

Schröder: The decision on the concrete configuration of the economic government can only be made by members in the euro zone, and not by the Council (the powerful EU institution comprised of European national leaders) as a whole.

SPIEGEL: The Poles and others won't stand for that. It will trigger shockwaves.

Schröder: The Poles and others will understand it. They'll have a say as soon as they have become members of the euro zone.

SPIEGEL: Then we'll finally have a two-speed Europe.

Schröder: But we've already had that for a long time with the euro zone. We should stop dithering and get serious with the idea of a core Europe. Otherwise Europe and its countries will sink into irrelevance between Asia under China's leadership, on the one hand, and a reinvigorated America, in which I believe. The Europe I imagine is a more integrated Europe, complemented by Turkey's membership, on the one hand, and association with Russia, on the other. This is the once chance to enable this Europe to operate on a level playing field with Asia and the United States. Otherwise I don't see the slightest chance for European countries to maintain their importance. Europe has to wake up.

SPIEGEL: Is it that drastic?

Schröder: Yes. If you need an example, just take a look at the 2009 climate summit in Copenhagen. What happened there, politically speaking? What happened is that neither the European Union nor the countries of the EU played a role there. The Americans didn't play a role, either. At the Copenhagen summit Asia, under China's leadership, said: This is what's going to happen. Then they graciously invited the American president to sign the finished document. Not a single European player, neither the climate chancellor nor Mr. Barroso, nor anyone else, played a role there.

SPIEGEL: Now that we're talking about global issues, are the financial markets running the world?

Schröder: We made some proposals to regulate those financial markets more effectively.

SPIEGEL: After the Social Democratic Party (SPD) and Green Party coalition government had initially done some deregulating.

Schröder: In Germany? This isn't a national problem. We tried to make headway at the 2005 G-8 summit in Gleneagles. The British and the Americans laughed at us when we said: We have to get a handle on these financial markets. No one was willing to do so, out of consideration for the financial centers on Wall Street and in London.

SPIEGEL: No one was laughing at the G-20 summit in 2009, but no one did anything, either.

Schröder: That's the problem. The world's new financial architecture can only be shaped within the framework of the G-20. The G-8 can't do this anymore.

SPIEGEL: Perhaps it's really true that the real globalized world is a world of money, but not of politics?

Schröder: That's too defeatist for me. Of course politicians have a difficult time of it, because they cannot simply make take-it-or-leave-it decisions without justifying them first.

SPIEGEL: And that's coming from you.

Schröder: (laughing) Sometimes it simply feels good to put your foot down. But of course I too am aware that democracy doesn't work that way. Democracy is slow, while the markets are fast. But that doesn't mean that politicians have to capitulate in the face of the markets. For instance, they set the rules through the G-20. Let's put it this way: The political system might be slower, but it has greater leverage. It just has to use it.

SPIEGEL: Mr. Schröder, we thank you for this interview.

Interview conducted by Georg Mascolo and Christoph Schwennicke. Translated from the German by Christopher Sultan.
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