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European Luminaries Reflect on Euro 'Seventeen Countries Were Far Too Many'

Former German Chancellor Helmut Schmidt and former French President Valéry Giscard d'Estaing are two of the leading architects of the European Union. In a SPIEGEL interview, the veteran statesmen discuss the causes of the euro crisis and the lack of vision among today's European politicians.

Seldom have a German chancellor and a French president seen eye to eye on so many economic and fiscal policy issues as Helmut Schmidt, 93, and Valéry Giscard d'Estaing, 86. During their terms in office, which began in 1974, both had to deal with the oil crisis, stagnating economic growth, rising inflation and unemployment. After the demise of the Bretton Woods international monetary system, in which the dollar served as the world's key currency, they strongly advocated the introduction of the European Monetary System (EMS), with stable yet adaptable exchange rates and the European Currency Unit (ECU), as the standard unit of account.

In 1975, their efforts also led to the founding of the Group of Six (G6), which consisted of the world's leading industrialized countries -- France, Germany, Italy, Japan, the UK and the US -- which met once a year for a global economic summit. After they were voted out of office (Giscard in May 1981, Schmidt in Oct. 1982), they both remained true to their European ideals. In 2001, Giscard was elected chairman of the European Convention, which was tasked with drafting a constitution for Europe. To this day, the two statesmen have maintained a close friendship.


SPIEGEL: Over 30 years ago, you both initiated the establishment of the European Monetary System, which was a decisive preliminary step toward European monetary union. Now, as elder statesmen, do you have reason to fear that you will live to see the collapse of the euro?

Schmidt: The euro will, of course, still exist a few years from now. I am certain that it will outlive me. It could be that it outlives us all, and that is what I assume will happen.

Giscard: The euro will certainly be around longer than us. Your question is interesting because it is highly unusual. Why don't you ask for instance whether the US dollar will still exist in a few years' time, or the Japanese yen or the Chinese yuan?

SPIEGEL: The difference is obvious: These are the national currencies of large countries and economies.

Giscard: The euro is the currency of a region that has less debt than the dollar zone, a huge trade surplus and a well-managed central bank. Its current exchange rate to the dollar is above the introductory exchange rate in 2002. Why all the doubt?

Schmidt: Every day some kind of doubt is sown. But the euro as such is not in jeopardy. There is no reason why it should cease to exist.

Giscard: We are the victims of a smear campaign that has its origins in the American banking system. We are in the middle of a communication battle that is fueling speculation.

SPIEGEL: The euro zone lacks political and economic uniformity. How can a union with such diverse members endure?

Schmidt: When the Maastricht Treaty was signed in 1992, the EU had 12 member states. And these 12 made the mistake of inviting everyone in Europe to join, and even to become a member of the monetary union. The currency wasn't actually born until 10 years later. Now, the EU has grown to 27 members, the majority of whom decided to adopt the euro.

SPIEGEL: Was that the common currency's birth defect, if you will?

Schmidt: Not the only one. It was a mistake to invite 27 countries and subsequently accept 16 or 17 of them.

SPIEGEL: Are 17 still too many today?

Schmidt: In any case, 17 were far too many.

Giscard: To be perfectly frank, it was a mistake to accept Greece. Greece simply wasn't ready. Greece is basically an Oriental country. Helmut, I recall that you expressed skepticism before Greece was accepted into the European Community in 1981. You were wiser than me. The Euro Group cannot be allowed to expand endlessly.

SPIEGEL: Do you favor a freeze on new memberships in the euro zone?

Giscard: I hope that we won't be so quick to accept any additional members -- perhaps with one exception: Poland. I am confident that this country has the capability and the willingness to take this step. That could work. But we cannot accept anyone else.

Schmidt: That is also my opinion.

SPIEGEL: Were the founding member states too naïve in Maastricht?

Schmidt: The governments were spoiled by the fact that the preceding European Monetary System had worked relatively well. They thought that things would work out similarly with the euro and that everything would sort itself out. They overlooked the fact that this also requires making economic agreements and coordinating economic and fiscal policies.

SPIEGEL: There were quite strict conditions placed on membership. Limits were placed on budget policy and government debt.

Schmidt: The Germans didn't look closely enough. They were busy with German reunification. As far as they were concerned, there was no European problem. They faced the necessity of unifying the former East Germany with the existing West German economy. This has succeeded to some extent, but it has been a struggle.

Giscard: It is not as if no provisions had been made. It is simply that nothing was done. The problem was not the text of the treaty, but rather its non-application. That is a curious development. The European Commission, which is tasked with monitoring compliance, did not do so for a long time and issued no sanctions. This absolved the governments of all risks. They were able to spend money hand over fist with no fears of devaluations or financial penalties.

SPIEGEL: Back when the monetary union was established, should they have also immediately pushed through a political union?

Schmidt: That is going a bit too far. A political union is not absolutely essential to overcoming the government debt crisis, the bank crisis and the economic crisis, in other words, the three-fold crisis that we currently face in Europe. Over the medium term, it is entirely desirable, but it is not a conditio sine qua non -- in other words, something that we absolutely need in order to emerge from the current three crises.

