Europe is clearly in a serious crisis that requires courageous decisions of great magnitude to be taken. The SPD has concluded that the Federal Government must change its policies if it is to lead Europe out of the crisis. The party chairman, Sigmar Gabriel, and the chairman of the parliamentary group in the Bundestag, Frank Walter Steinmeier, have released a joint letter in which they map out viable, long-term solutions that send out a strong message for the future of a united Europe.
In recent days and weeks the debt crisis that has been smouldering for over a year has assumed a new dimension. The financial difficulties facing Greece, which accounts for just 2.6% of the gross domestic product of all the euro countries, have been aggravated by the Eurozone government’s failure to take decisions. This has triggered a European currency crisis as well as a political crisis over the unification of Europe. The financial markets – driven by the international rating agencies – are demanding ever higher risk premiums for their willingness to provide money to individual heavily indebted members of the Eurozone.
People in Germany and all the other countries in the Eurozone are increasingly worried about the prosperity they have toiled to achieve, the money they have put aside and the provisions they have made for their old age. Despite all the drastic austerity programmes, Greece and Portugal have failed to reduce their deficits and regain debt sustainability. Both countries are in the throes of a downward spiral. Massive cutbacks in government spending and investment are exacerbating the recession. Higher unemployment and falling tax revenues in the first half of 2011 forced Greece to increase rather than reduce its debt. The gross domestic product in Portugal, too, is forecast to shrink in 2011 and 2012. A lack of hope and prospects is fanning the protests in Athens and Lisbon and fuelling mistrust in Germany. There can be no doubt that Europe is in the middle of a crisis.
In this serious situation, courageous decisions of fundamental, long-term importance can no longer be shirked. The Federal Government and the parties in the ruling coalition – the CDU, the CSU and the FDP – must change their policies. It is time to put an end to the dodging of issues, the obscuring of facts, the delaying of decisions and the sidestepping of parliament. We need viable, long-term solutions that send out a strong, unambiguous message for the future of European unity. The Federal Government must focus its attention on what is needed to ensure the stability of the currency union and what can be done to overcome the European crisis. The solutions must be clearly formulated and put to a vote in the German Bundestag.
Provided this is accepted, the Social Democrats are prepared to engage in constructive joint action, as we stated in a letter to the Federal Chancellor. The SPD’s position is unequivocal. In May 2011 and again in June 2011 we said in the German Bundestag:
· Greece’s creditors will have to forfeit some of their claims. A rescheduling of the country’s debt is unavoidable. If Greece can buy back bonds with a discount on the nominal value, the burden imposed by prohibitive interest costs will be greatly reduced. At the same time we must make sure that the banks and insurance companies affected can refinance themselves.
· We require a limited Community liability of the entire Eurozone for the bonds issued by its members. This is needed to effect long-term pacification of the financial markets. Intelligent models can be used to supply Community security for a part of the debt. Excessive debt would remain a national risk.
· We must provide the countries affected with the prospect of economic recovery. We need a European programme for modernisation and growth. Greece needs support from the European Union if it is to get back on its feet again. Without such support people in Greece will not accept the inevitable harsh cuts.
· We need a financial transaction tax. This will also help to curb speculative financial transactions. First and foremost, however, it will ensure that the financial sector contributes to resolving the crisis, which many players in the market have done very well out of for a long time. We must also start regulating the financial markets with the requisite determination.
· We need more, not less Europe. Ultimately, a currency union cannot function properly without close cooperation between the Member States in economic and financial matters.
Not all of these demands can be put into practice straight away. But without the vision that inspires them we will only be tackling the symptoms and not the causes of the crisis. Let there be no misunderstandings. The tough austerity programmes in the countries with serious debt problems are inescapable. An uncompromising battle must be waged against economic patronage, corruption and tax evasion. There must be stricter monitoring of the budget policy of countries that receive financial assistance from the Eurozone countries. However, a genuinely practicable consolidation of public finances requires an easing of the burden imposed by prohibitive interest premiums and the potential for innovation and growth in the economy. In the countries hit by the crisis there must be the hope of sound economic development and the jobs that go with it. Light at the end of the tunnel is vital to ensure enforcement of the austerity programmes in the countries concerned – which will entail considerable hardships – and to rebuild the confidence of the populations in their democratic governments and in Europe as a whole.
It is also abundantly clear that those who aspire to a social Europe for the people cannot tolerate a situation in which individual European Member States find themselves subjected to the mercy of international financial market speculators. Otherwise the European idea will suffer irreparable damage in every country.
Germany has no interest in any further aggravation of the imbalances in Europe. A split continent in which a handful of countries in the North prosper while others fall further and further behind will not be able to safeguard the currency union. Germany would have to pay a very high political and economic price for the break-up of the euro. Politically, there would be a dramatic worsening of the isolation already caused by the Merkel government. Virtually no other country in Europe profits from the exchange of goods and services in the way that Germany does. Almost two-thirds of our exports go to the European Union, over 40 per cent directly into the Eurozone. Only in an economically healthy Europe will we be able to sell our vehicles, our steel, chemicals, mechanical and electrical engineering products and our services. We have a strong interest in countries like Greece investing in real economic development and exploiting their inherent strengths in renewable energy sources, transport and logistics and a modern, ecologically sustainable tourist industry. Many German companies are active in Greece and could serve as partners for innovation and recovery. The opportunities and openings are there, as is the willingness to work hard. What is missing is the political will in Europe to formulate an ambitious recovery plan and initiate a European growth programme that does justice to the grandness of the European idea. A strong Germany that combines economic success with social security needs strong neighbours in Europe. Ultimately, the prosperity of our neighbours is our prosperity too.
From the very beginning of the euro crisis we Social Democrats have therefore urged that the necessary austerity measures in the Eurozone member countries affected should be combined with stricter regulation of the financial markets, effective debt rescheduling programmes and measures to stimulate growth. This would be financed not by rising contributions from the EU Member States but by a ‘turnover’ tax levied in the financial markets (financial transaction tax). The introduction of such a tax would at the same time correct a congenital defect of the euro – the lack of a coordinated financial and economic policy in the single currency zone. A strong signal of this kind would have curbed financial market speculation and stabilised not only the Member States concerned but Europe as a whole.
Along with the overwhelming majority of the conservative governments in Europe, the Federal Government of CDU/CSU and FDP has hitherto refused to send out such a strong signal. Instead, they have timidly put their faith in the short-term interests of the respective countries. This has led to increasing irritation among investors in the financial markets and has fanned speculation. Much of the responsibility for this is due to the tactical dawdling and dithering of Federal Chancellor Angela Merkel.
In the present situation two crises are wound into one: the crisis caused by the excessive debt of some members of the Eurozone and the political leadership crisis that has arisen within the European Union as a whole. This has fuelled a genuine crisis of confidence. Seldom have EU citizens been so sceptical and negative about the European institutions and the parties, parliaments and governments in Europe. Anti-European feelings are on the increase and the lack of any hope or prospects in the crisis-ridden European Member States is propelling the anti-Europeans and the neo-nationalists into the parliaments and governments.
As the largest economy in Europe, Germany has a special role to play. Naturally, the vast majority of the people in this country do not want see the taxes they have paid for their hard work being used to finance the mistakes, corruption and irresponsibility of other governments in the European Union. In Germany, too, anti-European sentiments are on the rise. It is, therefore, all the more crucial that the country should have good political leadership.
Germany, as the main political beneficiary of European unification after the Second World War and the main economic beneficiary of the European currency union, must not yield to the increase in EU scepticism. We must shoulder our responsibility for the continued existence of the European Union and the success of united Europe.
This letter was first published in German on 18th July 2011