Exclusive Interview: Peer Steinbrück on the Eurozone Crisis and the Future of the European Union

steinbrueckAngela Merkel’s European policy has so far not succeeded in solving the Eurozone crisis and has been widely criticised across Europe. If you become the next German Chancellor, what would you change in the German European policy approach? Would you change the current austerity policy that is widely viewed as the main reason for Europe’s bad economic performance?

Absolutely, yes! Fiscal retrenchment and reforms aimed at increasing competitiveness are undoubtedly right, especially in the European crisis countries. But the austerity programs now being imposed on these countries are misconceived and dangerous. The current crisis strategy is clearly too one-sided. The consequence is recession in the countries affected, rapidly rising unemployment, a widening gap between rich and poor and social tensions that could also threaten the future of democracy in these countries. So as well as promoting sound fiscal discipline, I want to see Europe doing more to encourage growth, innovation and employment, and making available the necessary financial resources.

But if you are asking me what I would do differently if I were German Chancellor, then there is another aspect to this that matters greatly to me. This has to do not so much with specific political initiatives, but rather with the general stance adopted by Germany in its political engagement in and for Europe. What I believe is this: if Europe does not want to be broken apart by this crisis, and is not prepared to settle for a sticking-plaster solution that simply seeks to avoid the worst, then its political actions must be guided by a sense of solidarity and an acceptance of collective responsibility. That means that Germany’s policy towards Europe must have larger aims in view than simply pushing its own short-term national agenda at the European level. Instead such a policy must serve the higher interest that Germany has in the creation of a strong Europe. Unfortunately this is a consideration that the present German government loses sight of all too often.

Angela Merkel often talks about the need for Eurozone crisis countries to adjust their competitiveness, i.e. prices and wages. A balance of payments crisis is often regarded as the key underlying structural problem of the Eurozone. But in this context both deficit and surplus countries play an important role. What do you think surplus countries such as Germany need to do in order to help overcome the Eurozone crisis? Are higher wages and a legal minimum wage in Germany part of the solution?

The basic problem is this: Mrs. Merkel takes a one-sided view of the crisis in the Eurozone, seeing it as something that in truth it only is in part – namely a debt crisis affecting individual countries. As for the underlying causes of the crisis – the excesses on the financial markets, the deficits in the European banking system and the structural weaknesses in the European Economic and Monetary Union – she more or less blanks them out. And this is precisely why far too little is being done about stricter regulation of the financial markets and the banking sector, and about improving coordination of economic policy between the EMU member states. I know we’ve had a whole series of resolutions and agreements, not to mention several growth packages, an EU 2020 strategy and the Euro Plus Pact; but there has been little concrete progress on any of this, let alone any sensible coordination designed to ensure that the desired economic incentives translate into more jobs.

What Europe still lacks is a consistent and definitive coordination of economic, fiscal and social policy with the clear aim of securing growth and prosperity for the long term. As I see it, that entails not only a commitment by deficit countries to improve their competitiveness, but also an acceptance of responsibility by surplus countries such as Germany to contribute something towards the correction of economic imbalances within the Eurozone. This is one reason why fair wage settlements and a legal minimum wage are important and sensible steps, which my party wants to see introduced in Germany.

The British Prime Minister David Cameron has recently given a speech in which he demanded a special deal for the United Kingdom in the changing European Union. What is your reaction to his speech? Can there be a special deal for a single country? Or would this be the beginning of the end for the European Union as every member state would then seek to opt-out of the aspects the Union they don’t like, making the EU effectively ungovernable? What solution for this problem do you see? Could the future of the EU be a multi-speed Europe with the Eurozone at its core and a second tier of non-Euro member states?

Europe is a political community. As such it can only function if all the member states are willing to embrace a certain degree of solidarity, and if they share the belief that this European Union possesses a value from which all of them collectively benefit. But if one country thinks only of itself and asks how it can extract the maximum possible advantage from the EU, and is not willing to put something back into the European community, then it weakens the EU as a whole and damages its own long-term interests. The value of a strong and united European Union for us all is self-evident in my view: in the 21st century, when ideas and values, politics and economics have become global commodities, Europe can only hope to compete successfully as a united whole. Neither Germany nor France nor the United Kingdom will be able to promote their interests in the global arena more effectively on their own than if they stick together. And this is precisely why it is so important for the United Kingdom not to leave the European Union, because it brings a political and economic weight to this community that we really need going forward. Of course, in the future – as in the past – not all member countries will always move ahead at the same speed and on the same broad front. And of course we will also need to make further progress towards a better European economic and financial policy, particularly within the European Economic and Monetary Union. But this internal differentiation must not be allowed to lead to a situation where European unity as a whole starts to disintegrate. And that would certainly be the result if European policy were to become some kind of bazaar, where each member is only intent on getting what it thinks is best for itself by threatening to opt out or leave the European Community. This would not work in the long run.

Where do you see the European Union ten years from now?

That is probably harder to predict than ever before. A great deal depends on what decisions the EU takes – or doesn’t take – in the next few years in order to get itself out of the crisis and position itself better for the future. What happens in the immediate future will determine whether Europe emerges from the crisis unified and strengthened, and whether it will be in a position ten years from now to hold on to its prosperity, its model of society, and indeed its freedom and democracy, and to build on these in the face of competition from the world’s other emerging regions. The alternative would be a Europe that is unravelling, economically and politically weakened to the point where it can no longer play an important or creative role in tomorrow’s world. I don’t believe it has to come to this, provided we Europeans can get it together and find the courage to take political decisions that do not always reflect merely the lowest common denominator, but are founded on the awareness that we are stronger together, and can achieve more if we stay together.


  1. Global City says

    Why do Europhiles see the rest of the world as being scary? britain, Germany or france could ‘hold their own’ just as well as japan, Australia or Mexico will. The world does not actually work as Europhiles seem to think that it does. It is really strange and inward looking. You are too convinced of the perfection of your model. If it really were such a good one then every region around the world would be replicating it. As it is the vast majority of serious regions are entering into nice free trade areas, with none of the political integration and ‘nation building’ that the European elite are so obsessed with.

    The confidence in the ‘ever closeer union of the peoples’ of Europe’ model is corrupt and undemocratic, to say nothing of being structurally incapable of dynamism. It is a bit like the British delusion about the NHS (political model) being the envy of the world!

  2. says

    Great interview. I got to say Peer Steinbrück is a smart cookie. He was and would be a great finance minister again, but becoming the chancellor I really don’t think it would do much good to germany. In our days relations with other countries have becom even more important. Building up relations, and using a bid of diplomacy isnt really one of his strength

  3. says

    “The alternative would be a Europe that is unravelling, economically and politically weakened to the point where it can no longer play an important or creative role in tomorrow’s world. I don’t believe it has to come to this…”

    But it is coming to this! All things point in this direction! The EMU with Germany’s leadership need empower the ECB to become something more than a crutch propping up criminally reckless banks and likewise prevent the ESM from becoming their bottomless pit garbage dump. The ECB need be transformed to a credit bank financing capital investment on the continent for the sake of profitably developing physical resources and increasing commerce in commodities and value-added products. The so-called “universal banks” are hopeless gamblers and will never commit to this kind of investment (which is exactly the way the City prefers things). The ECB must be transformed to fill this void committing trillions of euros in credit to buy up the bonds of member states issued for the sole sake of capital investment. It goes without saying that, for this to be successfully achieved the EMU will have to adopt the same banking and securities reforms as did the U.S. at the start of the New Deal in 1933. As for current, outstanding sovereign liabilities, there will need to be a debt moratorium lasting for the duration of the depression that in fact is deepening on the continent. There’s no other way.