A Way to Resolve the Euro Crisis

An interview with Peer Steinbrück, Former German Finance Minister

In a SPIEGEL interview (September 12), Peer Steinbrück, now a prominent member of the opposition Social Democratic Party, argues for a complete overhaul of Europe’s currency union – one that would include euro bonds, strict rules and harsh sanctions.

Here are some excerpts:

Steinbrück: One has to explain to people that the EU is the answer both to 1945 and to the 21st century, in a dramatically altered world with new heavyweights, and that Germany benefits from the continued integration of Europe in political, economic and societal ways. And, of course, that means the Germans will have to pay. But the money is well invested in both our future and Europe’s, in peace and prosperity. This is the kind of explanation that’s missing. German politicians should have come up with a new narrative for Europe – and especially one that justifies the country’s financial contribution to its own people.

SPIEGEL: What should the future design of the currency union look like?

Steinbrück: A country that wants to benefit from euro bonds, for example….

SPIEGEL: …That is, from bonds guaranteed by the euro zone as a whole…

Steinbrück: …will have to yield part of its budgetary sovereignty to independent institutions. It will have to have drafts of its national budgets approved and submit to macroeconomic monitoring.

SPIEGEL: In other words, the rights of particular countries to devise their own budgets will be severely curtailed.

Steinbrück: Yes, but that’s not any different from what the International Monetary Fund (IMF) also does with countries in crisis.

SPIEGEL: But what happens if the respective governments refuse to subject themselves to this regime, for example, because strict belt-tightening measures trigger unrest among their populations?

Steinbrück: Then they won’t get any euro bonds.

SPIEGEL: And then what?

Steinbrück: Then these countries will be forced to go it alone and fend for themselves. One can’t threaten sanctions without being prepared to implement them, too.

SPIEGEL: Wouldn’t this ultimately result in the bankruptcy of a euro-zone member?

Steinbrück: In an extreme case, it would involve orderly insolvency proceedings for the state.

SPIEGEL: If I correctly understand what you are saying, you believe there’s going to be a sort of “currency union 2.0” with new, stricter rules. Why should people believe this one will be any different from the old one, that countries are going to honor the new regulations and keep their new promises?

Steinbrück: The bang was really pretty loud; everyone heard it. If we weren’t convinced that there are also political learning curves, we would be forced to stay in bed in the morning and pull the covers over our heads.

SPIEGEL: Bigger bailout funds, euro bonds, purchasing sovereign bonds and whatever else may come – is it possible that the price Germany will have to pay for Europe will be too great in the end?

Steinbrück: Nobody knows. We have yet to pay a single cent; we’ve only given guarantees. In these conditions of extremely high insecurity, we must act in a way that is politically responsible – for the sake of both Germany and Europe. It’s just that the government needs to explain that to the Germans. Over a period of 20 years, German reunification has cost €2 trillion, or an average of €100 billion a year. So, we have to ask ourselves: Aren’t we willing to pay a tenth of that over several years for Europe’s unity?


4 responses to “A Way to Resolve the Euro Crisis

  1. Herr Steibruck is stating the obvious and the inevitable. “He who pays the piper calls the tune.” And the tune is a brisk, disciplined march.

    • Obvious and inevitable? There are many alternatives and a brisk discplined march is unlikely. Angela Merkel opposed euro-bonds. Soros favours them. And many prefer Greek insolvency.

  2. What happens when there are riots in the streets ? As there are already ?

    • Yes, in Athens and Rome. And in London, of course. What happens? Governments have to take them into consideration when they make their decisions.