Schmidt scathing on German role in crisis


EURO ZONE DEBT CRISIS:EUROPE NEEDS German solidarity and empathy to tackle the euro zone crisis and not a “damaging, nationalistic show-off”, according to former chancellor Helmut Schmidt.

The former Social Democratic (SPD) leader earned a standing ovation yesterday for attacking Germany’s proposal for treaty change to introduce EU budgetary regulation to stabilise the euro zone.

Warning of the lengthy ratification process treaty change requires, Mr Schmidt (92) said: “We should concentrate today on what is needed today and exhaust the possibilities the currently applicable treaty gives us to strengthen budgetary rules and economic policy in euro area. The current crisis cannot be allowed to drag on for even longer.”

Although frail and wheelchair-bound, the former SPD chancellor’s hour-long address demonstrated an undimmed intellectual capacity. He earned a standing ovation for expressing his “shame” at the “unease” Germany’s European leaders feel towards Berlin.

This unease, he said, arose from a failure of German politicians to explain adequately Germany’s moral obligation, economic necessity and strategic interest in the continued success of the European Union.

“If we Germans let ourselves be seduced, based on our economic strength, to demand a leadership role in Europe . . . an increasing number of our neighbours would act effectively against this,” he said. “To protect us from ourselves, Germany needs to be embedded in European integration.”

The euro zone crisis would not be overcome by a prescription of German austerity alone, he added, calling for budgetary flexibility to allow spending programmes to generate jobs.

“We Germans cannot force our economic or social model on to European partners as model or benchmark, merely offer it as one example among many realities. Without growth and new jobs no state can reorganise its budget.

“Whoever thinks Europe can return to health alone through budgetary cuts or tax increases should study the effect of [Weimar Republic chancellor] Heinrich Brüning’s deflationary politics.”

Two years after losing office, the SPD hopes its three-day party conference can finally heal the scars of its grand coalition experiment with the Christian Democrats (CDU).

Beneath the scars lingers a resentment among left-wingers at the Schröder-era reform programme that cut welfare and hiked the retirement age.

SPD leader Sigmar Gabriel, a protege of Gerhard Schröder, is torn between the best way to get out of opposition – to give in to party pressure and allow the party to move left or to challenge Angela Merkel’s CDU in the political centre.

Mr Gabriel’s hope of taking Dr Merkel in 2013 is far from a given: former finance minister Peer Steinbrück, now a backbencher, has designs on that role, although the loathing of party left-wingers could yet dash his hopes.

The third hopeful is SPD parliamentary leader Frank Walter Steinmeier, who failed to unseat Dr Merkel in 2009.

He used his party address yesterday to give a left-wing tinged speech calling for European parliaments to rise up against a shift towards a technocratic Europe.

Presenting the SPD European motion, Mr Steinmeier warned against allowing the ECB to continue its emergency bond-buying on the secondary markets and made the case for common sovereign bonds. These could be managed by the permanent euro zone rescue mechanism which, he said, should be activated earlier than 2013 to become come the “nucleus” of a European monetary fund.

He called for an EU investment programme to prevent a looming European recession, financed by a long-delayed European financial transaction tax.

In addition, EU leaders should tackle “tax dumping” through a common corporate tax base adopted by a core group of member states interested in tax harmonisation. “We need a gravitational centre-point because Europe will fail if the slowest dictate the pace,” Mr Steinmeier added.