Wolfgang Schaeuble gets bad press. The German finance minister is used to being Europe’s bogeyman.
In Greece, the “no” campaign in July’s bailout referendum even tried to associate him with the “yes” campaign, knowing how deeply unpopular he is.
In the final stages of the country’s bailout negotiations in July, Schaeuble offered the chance of a temporary exit from the euro — along with a bundle of cash to smooth the departure — but his idea fell flat and another bailout was agreed.
For this and his generally stern approach to negotiations over Greece’s bailout, Schaeuble is often reviled, but that seems deeply unfair.
He’s not a genius, and there may well be better ideas out there for how to make the eurozone function — but Schaeuble seems to have the only one that’s likely to happen.
Schaeuble is often seen defending European rules on things like government spending (some of which were broken by Germany in the early 2000s), and is widely mocked for it. But while major decisions are made by negotiation with 19 governments, it is genuinely difficult to understand how the eurozone is meant to work without them.
Appeals for finance ministers to offer Greece more lenient conditions out of a sense of European solidarity are clearly well-intentioned. It certainly seems like it would be better, for example, if the German and French governments (among others) simply took a massive haircut on their Greek debt holdings — they’re far more capable of taking that hit.
It’s probably more difficult to see it from that perspective if you’re elected by and ultimately representing the interests of French and German voters.
The Eurogroup meetings that have passed in the last eight months would be recognisable to Metternich or Talleyrand, participants in the 1815 Congress of Vienna held two centuries ago. It’s an intergovernmental negotiation, and the outcome will always be something of a hash, with dozens of attendees trying to get their own voices heard and their own priorities recognised.
The only alternative seems to be a federal Europe — exactly what Schaeuble has advocated for 20 years and more.
Schaeuble wrote about the need for a federal structure based on a “core Europe” when Alexis Tsipras was still at university. Back in 1994, he was pushing for a political union to go along with the coming monetary union.
In fact, it’s French Prime Minister Edouard Balladur who shot down Schaeuble’s suggestion in his own 1994 response:
Must Europe move towards a federal system? Why revive this ideological debate? The time for this is past: an enlarged Europe, including a greater number of member-states, could not be federal … Only flexible forms of organisation in such a group can be considered.
Here’s what Schaeuble said about Federalism in a 2006 speech:
In the context of European unification, some in Germany have called — fortunately not very loudly — for doing away with federalism. I think that is a bad idea. However, I am well aware that, when it comes to concrete issues, public opinion is not all that enamoured of federalism: Whenever problems are serious, then public opinion polls quickly show a majority in favour of centralised solutions.
And he’s not wrong on public opinion, at least in his own country and the rest of the “core”. An Opinium survey conducted just this month showed that though the concept of “ever-closer union” in Europe commands the support of over 40% of people in Italy and over 50% in Spain and Portugal, in Germany it falls to 30%, in France to below 25% and in the Netherlands to below 20%.
Schaeuble has spent most of his political life constructing a version of European federalism that might be palatable to German voters — and the honest truth is, if it’s not palatable to southern Europe, then there probably won’t be a federal Europe at all.
I think that Syriza are probably right about Greece’s debt burden, and its growth prospects more generally. But that’s unacceptable politically, not just to Germany but to tens of millions or people across the rest of the continent.
There’s also a completely reasonable argument that a less austere approach to the Greek crisis and southern Europe’s depression might be beneficial in the long-run to Germany. That argument may be entirely right. But given that it’s been seven years after the financial crisis and five years since the first bailout programmes began, it doesn’t seem like Berlin’s mind is going to change at any time soon.
It’s hard to think of a major crisis or turning point in the last 200 or 250 years of European history that didn’t have its origins or resolutions in Germany, at least in large part. It’s had a huge influence on the eurozone’s institutions too — particularly the European Central Bank.
Similarly, it’s extremely difficult to see how some solution to Greece’s crisis, or any further major advances in European integration can go ahead without Germany probably leading the process.
For all of the discussion of a potential Franco-Italian alliance to build an agreement on Greece, all that has been achieved is another can-kicking. The fiscal cliff for Greece’s government has been extended into the future, painful and perhaps impossible reforms will be pursued, and growth will be slow if not non-existent.
If Francois Hollande has a grand plan for the future of Europe he is largely keeping it to himself, and Matteo Renzi has enough problems to deal with at home.
So there are very few options left for Europe. One is some version of what exists now — a monetary union that sometimes looks more like a fixed exchange rate system, in which countries get little support (without serious conditions) and can drop if needs be.
The other is Wolfgang Schaeuble’s stern federalism, centred on France and Germany. You might not like the taste, but nothing else really seems to be on the menu.