German President Christian Wulff opened an economists' conference on Wednesday with a speech on the euro that surprised leaders across Europe, mainly because President Wulff tends to say so little. He warned the assembled Nobel economics laureates and other financial experts in Lindau, near Switzerland, that Berlin could not keep shovelling money to its indebted European neighbors just to satisfy the credit markets.
By Wulff's standards, it was a populist speech, a surprising criticism of European financial elites. He strongly condemned the European Central Bank, which has entered a second round of bond buy-ups from heavily indebted euro-zone nations, hinting this scheme to stabilize the euro contradicted the EU's basic treaty.
"I regard the huge bond buy-ups of individual states by the ECB as legally and politically questionable," he said, and warned that EU solidarity was not the same as guaranteeing limitless debt.
He implied that creditors might have to take a haircut on loans to countries like Spain and Greece and criticized the idea of euro bonds as another way to shift money from one European capital to another.
Tension Between Germany and the Bond Markets
"What is actually being called for in this context? … For whom would you personally stand guarantor … For your children? -- I hope so! For more distant relations? -- ah now it gets a bit more difficult," he said. "Perhaps we would stand guarantor if that was the only way to give the other person a chance to get back on his feet. … Even a guarantor can behave immorally if he is just putting off inevitable insolvency."
Tension between Germany and the bond markets has simmered since the start of the euro crisis. Institutional creditors who want their loans repaid also want to see richer nations, like Germany, shore up euro-zone debt and prevent restructuring or bankruptcies. Wulff told the conference in Lindau that Germany was unwilling to make such sweeping guarantees.
This topic has been hotly debated for months in Berlin, but on Thursday newspaper commentators follow Wulff back into the fray. Most of them pile on the German president for saying not too much, but too little.
The left-wing Berliner Zeitung writes:
"Wulff has expressed himself on the state of the nation. He's used the freedom of his (largely ceremonial) job to talk without having to act. That's the privilege of a German president. It invites the criticism that he has nothing but cliché to offer. But that's not the irritating part of his speech. The irritating part is its lack of historical perspective."
"Christian Wulff talks as if the subservience of EU politicians to the power and logic of the markets has just recently fallen from the sky. But it's been the work of the Christian Democrats (CDU) -- a party Wulff has led and voted with for years -- to bring Germany down this foolish path."
The center-left Süddeutsche Zeitung writes:
"The euro is teetering. If it falls, Germany will lose huge numbers of jobs created by an unprecedented recent export boom. At such a historic moment, you'd expect to hear from the German president. But Christian Wulff has taken his time -- far more time than his predecessor, Horst Köhler, took to utter some biting and relevant words. But at last Wulff has made his criticism. The ECB, he says, should not buy up debt from weaker EU states."
"There's one problem. The ECB started the first round of buy-ups in May 2010. The problem is occurring to Wulff about 15 months too late. It would have been much more helpful if Wulff had not let the concrete portion of his speech rest on this issue alone."
"Reforms of euro-zone debt regulation so far remain too vague to bring stability. Resentment is growing. If this trend can't be rolled back, the ruling coalition in Berlin and other (rich capitals) will quit waving through bailout packages."
The Financial Times Deutschland argues:
"It's good that Wulff has expressed the opinion of many Germans. But it's not enough for a leader to just simply parrot their perceptions. He needs to engage and explain -- to make rational answers to bursts of emotion. But Wulff has only served the people's prejudices and fears. He's behaving like a populist, not like a president."
"From the head of state of Europe's largest national economy, we can expect some understanding of the difference between private finances and the financing of a European state. But Wulff brushes aside the idea of euro-bonds by saying a private person would also not guarantee debt for all his relatives … Such wild talk doesn't help anyone find a solution for the euro crisis in the context of a softening economy and jittery institutional investors."
The center-right Frankfurter Allgemeine Zeitung writes:
"His speech did not just tweak certain elites by the nose -- the ones whose 'malfunction' actually threatens the unity of German society in the long term. German citizens themselves also came in for implicit criticism: There have been popular movements in recent years against such things as a new train station in Stuttgart, but no broad-based protest against Berlin's march into public debt and living beyond the government's means. Wulff, like Chancellor Angela Merkel, points to the single true way out of the crisis -- namely a return to firm economics from Germany to Greece. The price for that, he says, will be 'painful cuts.'
"Wulff laid out no new agenda, but that also isn't his job. He simply reminded everyone of some basic ground rules that have been ignored for too long. Without observing them, there will be no end to the crisis in Europe."