Giscard: The Euro Group simply doesn't have the organization that it needs. We have to stop mixing up the large European Union with the smaller monetary union. It is not possible for all 27 EU members to constantly intervene when the 17 euro-zone members discuss their concerns. They don't speak the same language in both circles.

SPIEGEL: Does the Euro Group need its own institutions that function in parallel to those of the EU? After all, it already has a chairman, Luxembourg Prime Minister Jean-Claude Juncker.

Schmidt: It would have been desirable to give the Euro Group its own staff in addition to a chairman from Luxembourg. This need has been neglected.

Giscard: Of course, one needs institutions -- how else can the fiscal and economic policy coordination be expected to work? When the Euro Group meets under Juncker's chairmanship, there is not even a secretary general, not even a written record of the meeting. That is absurd. The Euro Group council needs its own structures, independent of the large European Council. For some time now, a decision has been pending on the successor to Mr. Juncker as chairman of the Euro Group. This is an incredibly important position. It may even end up being a German. In addition to him, a secretary general should definitely be appointed to stand by his side. Every council in the world has a secretary general.

SPIEGEL: Doesn't this run the risk of creating a big institutional mess?

Giscard: On the contrary, it is precisely the confusion between the 27 EU member states and the 17 members of the monetary union that has to be avoided. That is why I am urging that the small euro council should meet in Strasbourg, not in Brussels. The summit venue should make the distinction clear.

SPIEGEL: Wouldn't both camps then irreversibly drift apart?

Giscard: There is already a Europe of integration, which is more or less rapidly making progress: the Euro Group. And there is the Europe of the internal market, with the countries that are only interested in the EU as a free-trade zone. The institutions of one are too unwieldy for the other, and unwieldy institutions are powerless. In the Euro Group, there are those who pay, and there are those who seek aid. Those who pay should also monitor those who submit applications for assistance. It doesn't work with the European Commission, which is responsible for the entire union.

'There Is a Lack of Momentum'

SPIEGEL: Can the debt brake in the fiscal pact, which will force signatory countries to reduce their structural deficits to almost zero, address these shortcomings?

Schmidt: If you are satisfied with a short answer, then the answer is: not really.

SPIEGEL: That compels us to ask: why not?

Schmidt: There is a lack of momentum, such as we had 30 or 40 years ago, namely the absolute will of the French president and the German chancellor to work together -- no matter what the problem is. As long as this will is not present, the technical tools are of secondary importance. You cannot replace this with the fiscal pact, even if it is significantly better negotiated than the preceding euro stability pact.

SPIEGEL: How do you explain this lack of drive? Do the president and the chancellor not know each other well enough, or does it have to do with the fact that a postwar generation has taken the helm?

Schmidt: We can philosophize at length over the reasons and motives. You are apparently not disputing this lack of momentum, which is something that I can regrettably understand.

SPIEGEL: The question is: Will it improve with time?

Giscard: I think so, yes.

Schmidt: We can only hope that it does. The majority of the French and the Germans favor enhanced cooperation and integration. So it is up to their leaders to commit to these goals. They should not merely say it; they should also genuinely proceed in this direction.

Giscard: One should not expect that there can be a German leadership in Europe. From a historical perspective, that is impossible. A French leadership admittedly does not work either. The European landscape simply looks like this: There are two large countries in the middle, Germany and France, which coexist. They have to work together -- period.

SPIEGEL: And they have managed to do this, despite all the crises and tensions.

Schmidt: If I may, I would like to make a basic observation: The reconstruction of postwar Germany was possible at first thanks to the Americans and, to an increasing extent after 1950, to the Europeans, primarily the French. The European Coal and Steel Community was established in 1952, and the Élysée Treaty on German-French cooperation was signed 11 years later. Both came about as the result of French initiatives. The Germans benefited from the global situation and from their neighbors' solidarity, which was not granted out of selflessness, but rather out of necessity. After 1945, they could not allow the formation of areas of extreme poverty in the heart of Europe. And today the Germans, for their part, are in a position where they can -- and must -- pay. And they should embrace this. It first needs to be explained to the German people, however. But this is not happening -- at least not to a sufficient extent.

SPIEGEL: Who has to explain it?

Schmidt: The chancellor, the German president and the governing parties in the Bundestag.

SPIEGEL: They would respond that they are making every possible effort. And that includes Sigmar Gabriel, the chairman of your own center-left Social Democratic Party (SPD).

Schmidt: Some of them are doing it a bit, including Mr Gabriel, who you mentioned. The chancellor is doing very little (to explain the situation to the German people). The conservative group in the Bundestag is hardly doing it. The (influential mass-circulation) Bild newspaper is not doing it at all.

Giscard: Charles de Gaulle and Konrad Adenauer made this effort because they could vividly remember the war. Helmut and I did so likewise. (Former German Chancellor) Helmut Kohl and (former French President) François Mitterrand as well. Then it somehow stopped. The postwar consumer generation didn't care about it. They had no interest in it. We have to return to a simple, fundamental idea: European integration, the European merging process, has to take place in the euro zone. France and Germany are the driving force behind this. All of this is feasible; none of it exceeds human capabilities.

