THE BAILOUTS of Ireland, Greece and Portugal have “bought time” for those countries but only to enable them lower deficits and strengthen their economies, German finance minister Wolfgang Schäuble has said.
He was speaking at a conference in Brussels at which Irish Congress of Trade Unions (Ictu) general secretary David Begg said the terms of the Irish bailout were pushing the State “towards default”.
Mr Schäuble said the debt crisis showed that a common currency could not survive without solidarity between members but that such consensus could only prevent an individual country’s crisis from turning into a euro zone crisis. “A member state has to be willing to deal with the root causes of its problems itself.”
Making the case for private investors to bear bailout losses when the permanent euro zone rescue fund comes into force in mid-2013, Mr Schäuble said this would ensure the inseparability of risk and accountability. “Strong member states will not provide an automatic safety net for weak member states. They will not automatically account for risks taken by private creditors.”
The single currency was never intended to be a quick fix for its members or speculators, he said.
“It was not meant to be a system of redistribution from richer to poorer countries via cheaper borrowing for governments by means of common Eurobonds or outright fiscal transfers. European monetary union won’t succeed if a number of countries persistently run deficits . . . at the expense of the euro’s stability.”
It was right to provide short-term aid to the three bailout countries, the minister said. However, the crisis revealed weaknesses which “cannot and should not be fixed by routinely throwing other countries’ money at the problem”.
Mr Begg said he found Mr Schäuble’s remarks to be contradictory.
“He was in favour of deeper European integration, which I am myself. At the same time he had a definition of solidarity which was that you contain the problem in the peripheral countries and keep it away from the rest of Europe,” the Ictu general secretary said.
Saying the austerity programme in the bailout was undermining any chance of growth and a long-term recovery, he also criticised the insistence on repaying all private bank debt. “It makes no sense to persist with a policy which is pushing the country towards default in circumstances, which if they could be separated from debt, are manageable.”
Mr Begg acknowledged that domestic policy failures played a key role in the crash, but said the European institutions also bore some responsibility.
