Saturday , 19 October 2019

Schaeuble’s euro charm offensive seems defensive

“The idea that Germans want to play a special role in Europe is a misunderstanding,” the German finance minister wrote last week in an op-ed that appeared in the Guardian and several other European newspapers. “We do not want a German Europe. We are not asking others to be like us.”

The article appeared shortly after Schaeuble went to Athens to “encourage” the Greeks to stay the course of painful austerity charted out by him and other euro EURUSD +0.25% officials. He praised the country’s progress and held out the carrot of 100 million euros in German aid for small businesses.

It may be that Germans don’t want everyone to be like them, but Schaeuble made it clear there is only one way to do things right, and that is the way Germany does it.

“We want a Europe that is strong and competitive, a Europe where we plan our budgets sensibly, and where we do not pile up more and more debt,” Schaeuble said in the op-ed.

Greek economist Yanis Varoufakis took apart Schaeuble’s op-ed point by point in a scathing commentary: “They removed all worker protection and turned unemployment into a norm, and they called it ‘reformed labor markets,’” Varoufakis, who teaches at the University of Texas, wrote in his blog. “They disbanded social security and reduced public heath provision to a cruel joke, and they called it ‘reformed social security’… They pushed investment into negative territory, and they called it ‘investor confidence.’ ”

Some European commentators referred to Schaeuble’s trip to Athens as a “charm offensive,” though Varoufakis was certainly not alone in finding it more offensive than charming.

In a radio interview in German before the trip, Schaeuble displayed more candor and less charm. He said he expected protesters to demonstrate during his visit to Athens, which, of course, is their democratic right.

After all, Schaeuble said, if you were told that you had to pass these austerity measures before getting European aid, it would be natural to conclude that others are to blame for your problems — and he “respects” that.

“One also doesn’t have to take that too seriously,” the finance minister told his German interviewer. “We have to do what our firm conviction tells us is best for Greece.” Listen to the radio interview (in German).

Schaeuble complains in the newspaper op-ed that critics in Europe often fall back on tired stereotypes, but it’s unlikely that condescending statements such as these will dispel the widespread perception of Germans as somewhat arrogant and know-it-all.

In the radio interview, the questioner notes that “experts,” including the International Monetary Fund, expect that Greece’s creditors will have to take another haircut, perhaps as early as this fall.

“No one who understands a little about the situation,” Schaeuble shot back, “is talking seriously about a further restructuring for private creditors.”

In the world according to Schaeuble, in short, everything is clear, there is no room for debate. Not everyone has to be like Germany, but they have to follow its rules.

So why does Schaeuble feel the need to clarify all this just two months before national elections in Germany that are expected to give Angela Merkel a third term as chancellor?

The finance minister appears to be seeking a balance between charm and toughness, to placate German voters who want to be assured of the latter while avoiding a crisis in Greece or anywhere else that would blow up the euro issue before the election.

The problem is that Schaeuble, who will be 71 when Germans vote on Sept. 22, has never had much charm, and what he has is wearing thin.

While there has been talk of Merkel softening her insistence on austerity in the euro zone after the German elections, Schaeuble’s new comments come down largely on the side of toughness and leave little room for a change of course.

Given the balancing act required of the German coalition as the campaign enters its final phase, Schaeuble’s PR blitz seems less a charm offensive than a defensive measure to head off any last-minute crisis on the euro front.

Darrell Delamaide

Market Watch

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