Germany’s minister of finance, Wolfgang Schäuble, today called for a “shift in national sovereignty to European institutions” at a debate on European financial policy in Trinity’s Long Room Hub. Speaking at the event, the minister said he is a “strong supporter of political union in Europe” and that he would “prefer the same rules for all 28 countries (of the EU),” though he recognises that that is “not realistic in the short-term” given the need for unanimous support for treaty changes. “European integration has always followed crisis,” he said.
The panel event was chaired by RTE economics correspondent, Sean Whelan, who began by asking both ministers whether they had a “magic formula for recovery”.
Mr Schäuble responded by describing Ireland as a “huge exception”, before outlining what he saw as the three strands of the solution: dealing with unsustainable debt, structural reforms, and investment. Some members, he said, “need urgent institutional reforms”, with that being “a key precondition to sustainable growth.”
Mr Noonan spoke of the necessity to “repair the damage” by improving the originally insufficient framework that underpins the EMU and creating a banking union. He said that “those that didn’t engage in structural reform are the laggards, and include some of the “big countries”. He also highlighted a need to, “develop market sources of finances to drive the economy.” A point that would be repeated by both men, he noted that “great movements forward have been in response to crisis.”
Whelan, who had spoken in his introduction of the need to “bring the corpse of the European economy” to life, next asked if the “European crisis” was over and why Schäuble was opposed to Quantitative Easing (QE).
The “hardcore of the EU crisis,” said Schäuble , was the risk of contagion, pointing to the increase in the spread of Spanish government debt in the wake of a failure to form a coalition in Greece following the general election in May 2012. “Markets have understood that the Eurozone is stable” and that there is “assistance if needed from the European Stability Mechanism Fund,” he said.
As to whether QE – an action by central banks that seeks to stimulate the economy – may work, he said, “I doubt it,” but underlined that it was not his decision and instead that of the independent European Central Bank under Mario Draghi.
Schauble admitted that the Eurozone budget rules had been “violated” by his own country, Germany, in 2003, but said that, “we’ve taken our lesson; now we stick to the rules.”
Asked for his views on Eurozone countries failing to meet budgetary requirements, Noonan said there is “trade-off between results and attempted structural reforms” – and that it would be “a valid move” to allow more time if countries were attempting such reforms. He stated the necessity that all Eurozone countries adhered to budgetary rules, saying, “We can’t have a Europe that goes back to one set of rules for big countries, and another for small ones”, to which Schauble said, “I agree”.
Repeating an earlier point, Noonan said that the EU has operated a “stimulus-response model”, which he explained as meaning that it responds to a stimulus, such as the economic crisis. He said Draghi has been “quite successful in operating within his mandate”, and said the next step would be allowing the ECB the “policy lever” possessed by the Bank of England and the US Federal Reserve. Returning to a point he’d made earlier about “external geopolitical threats” such as the EU-Russia border, he said that, as a net exporter of energy, US interests in the Middle East have diminished, and while the US may initially “be our friend” it may “start suggesting, then demanding” that Europe keep peace on its borders
Asked about a “disconnect between electorates and institutions” and an “absence of accountability and transparency”, Schäuble said “you are partly right”. He said he, and Noonan, “can’t move without a mandate” and, with two-thirds of the parties in the European Parliament being strongly pro-Europe, he believed they have it. He noted an “uneasy mood in parts of populations”, but said that “Eurosceptics are a minority, and the majority has rights too.” “In every country, the decision was taken to stay” even though there was often a “hard price”. Schäuble implied that the strength of Eurosceptic parties was a product of weak government, and briefly mentioned France, before quickly saying, “I will not comment.” He cited previously hostile Scandanavia and the Czech Republic (which is now intent on joining despite strong opposition from former president Vaclav Klaus) as examples of countries where support for the Eurozone had increased.
Noting the role of exports to Asian countries in Germany’s success, Philip Lane, head of the economics department, asked what Germany’s fiscal policy would be in the event of an external shock. Having earlier said that “credibility is a valuable economic asset”, Schäuble said that, as minister of finance, “I would be an idiot to discuss what would happen in a crisis”, but, “believe me, we are prepared.”
On the question of the UK’s EU referendum, Schäuble said that he does not believe the UK will leave, joking that “the British are reasonable people” and that leaving the EU would “hurt the UK terribly”. He said there is “a common way, preferably without change to EU treaty, to secure structural reforms”. This commitment to compromise was recognised and welcomed by Noonan.
Noonan said, “Obviously we want the UK to stay in the EU – it’s in our interests.” He said that the UK gives a balance to the Franco-German EU, both economically and ideologically.