SPIEGEL: Governor Seehofer, Spain is the first European heavyweight to require a bailout. It is becoming more and more difficult for Italy to borrow new funds. And the Greeks are rebelling against strict austerity measures. How much longer can you convince voters that the chancellor's bailout policies are the right approach?
Seehofer: It is indeed a challenging communication task. You have to explain that it's in our national interest for the common currency to survive. And you always have to weigh two things against each other: the value of European integration and national interests. The euro boosts our export prospects, thereby securing jobs. On the other hand, the billions in aid cannot be allowed to overburden our country's economic strength.
SPIEGEL: You insist that aid should only be provided if certain conditions are met in return. Yet that is not what is happening. Spain is getting billions from the bailout fund for its ailing banks, and yet it is hardly required to do anything. Other countries will surely see this as a precedent.
Seehofer: The same principle also applies to Spain: No aid without reforms. We're not paying into a bottomless pit. It's particularly important to me that the aid doesn't go directly to the banks but to the Spanish government, which guarantees the loans. Now Spain has to tie the aid to conditions for its banks. Anything less than that would be impossible to explain to Bavarian citizens.
SPIEGEL: Why not?
Seehofer: The European financial assistance proceeding for our Landesbank, which we had to bail out to the tune of €10 billion, is now in its final stages. We will be given strict conditions. For example, 33,000 residential units will have to be sold, and the bank will have to cut its total assets in half. If we in Bavaria have to accept such steep cuts, it shouldn't be any different for the Spanish banks.
SPIEGEL: Greece is on the brink. Should the country leave the euro?
Seehofer: The CSU and the Free State of Bavaria have a clear position on this issue. We are willing to show our solidarity and provide assistance, but only if the Greeks don't relax their reforms. It's very simple.
SPIEGEL: How much longer do you give Greece?
Seehofer: The country will need new money from the bailout fund in July, and that means that clear rules have to be observed. The troika has to determine whether the conditions have been met for the next tranche. If not, the aid will come to an end. Then there'll be a moment of truth…
SPIEGEL: … and the entire euro will fall apart.
Seehofer: No, I've never supported the theory that the withdrawal of one country would jeopardize the entire euro zone or even European integration. On the contrary, I believe that it would be more dangerous to keep the Greeks in the euro if the price means drifting into a debt union. That would create much bigger problems for our economy than a Greek withdrawal.
SPIEGEL: At what point do you believe Germany should abandon the current bailout approach?
Seehofer: There is a red line. If Germany's top credit rating were threatened, we could no longer grant new billions in loan guarantees. Then it would become more expensive for us to borrow money, and we would be endangering our economy. Germany is a haven of stability in a troubled world. It has to stay that way. Our economic strength is insufficient to help finance all debt-ridden European countries. The paramedic cannot become the patient.
SPIEGEL: So you'd rather throw the patient out of the ambulance?
Seehofer: It doesn't do anyone any good if no one can be taken care of anymore.
SPIEGEL: One of the lessons of the euro crisis is that the European Union members have to coordinate their fiscal and economic policies more effectively. The four heads of the European institutions are currently developing a proposal under which the group of euro-zone finance ministers would have to approve new debts for member states in the future. Do you think this makes sense?
Seehofer: I am expressly in favor of strict rules and powers of control for a stability union. If individual countries in the euro zone operated with false numbers for years, it's obvious that the European Commission has to be provided with tools to prevent this from happening in the future. And if we know that bank regulators in some countries are too lax, a Europe-wide banking supervisory authority for certain major institutions that are too big to fail is the right way to go. But there can be no new decision-making mechanisms without the necessary democratic legitimization.
SPIEGEL: But the Brussels plans don't stop there. In the future, euro finance ministers will have to approve new expenditures when countries can't make ends meet.
Seehofer: That won't affect us, because we Germans don't even get into situations like that, thanks to the debt brake law. By 2016 at the latest, the federal government will only be permitted to incur a very small amount of new debt. And the Brussels plans don't affect us in Bavaria at all. We are even starting to pay back old debts, and we are the only state in Europe to do so. Bavaria will be completely debt-free by 2030.
SPIEGEL: The new debts in Europe are likely to be financed with euro bonds.
Seehofer: I knew that a proposal from Brussels almost always has a catch. I'm a strict opponent of any type of communitization of debt. The euro crisis is essentially a debt crisis. We won't solve it by making it more attractive to incur debt. That's why I'm against a debt repayment fund, which the opposition is calling for in the negotiations over the fiscal pact. I've been in politics for 40 years, and my experience has always been the same: Only the fiscally sound are also strong economically.
SPIEGEL: The chancellor says: "We have to relinquish powers to Europe step by step." It sounds as if such a development could end in European federalism. Is that what you want, too?
Seehofer: Anyone who wants to transfer rights of sovereignty to Brussels, over and above certain rights of control, will encounter our resistance. The CSU will not support a European federal state and anything that moves in that direction. We don't want a European finance minister, and we don't want a European economics minister.
SPIEGEL: Many in the federal government, especially the finance minister, take a different view.
