Q &A with Wolfgang Schäuble

The following is an edited transcript of Wolfgang Schäuble's interview with The Irish Times

Q: When in May you received Aachen's Charlemagne Prize for European achievement you warned against reducing Europe to the current crisis. Does it unsettle you that millennia of cultural exchange in Europe - Charlemagne was, for instance, taught to read and write by an Irish monk - have been brushed aside in this crisis?

A: You shouldn't overrate the crisis. People are taking note of the crisis and take it seriously but they know it's not the end of the world. And despite all frustration over Greece - when it comes to agreements, or figures - we have a common history and cultural exchanges going back millennia.

Q: A recent survey for our newspaper found that 69 per cent of Irish people thought Germany is playing a dominant role in Europe, particularly during the Merkel-Sarkozy era. One analysis of this suggests a concern that some larger countries, through the inter-governmental method, are more winning out over smaller members who favour the community method involving the European Commission. Does this concern you?

A: You could say that there's something true in that. But of course that has to do with the fact that the key to the community method lies in the willingness of people - also in Germany and Ireland -- to hand over sovereignty to the EU and the readiness to change treaties. That readiness is limited. In Germany the readiness is less limited because of our history. It is more limited in other countries – due to history or traditions.

I don't particularly like the inter-governmental method but if I have a currency union with a single monetary policy I also need some form of common economic and budgetary policy. As long as we haven't pooled responsibility for that, we have to move things on at inter-governmental level.

As for the role of France and Germany: French politics is often more self-confident then German politics due to the catastrophe in the first half of the last century. If Berlin and Paris don't agree, then it is difficult to make progress in Europe. But I am also someone who always says we have to take note of the smaller partners in Europe. And we do. We are in constant contact with all of our partners.

Q: The crisis has enabled political integration steps previously thought impossible. How much longer can the question of democratic legitimacy be left lingering on the horizon?

A: We have to take the people along and we have to convince them of the steps we are taking. But in a democracy the elected have to lead and have to move things on - citizens expect that, that's why they voted for them. As long as a society is prosperous the willingness for change is in general low. Crisis and pressure help foster change - that's why I'm not so pessimistic towards crises.

As long as we have no common budgetary policy, for instance, all decisions need to be negotiated by national governments and democratically legitimated by national parliaments. Whoever wants to change this has to transfer more power to Europe. And then the role and character of European institutions will change also. The more pressure (for change) the faster things happen. This is part of the questions which the German constitutional court is deliberating upon now. I'm convinced that the ESM meets the standards of our democratic system.

Q: You have called for the election of a European president. Is that possible, as you hoped, before the next European elections in 2014?

A: If we were to have a presidential election in Europe it would be an event that would spark a huge interest in people from Lisbon to Helsinki, just like national elections. And it would create a completely different political setting in Europe. We will have to see how long it will take to agree on this, but I'm afraid it won't be 2014. I used to say this proposal for a European president had 27 natural opponents - the national leaders. Today it's different. The CDU and its leader, who is our chancellor, are in favour and the idea's gaining support here and will elsewhere. Naturally the question then is: who could candidate for the position?

Q: Would such a role as European president have its attractions for you, or would you be satisfied as head of the Euro Group?

A: I'm going to be 70 next month. I don't think that is a question that arises for me. The Presidency of the Euro group is an interesting and important task. But let's remember that Germany didn't start the debate about who should take that role. It was Jean-Claude Juncker himself, against my advice, who said he didn't want to continue.

Q: He says he can think of no more suitable candidate than you.

A: You're talking to me now and not him. At the moment he is the president. And we have talked about it and agreed quickly that each of us wishes that the other should do it.

Q: Chancellor Merkel demonstrated with the Fiscal Pact what, in a crisis, can be achieved in a short time. Where is the pact for European democracy?

A: First we have to remember that with the Fiscal Pact, we did not achieve what we wanted to because we could not reach unanimity in Europe. And if we would wish to strive towards a political union in Europe this can only be achieved when we have a unanimous decision. And if we want to strengthen institutions for the euro zone, which may be necessary, some other European member states will not want that we open a greater gap between us and them. So once again we are up against those who have greater reservations against further integration.

Q: You spoke in Aachen of the need for "instruments of varied integration" and "flexible geometry" in Europe. Do you envision a core and periphery euro zone with Greece, for instance, remaining legally in the euro zone but, factually, not?

A: It makes little sense to speculate about Greece today, which is in a really difficult position. We'll wait for the (troika) report and, together with Greece, then have to find solutions that create lasting market trust in the euro zone.

