Photo Gallery: Peer Steinbrück, Merkel's Outspoken Challenger

Foto: AP/dpa

Peer Steinbrück 'Merkel's One-Sided Crisis Management Is a Mistake'

In an interview with SPIEGEL, Peer Steinbrück, the 66-year-old Social Democrat German chancellor candidate, says Chancellor Angela Merkel's strict focus on austerity in the debt crisis has been wrong. He also vows to crack down on tax evaders and raise taxes on high earners.

SPIEGEL: Mr. Steinbrück, following the revelations about trillions of euros in assets deposited in offshore tax havens, you have called for a tougher approach against tax evaders. Why have you waited so long? You would have had an opportunity to do this when you were finance minister.

Steinbrück: First, I have advocated a tougher approach for years. Second, if there was anyone who placed the topic on the agenda during his term in office, with the support of the OECD and my French partners at the time, it was I. Some have even quoted my use of the word "cavalry" to criticize my hard-hitting approach.

SPIEGEL: Why do Germany and the European Union have such a hard time taking action against tax havens?

Steinbrück: The current government has indeed neglected the issue. Worse yet, Mrs. Merkel's government wanted to stop German tax authorities and public prosecutor's offices from accepting tax CDs for their investigations of tax evaders. This makes the latest reactions about wanting to establish a sort of tax FBI all the more hypocritical. That's what the German government should have done long ago, instead of sidelining the tax evasion probes.

SPIEGEL: What's your objection to a nationwide tax investigation authority?

Steinbrück: It's the usual strategy of the government. First it does nothing, and now it's far too late in presenting an idea that the SPD already proposed in a five-point paper on combating tax fraud. In that document, we also proposed a criminal code for corporations, which could be used to force the banks to assist tax investigators. So far the government has rejected all of these ideas.

SPIEGEL: At least one tax oasis could have been dried out by now: Switzerland. The SPD prevented that from happening.

Steinbrück: No, the SPD prevented a tax amnesty that wouldn't even have made tax fraud impossible. The German-Swiss treaty would have left bigger holes than you get in a piece of Swiss cheese. My successor Wolfgang Schäuble was prepared to exempt German tax evaders from punishment, allow them to remain anonymous and accept tax secrecy, while the Americans get all the data on their tax evaders with money in Swiss bank accounts. With the help of the OECD, which I have just visited, and the European Commission, the pressure on European tax havens should have been intensified by now.

SPIEGEL: Do you expect that the desire to avoid tax will become even stronger if the SPD and the Greens form the next government?

Steinbrück: Why?

SPIEGEL: Because you want to revoke some of the tax cuts enacted during the former SPD/Greens government.

Steinbrück: Times have changed since the crisis. We will not increase all taxes for everyone, but some taxes for some people. I stand by that because the gaps in income and wealth distribution are widening. To contribute to greater equality of opportunities, we have to invest more money in infrastructure and education, as well as help local authorities. At the same time, we have to adhere to the debt brake.

SPIEGEL: You could also cut spending.

Steinbrück: An SPD/Greens government under my leadership will make savings. We will cut subsidies where there are environmental disincentives. For instance, we will repeal the Mövenpick tax break for hotels. Other changes will follow. For more than 10 years, we have been in a situation in which top incomes and assets have been growing considerably, while ordinary citizens have had to accept real wage losses. That's why stronger shoulders will also have to contribute more to the funding of public services.

SPIEGEL: The income gap between rich and poor hasn't grown any larger in recent years.

Steinbrück: The basic situation hasn't changed. In recent years, we have also been dealing with stagnating real wages and a significant increase in income and wealth at the upper levels of society. The gap has grown wider, as Hans-Ulrich Wehler recently explained convincingly in a SPIEGEL interview.

SPIEGEL: But it was already there when your party was still in power.

Steinbrück: We didn't manage to reduce the incomes gap. But the current government hasn't even tried. Besides, the situation and the challenges have changed since 2008, when the major crisis erupted. Society is drifting apart.

SPIEGEL: Former Chancellor Gerhard Schröder likes to point out that the relatively low tax rates have helped Germany become competitive again.

