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SPIEGEL: On the basis of your experience with the pound, what's your advice to politicians in the eurozone?
Clegg: Two things are very clear. You cannot have a successful single currency unless the straitjacket of a single interest rate is compensated for with greater flexibility in the economy elsewhere. That's why things like labour reform, pensions reform and an increase in economic competitiveness are so important. We also need to finally open up the single common market in those areas where the common market is still lacking, for example in energy, services or the digital economy. This would bring true growth. And the second big issue is this: You cannot have a single currency without fiscal transfers. Those fiscal transfers can take lots of different forms: They can be the sharing of debt, maybe in the form of eurobonds. They can be transfers from one government to another. You have to have something which creates a fiscal accompaniment to monetary union.
SPIEGEL: So you are in favour of jointly issued eurobonds, an idea that is anathema to the German government?
Clegg: I have a huge amount of sympathy for the German taxpayers and the German politicians. They are understandably reluctant to entertain those ideas and to once again become the paymaster of the European Union. But I fear that fiscal transfers are unavoidable. The eurozone cannot thrive through fiscal discipline alone.
SPIEGEL: Good luck explaining that to a German audience.
Clegg: The problem is: We are seeing a lack of clear comprehensive leadership which sets out a vision of how the eurozone is going to be sustainable in the long run. What people desperately need to know is not that the answer is implemented overnight. Of course not. It is a complex thing, everybody knows that. But the eurozone must know where it is heading. Politically, all you need to do is set out the vision, so that people know where the vehicle is being driven to and thus confidence in the system can return. If you don't do that, it's not just going to be economically destructive.
SPIEGEL: But?
Clegg: If the eurozone doesn't come up with a comprehensive vision of its own future, you'll have a whole range of nationalist, xenophobic and extreme movements increasing across the European Union. And, frankly, questions about the British debate on EU membership will just be a small sideshow compared to the rise of political populism.
SPIEGEL: Are you saying German Chancellor Angela Merkel is not active enough?
Clegg: Everybody should be more active. At the moment, you have one emergency summit after the other, one bailout after the other, and one government after the other gets voted out of office. This cannot carry on. We know this much from our continent: The combination of economic insecurity and political paralysis is the ideal recipe for an increase in extremism and xenophobia. And I, as a passionate liberal and pro-European, think it would be a disaster if a lack of grip and a lack of a comprehensive solution were to lead to a push to the extreme right or extreme left. But that's where we are heading.