06 June 2013

Wolfgang Schäuble – Interview with the Spanish newspaper ABC

Schäuble said it was a popular misconception that Germany was in favour of austerity while others were in favour of growth. He rejected claims that Germany was vehemently against a banking union as being 'completely inaccurate', and defended the common currency.

An increasing number of economists, journalists and international institutions such as the IMF, to name one key example, are questioning the idea that strict austerity is the most effective way to return to economic growth. What do you think of these views?

It is a popular misconception that Germany is in favour of austerity while others are in favour of growth. That’s nonsense. Our measured policy approach promotes sustainable growth – and so far, no one in Europe has been able to demonstrate that any other model is more successful than Germany’s...

I believe that spending money you don’t have is not conducive to sustainable growth. On the contrary – that sort of approach has a price, and in the end, the taxpayer always pays. Some European countries are learning this painful lesson at the moment...

There may be people – some of them in Germany – who say that Spain and Italy have been living beyond their means, and that the markets misjudged the associated risks. However, I think that is far too simplistic a view. Spain is suffering from the effects of a real estate bubble, whose bursting led to losses in the Spanish banking sector. The country has made enormous strides in recent years under Prime Minister Rajoy. It is on the right track and is making excellent progress. And the Spanish economy is strong – labour costs have gone down, exports have risen, and the Troika agrees that Spain is committed to the process of restructuring its banks

Italy is in a completely different situation. It has had high levels of government debt for a long time, but personal savings are also high. The country has a strong industrial backbone. In fact, Italy ranks second in Europe in terms of industrial output. It is on its way to being released from Europe’s excessive deficit procedure. During Mario Monti’s tenure as Prime Minister, Italy launched a series of extraordinarily successful reforms...

Why is Germany so vehemently against a banking union? Some people claim that there is a fear of the transparency that this would create, and that German banks, particularly regional ones, have a great deal to hide. Is that true?

No, not at all. That is completely inaccurate. The German government was the first to suggest joint banking supervision. That was almost exactly a year ago. We are in favour of a quick implementation of the banking union. But for us, it is essential to make sure that the legal basis for such a banking union in the treaties is beyond dispute. Our constitutional law and our constitutional court oblige us to be very careful about ensuring that all the legal requirements are met. It’s the same in any constitutional state. That’s why we said that the banking union, in its final form, requires limited amendments to the EU treaties. But we are also willing to do everything possible within the scope of the existing EU treaties. In a recent newspaper article, I outlined how a provisional banking union could be introduced quickly and very ambitiously.

What would you describe as the central mistakes made in introducing the common currency and creating the eurozone?

I don’t believe there were any central mistakes. Of course many economists at the time said that a common currency and monetary policy could never work in conjunction with numerous largely sovereign countries with their own fiscal and economic policies. But it did work, and the euro remains a very stable currency. The debt crisis in some eurozone countries doesn’t change that.

It was the right decision, because the alternative would have been not to introduce the European common currency at all. If we did not have a European currency, we would be dominated by the dollar, the yen and the renminbi to a much greater extent than is currently the case. At the height of the financial crisis, the euro was a stabilising factor. And the solidarity mechanisms we introduced as a result of the debt crisis are only available to eurozone members. The euro is a strong European currency, but European processes are complex, and international investors and financial markets do not always understand them. That is why problems arose, and we are now in the process of solving them more effectively.

The German government assures us that the euro only survived thanks to the Member States’ policy of fiscal consolidation. Nevertheless, a new party has recently emerged, the Alternative für Deutschland, which calls for Germany’s exit from the eurozone and a return to the Deutschmark. What are your views on this position, which seems to be gaining traction in Germany?

No, it is not gaining traction in Germany, and I believe it to be misguided. This so-called alternative has not even decided whether it is in favour of reintroducing the Deutschmark or not. Now these people have said that they want to keep the euro and that other countries should leave the eurozone. But Germans only have the power to decide whether or not Germany should remain in the eurozone. A decision on whether another country should keep the euro can only be made by voters in that country, not by people in Germany. Not to mention that the treaties don’t even provide for an exit from the eurozone. In short, this initiative is full of contradictions and inconsistencies, and therefore isn’t a viable alternative for anyone.

Full interview

© Bundesfinanzministerium