Steinbrück: Yes, but as I said, we face different problems today. Demographic change and the integration of children from weaker social classes mean that more money is needed for education, if we want to keep our society together and innovative. We'll have to do more for childcare to help improve opportunities for women in the workplace.

SPIEGEL: Where exactly do you stand within your party on a program like that? Still to the right or more to the left now?

Steinbrück: The left-right scheme is too simplistic for me. If something that is socially just also makes sense economically, I support it. The introduction of a comprehensive, statutory minimum wage, for example, is socially just and makes economic sense, because purchasing power is increased.

SPIEGEL: Those are the words of someone who is trying to please everyone. So far, you have always been viewed as a representative of the party's right wing.

Steinbrück: That doesn't make sense to me. It isn't a matter of right or left, but of right or wrong. For example, it's a question of ensuring that no child is left behind. And providing for affordable housing is probably less of an issue of right or left, but of social necessity.

SPIEGEL: You just visited President François Hollande  in France. What can a German Social Democrat learn from the winner of last year's French election?

Steinbrück: He too made an issue out of the question of greater balance, specifically in French society. Apparently both we and the French Socialists are concerned with the same question: How do we keep a society together? That's how he won the election…

SPIEGEL: … a victory he is now putting on the line with many scandals and a clearly leftist economic program.

Steinbrück: He has been in office for 10 months, and he can hardly be held responsible for the omissions of two conservative presidents. He can't be blamed for the scandal surrounding his budget minister, who lied to him and the French people. We have many similarities, especially when it comes to European policy. But that doesn't meant that in Germany everything has to be done the same way it's done in France.

SPIEGEL: How worrisome is the situation in France, where unemployment is rising sharply and the economy is in a crisis?

Steinbrück: The French president is familiar with the situation in his country and gave me a no-frills description. We Germans, in particular, have a great interest in ensuring that his efforts to make France more competitive are successful. Together, we have to make sure that the crisis in Europe does not destabilize our social order and social cohesion.

SPIEGEL: Hollande blames Europe's austerity policy, which Germany, in particular, has been pushing.

Steinbrück: The very one-sided crisis management pursued by Mrs. Merkel's government, which is geared solely toward cutting costs, is a mistake. As a result, entire countries have entered a vicious circle of sharply declining growth, higher unemployment, especially among young people, declining tax revenues and rising deficits, which they can hardly refinance anymore. Then their ratings are downgraded and the screw tightens even further. We have to be careful that this crisis management doesn't end up costing us Germans more money than it appears to be costing at the moment.

SPIEGEL: In contrast to Germany, wages have risen sharply in these countries in recent years, while productivity has stagnated. This is why European Central Bank President Mario Draghi argues that there is no getting around a strict austerity policy.

SPIEGEL: I disagree. Reforms are necessary and mistakes have to be corrected. But the mix of consolidation and growth enhancement, of demanding and encouraging, isn't correct. As a result, social tensions are building in these societies.

SPIEGEL: In the end, your argument amounts to a call for Germany to spend more money for Europe.

Steinbrück: Well, saying that in Germany, at any rate, has long been a taboo for the current government.

SPIEGEL: Then you now have the opportunity to break the taboo.

Steinbrück: I'm not saying this for the first time: We must tell people the plain truth. Overcoming the European crisis will cost money. And Germany will always only do well if its neighbors are doing well.

SPIEGEL: Do you want to give the affected countries more time to save money?

Steinbrück: Yes, as long as they make verifiable efforts to improve their situation in return for the solidarity they receive from others.

SPIEGEL: And the consequence is that the rest of Europe, including the Germans, will have to take on more costs?

Steinbrück: If consolidation efforts are tied to stimulating economic growth, it will also be possible to curb costs. Any other solution will not only come with an economic price, but will also impair democracy in Europe. Then we won't be seeing a peaceful demonstration by 200,000 young people in Madrid, but of 300,000, and protests of similar magnitude elsewhere.

SPIEGEL: Do you think Germany has assumed sufficient responsibility in Europe?

