In an interview for Die Welt, the Chairman of the Council of Scientific Advisors to the German Ministry of Finance Prof. Dr. Kai A. Konrad proposed a compromise between austerity and the desire of the European countries to borrow and spend more. His prognosis for the future of the European currency is negative, but he seams to believe that the European monetary union can still be saved.
Germany attempts to force other countries into economic austerity, while the leaders of countries like Spain or France believe that they should be allowed to borrow and spend more in order to stimulate their national economies. These two positions are irreconcilable and the conflict between Germany and the European periphery threatens the existence of the Euro. “I give the euro medium-term only a limited chance of survival”, said Prof. Dr. Kai A. Konrad. “When you try to impose such conditions on member states, it only creates resentments, and in the end, it puts the European project at risk”, he added. At the same time, there is a solution that could be suitable for everyone.
Prof. Dr. Kai A. Konrad proposed the following arrangement: Eurozone countries should be free “to borrow as much as they want to, with the stipulation that they alone are responsible for their debts.” Such a solution would give the European countries the opportunity to borrow as much as they want, but the German taxpayers and the German budget will bear no responsibility for the subsequent blowups, sovereign defaults and destruction of national economies. In a way, this revolutionary proposal is nothing more than a return to the principles of the Maastricht Treaty which forbids explicitly that the EU or a single member state to be liable for the debts of any member state. While the Maastricht Treaty is still technically valid, its provisions are no longer respected. Now, the leader of the most influential policymaking group within the German pyramid of power proposes a return to the Maastricht principles. The message sent to the rest of Europe is clear: “you hate Germany for imposing austerity. Fine! We let you borrow as much as you want, but don’t come begging for a bailout!”
It remains to be seen whether the other European countries will agree with such a proposal. Most likely, they will push for another solution which will involve unlimited borrowing, backed up by German guarantees for all the member-states of the European Union. Germany will not agree with such an arrangement. This conflict will surely destroy the European monetary union if it remains unresolved.
Categories: EU Erosion