Wolfgang Schäuble

The Carrot Without the Stick

Schauble mikes DPA
Wolfgang Schäuble, Germany's finance minister, is known for tough talk and a hard line against Greece. But some doubt he will push the country out of the euro currency.
  • Why it matters

    Why it matters

    As finance minister of Germany, the euro zone’s largest economy, Wolfgang Schäuble, has the power to decide on Greece’s position in the single currency area.

  • Facts


    • Mr. Schäuble, a member of Chancellor Angela Merkel’s ruling conservative party, has been finance minister since 2009.
    • In 2012, Mr. Schaüble had been planning for a potential Greek exit from the euro area, then-U.S. Treasury Secretary Timothy Geithner has written in his memoirs.
    • A European Union with a “strong center” has been Mr. Schäuble’s political goal for more than 20 years.
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In the summer of 2012 when global financial markets were betting that Greece would bring about the demise of the euro zone, then U.S. Treasury Secretary Timothy Geithner jetted to Germany to discuss the matter with his counterpart, Wolfgang Schäuble.

To the American’s shock, Mr. Schäuble told him many in the European Union were willing to kick Greece out of the currency union and Germany was making plans to safeguard the financial security of remaining euro members in the case of a Grexit.

Mr. Geithner concluded Germany was dead serious about the booting Greece from the single currency, he would write in his memoirs.

Two and a half years after this encounter, the question of whether Mr. Schäuble favors a Grexit is more crucial than ever.

The new leftist Greek government last month narrowly averted a bankruptcy with new reform promises and an extension of its loans.

But new debt repayment deadlines are approaching, and there is talk of Greece needing another credit extension by this summer.

The euro zone — and perhaps the single currency itself — is by no means out of the woods yet.

Rules are important in the world of Mr. Schäuble. They are necessary for peaceful coexistence of the nations.

Asked about the future of the single currency, Mr. Schäuble typically gives a politically correct answer.

His standard reply is that he wants none of the 19 countries to leave the currency union. Which is why he recently supported approving Greece’s latest aid extension. But in closed-door negotiations with the Greeks, Mr. Schäuble is frequently annoyed, even confrontational.


Schauble and Varoufakis DPA
Sharing a laugh with Greek Finance Minister Yanis Varoufakis. Privately, the two men have reportedly not minced words over Greece’s future in the euro. Source: DPA


The carrot-and-stick approach is tactical, designed to keep the Greeks in line and off balance. But some of Europe’s other finance ministers doubt whether the warhorse of German politics, one of his country’s most unexpectedly charismatic and inspiring leaders, will follow through on his threat.

Mr. Schäuble’s predecessors in the finance ministry used to focus on mundane issues such as budget cutbacks, value-added tax revenue and tax benefits for married couples. Mr. Schäuble, 72 and feisty as ever, has long left such banal issues behind.

He has mutated into some sort of super minister for all-European questions. When he’s in India, the United States or China, he doesn’t only represent Germany, but Europe.

A former top aide and chief of staff to German chancellor Helmut Kohl in the 1990s, Mr. Schäuble has morphed into a national symbol of  German grit and perservance as the longest-serving member of the Bundestag. He has been confined to a wheelchair since October 1990 after he was shot three times by a psychologically disturbed attacker during a campaign appearance in southwest Germany.


German outperformance GDP Greece Greek Euro Zone change in percent 2008-2016


The most influential member of Germany’s Christian Democratic Union party aside from its chancellor, Angela Merkel, Mr. Schäuble has projected his gruff, irascible profile lately across much of Europe, as his nation’s economic and political clout has grown on the continent.

Germany today is by far the economically strongest country in the currency union, and is contributing the most towards the €240 billion rescue package provided to Greece. That alone makes the German finance minister more important than his Italian or Spanish counterparts.

In the final stage of his career, Mr. Schäuble is finally getting the attention and respect denied to him earlier in his lengthy career. He was supposed to become Germany’s president and eventually didn’t; he wanted to become chancellor and wasn’t allowed to, outmaneuvered by an even fleeter-footed political survivor, Ms. Merkel.