Seehofer: Anyone who wants to go that far would have to consult the German people. I want people to be more heavily involved in decisions on European issues in the future. We have to change the constitution in such a way to make referendums mandatory in three situations: when additional powers are to be transferred to Brussels; when the EU wants to accept new members; and when new aid programs that go beyond the current bailout funds are to be established in the context of the euro crisis.
SPIEGEL: In other words, you want citizens to have to approve all efforts to increase Germany's guarantees beyond where they are now?
Seehofer: That's right. The people should decide. And because I know that there is resistance to referendums in the political sphere, we'll write it into our CSU election platform. Then the people can vote on it in the next Bundestag election. It's not a matter of every new aid package from the existing bailout fund.
SPIEGEL: What is it a matter of?
Seehofer: If the framework for Germany's financial commitments is expanded, we ought to ask the people in our country for their opinion. The referendum in Ireland showed that people can address European issues in a responsible way. Those who can explain Europe effectively have no reason to fear the people.
SPIEGEL: Germany is more or less globally isolated with its calls for austerity. English-speaking countries feel that debt-financed growth stimulus and the communitization of debt through euro bonds would be a better way to go.
Seehofer: I don't think we have to accept admonitions from the Americans, especially not when it comes to sound fiscal policy. Only those who are doing well should be giving advice. The Anglo-Saxon countries are poor advisors in the crisis. Their total-market model has led to the deindustrialization of entire regions in the United States and England. Was it a good thing? No, it was just fashionable. The law of the jungle, pure profit maximization, pure yield optimization -- that kind of thinking led to the financial crisis. The world of speculative capitalism collapsed.
SPIEGEL: Some economists come to a conclusion similar to that of the United States. They say that one reason Germany weathered the crisis so well is that all of Southern Europe buys our cars and machines, and has gone into debt to do so.
Seehofer: That's nonsense. The main reason we Germans are in such good shape is that we have implemented reforms. There was even a change of government in 2005 as a result. Name another country where, without the pressure from the financial or debt crisis, there were pension freezes for retirees for years, where for more than 10 years the collective bargaining agreements for workers ended in the loss of purchasing power, and where the retirement age was raised and higher deductibles were introduced in the healthcare system. The notion that the Germans are now making unreasonable demands on others while they are both unwilling and incapable of satisfying the same demands themselves is fundamentally wrong.
SPIEGEL: Our neighbors, the French, are also distancing themselves from the Germans. With François Hollande, the country now has a president who sees himself as a counterweight to the German chancellor. He wants to introduce euro bonds and use debt to pay for growth.
Seehofer: Does that surprise you? It's been the prevailing doctrine among socialists and social democrats alike for many decades. They want to pursue growth policies with deficits. Whether it's François Hollande or my fellow governor in Düsseldorf, Hannelore Kraft, they're all the same on this issue. You say that we'll pay off the debts in a few years, when our economy is back on track. But this second step never takes place.
SPIEGEL: Hollande also won the election with the promise of growth-oriented policies. The SPD leadership just paid him a visit. This debate is coming to your own state soon as well.
Seehofer: That's true. I expect a sharp debate with the Social Democrats over financial policy in the 2013 election. Then debt will be pitted against stability and tax hikes against tax reductions. These are key differences. SPD Chairman Sigmar Gabriel wants to raise the top tax bracket and increase the inheritance tax, and also to reintroduce the wealth tax. This is punishment for all mid-sized companies, without which we would never have weathered the economic and financial crisis as well.
SPIEGEL: The fronts aren't as clear everywhere. You're on the same page with the SPD over the financial transaction tax -- and the head of the Chancellery, Ronald Pofalla, is stepping on the brakes.
Seehofer: The financial transaction tax is coming, probably even in this legislative period. If you need two thirds of votes in the Bundestag for the fiscal pact, you're well advised to include two thirds of the various opinions in a compromise.
SPIEGEL: Do you think that the content of the financial transaction tax is justified?
Seehofer: Yes, why not? You pay sales tax when you buy a coffeemaker. The tax will hardly affect a normal citizen who owns securities. But it does affect the institutions that are pushing billions around the globe by the second. And that's the way it should be.
SPIEGEL: You have to pick up a coffeemaker in the store, whereas you can also conduct market transactions in Singapore, if necessary. That's why the FDP wants all EU countries to introduce such a tax.
Seehofer: Those who only want the financial transaction tax if all EU members approve it really don't want it, and they should be honest about that. I think it would be ideal if a certain number of euro-zone countries were willing to introduce this tax, and would then agree among themselves on how high it should be and to which transactions it should apply.
SPIEGEL: And if that doesn't happen?
Seehofer: Then we Germans will simply have to set a good example. It wouldn't be the first time. When Germany introduced unleaded gasoline and catalytic converters, many predicted the demise of the German auto industry. Instead, it marked the beginning of an unparalleled triumph.
SPIEGEL: Governor Seehofer, thank you for this interview.
Interview conducted by Peter Müller and Konstantin von Hammerstein