The real problem in the euro zone is that, as a result of the financial and banking crisis that started in America, financial markets identified the risk associated with high public debt. We have to overcome this loss of trust. And the test of any solution for Greece is: will this win back trust in the euro zone as a whole?

Q: How important is it politically for Germany that Ireland remains a success among the programme countries?

A: Ireland is incredibly important because it had huge problems and has made massive progress. Not just considering the size of the programme in relation to GDP but also in winning back trust, as you can see in financial markets, where yields on Irish government bonds have recently fallen to their lowest level since the programme was agreed. So we can say that the philosophy of our politics - to lead the euro zone out of this crisis of trust - is correct. Ireland had one of the most difficult situations yet is mastering it well. It shows that Europe is a community with a common destiny - with each other and not against each other.

Q: Some in Ireland say a successful bond auction with lower interest rates reflects a market expectation that relief is coming in the autumn for Ireland on the bank debt issue. Do you want to preserve this market trust by relieving the debt burden?

A: Of course we will look at this closely. But we will have to be careful in making sure that we really preserve the market trust, which is nothing but expectation towards the future and, at present, the view of markets is that Ireland is meeting its programme, something the markets honour. So we will have to avoid to generate a headline like "Aid programme for Ireland Topped Up" because then investors in California or Shanghai might not understand that this top-up is a reward for Ireland, but might be tempted to conclude that what was agreed two years ago for Ireland was not enough. And that is surely not what we want.

Q: A technical solution might be found if the political will is there. Is there a political will in Germany to agree relief for Ireland in October?

A: The decisive point is: we cannot do anything that generates new uncertainty on the financial markets and lose trust which Ireland is just at the point of winning back. Naturally we want to help each other but I am not yet convinced by any means that some of the measures which are mentioned would not have the opposite effect. We will talk about this again.

Q: So the expectation is not misplaced, that a yes from Germany will come in the autumn?

A: It's not a question of a yes or no from Germany but what is the right solution. And, by the way, this is not only true for Ireland, but also with other countries: with Greece, the question is not whether we are generous or not but what is the best solution for Greece and for Europe. The final goal is sustainable stable economic development in Europe. And in addition to this: if we do things that overwhelm Germany's economic potential in the view of the markets, then Europe is weak as a whole.

Q: With a difficult budget coming in Ireland, there is a fear that failure to agree on relief might contribute to an Irish slump. With an eye on the German federal elections next year, can Berlin afford, politically, to risk a programme success story?

A: I don't accept that question. It's not about the German federal elections. We don't want that Ireland does worse but that the winning back of trust continues. That is the measure of all decisions we will take.

Q: At some point it will come to a referendum in Germany on greater European integration. Are you concerned that, by then, German critics of your crisis strategy will have poisoned enough of public opinion here to torpedo the project?

A: We might need a referendum at some point because it's in our constitution that, when we transfer considerable parts of our sovereignty to the EU, Germans will at that point have to give themselves a new constitution. When that day comes we will have to lead a big campaign and I am confident we have a good chance it will go well. Germans are in general very pro-European. But it's not a question of now.

Q: Another claim made by your critics is that Germany's support for bailouts is not just to preserve European prosperity but to guarantee the repatriation of German capital invested in crisis countries. How do you respond to that?

A: I don't see this is a primary interest for our policies. Our primary goal is to stabilise the currency as a whole and to overcome the loss of trust in parts of the euro zone among investors. And it might be useful here to look at who was most involved in private-sector involvement (haircuts) for Greece - it was the German taxpayer.

Q: It's not often that a German finance minister passes comment on the ECB president, as you did when Mr Draghi's promised to do "whatever it takes" to stabilise the euro.

A: I said I support this remark because Mr Draghi clearly said the ECB would respect the limits of its mandate. It is claimed in some quarters the ECB is breaching its mandate, I don't see that.

Q: The Bundesbank does.

A: If governments start criticising independent institutions it is a breach of this independence. Thus we do not comment on independent institutions.

Q: Some in Berlin suggest that the Chancellor's European policy, particularly in the crisis, has had no small influence by Wolfgang Schäuble. Would you agree?

A: That is a nice compliment. But it is important to stress that if the chancellor and finance minister are not of the same view, the finance minister cannot exercise his role and the chancellor should seek out another.

Q: Does today's German finance minister have more influence in European politics than some German chancellors in the past?

A: I wouldn't see it that way. Germany has always a particular role in Europe because of geography, size and history – perhaps even more in the unusual situation of the euro crisis. All the more reason to have close trust with the chancellor. It works very well.