For years, the southern countries in the euro zone have been pining for a clear German move toward deeper integration of the currency union, to stave off another crisis. In particular, French president Emmanuel Macron has pinned his hopes for reforming Europe on a big deal with Germany. Conservative Germans have been resisting these demands as veiled schemes to trick Germany into a “transfer union”, where righteous German taxpayers cough up for wayward Mediterraneans. Germany’s Social Democrats have been more open to the southern demands. And now we have the inevitable clash.
Germany’s vice chancellor and finance minister, Olaf Scholz, is a Social Democrat with hopes of becoming chancellor one day. He has come up with a rough draft of an idea that deserves some attention. He wants to give the euro zone a common unemployment-insurance backstop. Member states would still keep their discrete unemployment systems. But they would also pay contributions to this reinsurance fund. If one member state runs into a huge crisis, basically Greece 2.0, it could borrow from the fund, but later pay the loans back.
There is a certain elegance to the idea. First, it provides a “stabilizer” that could cushion economic shocks, similar to the (more automatic) stabilizers in America’s unemployment-insurance system. It would also show some degree of solidarity. At the same time, the money would come in the form of repayable loans, not transfers. And countries would have incentives to reform their economies to keep future contributions low.
And yet, to all those in Brussels and southern capitals who are now getting their hopes up: Fuhgeddaboudit. The plan is already a victim of Germany’s dysfunctional “grand coalition”, where the conservative Christian Democrats are vying with the Social Democrats for kudos. In this case, the economics minister, Peter Altmaier (CDU), has in effect already nixed Scholz’s proposal. Part of that may be retaliation for Scholz’s Nein to a corporate-tax cut Altmaier wanted.
As modest as Scholz’s proposal is (or was), it also triggers all the old German reflexes. The split runs right through society, and even through the Handelsblatt editorial team. Compare, for instance, the view by our Brussels bureau chief, Ruth Berschens, to that of the political editor in Berlin, Thomas Sigmund. Ruth, channeling the people she meets in Brussels, likes the Scholz plan because it “would prevent more and more countries from falling into a downward spiral”. Thomas, channeling the folks around here, worries that German taxpayers will “finance unemployment in Greece, Spain and Italy,” and jeers that “Mr. Scholz apparently wants to become Europe’s paymaster.”
My two cents: If Germany can’t even stomach such a comparably small “concession” to the south, what will it ever agree to? Remember, the south originally wanted eurobonds and actual debt “mutualization”. If Germany and the north really won’t budge at all, then, as I argued in June, we must take the next logical step, and calmly talk about loosening or dissolving the currency union as it exists today.
Remember last month, when we told you that Siemens was close to snatching a huge contract to build Iraq’s power grid? We spoke too early. It now appears that The Donald made some calls to Baghdad, reminding the new government of the thousands of American soldiers who lost their lives in Iraq since the invasion of 2003. Now General Electric is suddenly the odds-on favorite to win the contract. Billions are at stake. Siemens boss Joe Kaeser (pictured) had personally pitched for the deal, and is apparently still trying to salvage it. Maybe it’s not all gone yet.
Tip of the hat to Germany’s spies, spooks and sleuths. You often don’t get much love in this country, obsessed as it is with data privacy and the memory of the Stasi and Gestapo. But nowadays you often save lives. Lots of lives. For instance, as we now know, you foiled a major attack by the Islamic State on a German music festival, an atrocity that had been in the planning for years. I don’t want to picture what would have happened without you. We don’t know your names. But please keep at it.
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