No quick fix for EU's problems, says Schaüble

 

GERMAN FINANCE minister Wolfgang Schäuble has said euro zone reform is best served by a “smart balancing” of national and European interests and not an “ultimate corrective”.

Mr Schäuble insisted last night that Berlin’s recent calls for greater fiscal and economic harmonisation are to be seen as a continuation of, not a break with, its European tradition.

“We have to hold to the classic European construct, a smart balancing of national and European competences and to legitimate every decision democratically,” said Dr Schäuble at Berlin’s Humboldt University last night.

The finance minister said more intergovernmental decision-making was essential to closer co-ordination of financial, economic and social policy.

“It’s the second best solution but the only one to be realised in the near future,” he said. “This may sound disappointing to all those who would like an ultimate correction to presumed mistakes in the European currency union but it marks the genesis of European integration. Europe is and remains complicated and progresses step by step.” The finance minister said “existing institutional arrangements” were the best way of encouraging “responsible budgetary policy”.

“In future we will not look on as countries encourage structural problems through bad politics and undermine their competitiveness,” he said.

A decade after Joschka Fischer’s famous call for a federal Europe here, Mr Schäuble used his own Humboldt speech to insist that Berlin was interested in European evolution, not revolution.

His speech came as leading officials were working on a paper to reform the euro zone to allow greater economic and fiscal harmonisation.

The German finance minister said his government was interested in practical results and not theoretical discussions about European ideals. Any changes would come at inter-governmental level, he said, because European institutional development was unlikely, given huge political, legal and public opposition around the continent.

The level of opposition was clear from a representative survey suggesting the euro zone crisis has caused a spike in German unhappiness with the EU.

In March 2010 some 51 per cent of Germans said they had no confidence in the EU, a figure that is now at 67 per cent, according to the Allensbach polling institute. In the same period, the percentage professing trust or great trust in the EU has dropped from 37 per cent to 25 per cent.

Asked to respond to the statement “Europe is our future”, some 41 per cent agreed while 34 per cent disagreed.

Germans have always had an ambiguous relationship with the EU: while public opinion has opposed everything from enlargement to the euro, it has always been a given that Germans see the EU in general in a positive light.

“Now it appears that the finance crisis has overburdened the patience of Germans,” said Dr Thomas Petersen of the Allensbach polling agency in the Frankfurter Allgemeine daily.

“One gets the impression of a landslide, a sudden loss of substance that won’t be easy to balance out.”

Chancellor Angela Merkel’s spokesman, Steffen Seibert, declined to be drawn yesterday on the timetable and scope of interest rate cuts for future Irish loans, as put forward by the finance ministry on Tuesday.

“But stronger co-ordination of EU economic policy will have a particular importance,” he said.

He described the German leader’s dinner table talks with European Commission president José Manuel Barroso on Tuesday evening as a “lively discussion”. After conceding that, in diplomatic language, “lively sounds like glasses were thrown”, Mr Seibert settled on “open and friendly” to describe the atmosphere.

German officials are still smarting from Mr Barroso’s call in an interview to top up the €440 billion euro zone rescue fund’s effective lending capacity.

Mr Seibert admitted there were differences of opinion between Brussels and Berlin over the euro zone reform, but said the two politicians agreed on the necessity for speedy debt-reduction, a more robust stability pact and measures to improve EU competitiveness.

“A row is too strong a word for it,” he said. “The differences lay in nuance.”

Yesterday’s meeting calmed the atmosphere somewhat , according to officials, but the suspicion lingers in Berlin that, of late, Mr Barroso has sometimes acted as much in the interests of his native Portugal as the EU 27.

“The more the commission talks to us,” the politician said, “the less they like what they hear.” As Berlin works behind closed doors on euro zone reform, Mr Schäuble told a capacity Humboldt University crowd that any new sanctions measures were not intended to come at the expense of any member states.

“It was Germany and France who weakened the stability pact in 2004 and that’s something we have to accept,” said Mr Schäuble, a lawyer by training. “We jurists know that sanctions have to have teeth. We want to move the EU into a position where new sanctions don’t have to be used.”