Steinbrück: Germany has assumed responsibility. Our country had a good reputation for a long time, but it's no longer quite as certain at the moment. (Former Chancellor) Willy Brandt's motto about Germans wanting to be good neighbors is in question.

SPIEGEL: Does it worry you that posters in Southern Europe depict the chancellor with a Hitler moustache?

Steinbrück: That's completely unacceptable. We Germans haven't prevented these countries from implementing reforms and making themselves more competitive. Their governments should take a look at themselves and shouldn't lay the blame on Mrs. Merkel or a different German leader.

SPIEGEL: Should the Germans change their tone toward the other countries of Europe?

Steinbrück: Yes, there have been tones coming from Germany that were not seen as helpful. For example, the remark by Volker Kauder (chairman of the CDU/CSU parliamentary group in the Bundestag), that German is now being spoken in Europe, or some of the chancellor's speeches ahead of the 2010 regional election in (the western state of North Rhine-Westphalia) were unsettling.

SPIEGEL: You, on the other hand, with your keen diplomatic abilities, would be the right man to represent Germany in Europe?

Steinbrück: I can certainly distinguish between plain language and the duties of the office.

SPIEGEL: It's not that easy for voters.

Steinbrück: Many voters understand my language. In the case of Mrs. Merkel, it's hard to tell what she wants.

SPIEGEL: There would be no more talk of clowns and cavalry attacks?

Steinbrück: The cavalry remark put the debate in a nutshell in political terms. And I won't take back what I said about clowns in relation to Mr. Berlusconi.  But you can be sure that as chancellor I will speak the way a chancellor should.

SPIEGEL: So you think that you've learned something?

Steinbrück: One should never stop learning.

SPIEGEL: You were finance minister when you made your cavalry remark. You held a position of governmental responsibility at the time.

Steinbrück: Yes, and a broad segment of the public understood what I was saying perfectly well.

SPIEGEL: But it caused considerable upset in Switzerland.

Steinbrück: Perhaps, but much has changed in Switzerland since then.

SPIEGEL: So far you have only been restrained when it comes to Russia, even though the regime of (President Vladimir) Putin has just taken action against the Konrad Adenauer Foundation and the Friedrich Ebert Foundation, the latter of which is aligned with the SPD. Why were you so loud in the case of Switzerland and are so quiet on Russia?

Steinbrück: What the Russian authorities have done is completely unacceptable, and I strongly object to it. But I believe that since Willy Brandt's time, we have done very well with the motto "change through rapprochement." It's the way we should deal with countries where there are human rights violations. This also applies to China.

SPIEGEL: So you don't agree with your mentor, (former Chancellor) Helmut Schmidt, who says that the West should stay out of these issues?

Steinbrück: These issues must be clearly addressed in direct talks with the governments in question. All former chancellors have done so, it's what the current chancellor does and when I am chancellor, I'll do it, as well.

SPIEGEL: Do you enjoy running for office?

Steinbrück: Yes. Come to my events and you'll see.

SPIEGEL: Have you sometimes regretted running for chancellor?

Steinbrück: Never.

SPIEGEL: We don't quite believe you.

Steinbrück: When I was chosen as the candidate all of a sudden in late September, I assumed a responsibility that goes beyond me as a person. That is why I say "never."

SPIEGEL: Does that mean that you did indeed think of ditching your candidacy?

Steinbrück: No, because when the wind is blowing in your face, you automatically think that a candidacy isn't a private matter. It's sort of like the motto: The air contains iron, so I'd better pull the covers over my head and not get up anymore. I'm aware that I also assumed responsibility for my party, our supporters and a cause. And if things sometimes get tough, you can't ask yourself what impact it's having on you. It isn't an option.

SPIEGEL: Things certainly haven't gone that well in recent months.

Steinbrück: Of course, not everything has gone smoothly. I don't deny that at all. But there have also been times when I had the impression that others had an interest in stirring things up. But that's behind me, and now it's time to enter the campaign and talk about the issues.

Translated from the German by Christopher Sultan

Interview by Konstantin von Hammerstein and Gordon Repinski