SPIEGEL: Shouldn't the self-imposed rules of the Euro Group include an exit mechanism for countries that don't adhere to the regulations?

Schmidt: I see that as an entirely unimportant, tertiary question.

SPIEGEL: Nonetheless, with regard to Greece, it is a question that is currently being emphatically asked in Germany.

Schmidt: Of much greater importance is the absolute determination to work together, not how you escort someone out the door -- whether with compliments or kicks.

Giscard: It depends on everyone standing by their responsibilities and obligations. We cannot absolve Greece of this. If the country doesn't feel that it is able to cope, then it needs to decide for itself. If you are a member, you have to play by the rules.

SPIEGEL: Who would form the United States of Europe, if it came to that at some point in the future? The 17 members of the Euro Group or the 27 members of the EU?

Giscard: Definitely the 17! Anyone who wants to join this group must be determined to integrate. But we are not exerting any pressure whatsoever. If the British, the Danes and the Swedes don't want to belong, then that is simply how it is. This is not a source of conflict. On the contrary, the EU could fairly easily expand -- for instance by accepting Turkey or Ukraine -- as long as its core, the euro zone, remains unaffected. We could form the United States of Europe, but only within the close-knit core, not the larger union. Canada and Mexico are also not about to become part of the United States of America.

SPIEGEL: Even within the core, a transnational democracy, such as the one that would be required for a federal state, would present Europe with considerable challenges. How do you propose to rectify the often-deplored deficits in democracy and legitimacy within the European Union?

Giscard: Yes, the system suffers from a lack of democracy. It has to be gradually introduced. Who in the general public has heard of the permanent president of the European Council, Herman Van Rompuy? When it comes time to appoint his successor, it will not be possible to suddenly and immediately hold general elections to choose the president. But we can expand the circle of decision-makers, for example, by including the European Parliament and the national parliaments.

Schmidt: Over 30 years ago, Valéry and I both gave the European Parliament legitimacy by ensuring that it is directly elected. We presumed at the time that the parliament would henceforth start to speak out and make itself heard. But it has not done this. We thought that the parliament would stand up for its own rights. It has not done so, at least not yet.

SPIEGEL: But it has tried to do so, and it tries again and again.

Schmidt: These days we hear about the attempts. But we can hardly read about them. The German press refuses to publish even short stories about the negotiations and deliberations in the European Parliament. That is one of the many minor defects in the European system.

Giscard: The European Parliament is doing good work, but it has never shown the courage to make strong, weighty political decisions, and make its mark.

SPIEGEL: Such as?

Giscard: If the European Commission is unsatisfactory, it has to be replaced. Parliament could do that.

SPIEGEL: The best and most capable politicians still have no desire to pursue a career in European agencies.

Giscard: When Jacques Delors was the president of the European Commission from 1985 to 1995, Europe had a strong and well-known leadership figure. We have to enlist a generation whose ambition is to serve in important agencies in Europe. The president of the European Central Bank is above the individual presidents of the national central banks. It therefore should not be difficult to arouse ambitions.

Schmidt: One has to want such figures; one has to appoint them without being afraid of standing in their shadow.

SPIEGEL: Are you afraid that the crisis and the dispute over money will ultimately overwhelm Europe?

Schmidt: I am not just afraid of a re-nationalization, a manifestation of selfish national interests -- I observe it as a fact. It is not only happening in Germany, but it is particularly obvious in Germany. We are doing relatively well, while the others are doing poorly. So we want to keep our pennies for ourselves. That is a perfectly understandable attitude -- and yet it is unforgivable.

SPIEGEL: Can Europe fail due to historical amnesia?

Schmidt: That cannot be entirely ruled out. Nevertheless, Germany's recent history will never be forgotten, not even in 100 years' time. And that is a good thing.

Giscard: Nationalistic tendencies, which have reappeared everywhere, even in my country, are all backward-looking; they don't pave the way to the future. National nostalgia can only pull Europe down. Young Europeans know that there is no future in this. We have to instill new life into integration and reboot the system. That is the task that France and Germany must tackle.

SPIEGEL: Herr Schmidt, Monsieur Giscard, does one tend toward pessimism in old age? How do you see Europe's future?

Schmidt: Expecting optimism from a 93-year-old is quite a tall order. I am not looking to the future with pessimism, but rather with skepticism. Throughout my entire political career, I have never allowed myself to be an optimist or a pessimist. I have always endeavored to judge the situation as realistically as possible, and then act pragmatically. That has not changed in old age.

Giscard: With increasing age, one tends to see the long-term trends and tendencies, and they are not in our favor.

SPIEGEL: Will Europe be among the global powers of the 21st century?

Giscard: Yes. It has what it takes. And we should give it an opportunity to become one.

Schmidt: I would be somewhat more cautious here. The European Union will hardly coalesce to become a genuine global power. And Europe doesn't have to be a global power.

SPIEGEL: Herr Schmidt, Monsieur Giscard, thank you for this interview.

Interview conducted by Georg Mascolo and Romain Leick
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