Germany's finance minister says no reduction of Ireland's banking debt
GERMAN FINANCE minister Wolfgang Schäuble has dismissed expectations that Ireland’s progress in the year-old EU-IMF programme would allow a renegotiation of its banking debt burden.
Mr Schäuble dismissed as “entirely made-up” reports that Berlin was planning to issue “elite bonds” with other triple-A euro zone members or mulling plans for a “stability club” of tighter budgetary oversight within the euro zone.
Instead he suggested euro zone members win back market confidence with their own national redemption funds to manage all debt above 60 per cent of national gross domestic product (GDP).
“Like every country, Ireland has to manage its own affairs. Ireland has made great progress but it would be wrong to draw from this the conclusion that the structure of European solidarity can change,” said Mr Schäuble to foreign correspondents in Berlin. “The European solidarity construct is about helping countries find time to solve their problems. We are buying time on the market, sometimes it a very expensive way but it’s the only way to ensure that the the euro remains a secure currency.” Ahead of next month’s EU summit, Mr Schäuble said discussion should focus now on the nature of an agreement and ignore “distractions” such as demands to pool euro zone debt into so-called “eurobonds”.
“Pooling debt now would, quite simply, leave Germany swamped,” he said. “It’s quite likely that, after we did that, we’d have no country left in the euro zone with a triple-A rating.” He dismissed reports that euro zone triple-A rated countries, including Germany, were proposing common “elite” bonds.
“If you’ll forgive me for saying so, that is completely made-up – and not even well made-up,” he said.
He said Berlin was still anxious to see new binding budgetary rules agreed by all EU members through “narrow treaty change” and described an intergovernmental deal, side-stepping the treaties, as a “second-best solution”.
Ahead of Franco-German proposals for EU budgetary reform, the German finance minister recommended that euro zone members establish their own sovereign “redemption fund” to bring levels of debt to sustainable levels.
Last week, leading German economists proposed such a “redemption fund” at euro zone level, but German officials have rejected this as eurobonds by the back door.
Instead Mr Schäuble suggested the same idea at national level, mentioning as a model the fund that manages the cost of German unification with a fixed debt repayment plan. “The trust of markets would be considerably increased by an undertaking to reduce debt to 60 per cent of GDP,” he said.
German officials said such redemption fund to reduce total national debt could work hand-in-hand with national “debt brake” arrangements to limit new borrowing by governments.
Mr Schäuble said he understood anger towards Germany in the current crisis, but said many countries facing into a decade of reform had already enjoyed a decade of the benefits of euro zone membership – at the cost of their competitiveness.
“Sometimes I feel like a fireman being bad-mouthed by the arsonists for not yet putting out the fire,” he said. “It shouldn’t be the case that I have to send thank-you notes to countries that meet rules to which they themselves agreed.”
He insisted Berlin was not demanding austerity and budgetary reforms to “dominate” or homogenise Europe along German lines.
“We know that we are strong but we don’t overestimate ourselves any more. In the last century we thought we could do everything alone, that wasn’t a good thing,” he said. “We want to solve things within the treaties.”