When he took over the finance ministry at the peak of the euro crisis in 2009, hardly anyone thought him capable of filling the post. Mr. Schäuble, a lawyer who speaks English with an almost stereotypical German accent, seemed the wrong candidate for the sparkling world of high finance, ill-suited for the unrelenting travel and jet-setting required of the job.

Defying all expectations, Mr. Schäuble has not only settled into this new world, but thrived in it.

He is friends with Christine Lagarde, the French head of the International Monetary Fund, and Mr. Geithner is still fond of him, despite their different policy views. Mr. Schäuble is a dominant influence within the eurogroup of finance ministers; hardly anything can be decided without a green light from the German.

The idea of a finance minister for Europe stems from his time as his party’s leader in the Bundestag in 1994.

Back then, he co-authored a paper that claimed Europe would break sooner or later without a “strong center.” That is why, according to his analysis, a “steadfast inner circle of countries willing to promote integration and to cooperate” should lead the way. This nucleus might include countries “willing and able to comply with the requirements.”

At some point, Mr. Schäuble seems to have decided that Greece no longer meets these requirements. He was supposedly already in negotiations with former Greek Finance Minister Evangelos Venizelos about a Grexit. Mr. Venizelos reportedly was against it.


Greece Greek gov debt in percent and in billion of euro-01


Wolfgang Schäuble has viewed the euro crisis as an opportunity to create stronger ties between countries in Europe. His response to the crisis has been to attempt to blanket the continent in new rules – for banks, for companies, for national budgets.

Rules are important in Mr. Schäuble’s world.

They are necessary for the peaceful coexistence among nations, he has often said.

The German’s worldview is conservative. Man is fallible, and that imposes obligations on politicians to order the world. In Mr. Schäuble’s view, economists are wrong to assume that they can battle debt by issuing more debt, just because theoretical models suggest they can.

For him, common sense is a better guide in times of crisis than abstract economics. This might be the reason why there are hardly any economists on his own team anymore. His most important advisors are lawyers, just like himself.

If someone dares to disagree with Mr. Schäuble, it can end badly.

Like it did for Michaelis Sarris, the Cypriot finance minister. To circumvent the severe austerity measures Mr. Schäuble wanted to impose on Cyprus in exchange for a credit line, Mr. Sarris flew to Russia to find other sources of money.

But Mr. Schäuble had anticipated the move, and instructed his Russian colleague Anton Siluanov to deny funds to Cyprus. That’s how party leaders make members toe the line – or in this case, how Europe’s enforcer, Mr. Schäuble, makes renegade states toe the line.

But whenever he had the chance to be really tough, Mr. Schäuble in the end relented. Because Angela Merkel said so.

Mr. Schäuble, the great European, is also Mr. Schäuble, the strict European.

More power for the European Commission, the direct election of the council’s president, a referendum on the European constitution – that is how he envisions Europe. And that can only work if no one deviates, because in Mr. Schaüble’s view, it’s the only way to make it acceptable to the German people.

Greek Finance Minister Yanis Varoufakis is currently feeling Mr. Schäuble’s wrath. Mr. Varoufakis is waving a red flag in fron of Mr. Schäuble’s eyes by asking for a debt haircut and easing of austerity.

If Mr. Varoufakis has his way, then that would be a personal defeat for Mr. Schäuble.


Schauble Austria Slovenia DPA
As Germany’s influence in Europe has grown, so has Wolfgang Schäuble’s. Here, with the finance ministers of Austria and Slovenia, two other euro-zone countries. Source: DPA


But whenever he has had the chance to be really tough, Mr. Schäuble has relented.

Because Ms. Merkel — perhaps the only person to whom he is unconditionally loyal — has said so.

Ms. Merkel has stood by her finance minister through thick and thin, even during the peak of the financial crisis, when Mr. Schäuble was briefly hospitalized for several weeks and some in his own party began calling for his resignation.

But Mr. Schäuble is probably likely to cave in to Greece because he knows that the inner circle of Europe — his lifelong dream — can easily unravel quickly at a time when Russia is more than ready to console the offended and humiliated.

Soon, the next round of money for Greece must be approved.

Mr. Schäuble will complain, declare Greece’s reform promises to be insufficient – and in the end, sign on to the deal, as he always does.

This article originally appeared in weekly newspaper Die Zeit. To contact the author: mark.schieritz@zeit.de.

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