European Luminaries Reflect on Euro: ‘Seventeen Countries Were Far Too Many’

Former German Chancellor Helmut Schmidt and former French President Valéry Giscard d’Estaing are two of the leading architects of the European Union. In a SPIEGEL interview, the veteran statesmen discuss the causes of the euro crisis and the lack of vision among today’s European politicians.

Seldom have a German chancellor and a French president seen eye to eye on so many economic and fiscal policy issues as Helmut Schmidt, 93, and Valéry Giscard d’Estaing, 86. During their terms in office, which began in 1974, both had to deal with the oil crisis, stagnating economic growth, rising inflation and unemployment. After the demise of the Bretton Woods international monetary system, in which the dollar served as the world’s key currency, they strongly advocated the introduction of the European Monetary System (EMS), with stable yet adaptable exchange rates and the European Currency Unit (ECU), as the standard unit of account.

In 1975, their efforts also led to the founding of the Group of Six (G6), which consisted of the world’s leading industrialized countries — France, Germany, Italy, Japan, the UK and the US — which met once a year for a global economic summit. After they were voted out of office (Giscard in May 1981, Schmidt in Oct. 1982), they both remained true to their European ideals. In 2001, Giscard was elected chairman of the European Convention, which was tasked with drafting a constitution for Europe. To this day, the two statesmen have maintained a close friendship.

SPIEGEL: Over 30 years ago, you both initiated the establishment of the European Monetary System, which was a decisive preliminary step toward European monetary union. Now, as elder statesmen, do you have reason to fear that you will live to see the collapse of the euro?

Schmidt: The euro will, of course, still exist a few years from now. I am certain that it will outlive me. It could be that it outlives us all, and that is what I assume will happen.

Giscard: The euro will certainly be around longer than us. Your question is interesting because it is highly unusual. Why don’t you ask for instance whether the US dollar will still exist in a few years’ time, or the Japanese yen or the Chinese yuan?

SPIEGEL: The difference is obvious: These are the national currencies of large countries and economies.

Giscard: The euro is the currency of a region that has less debt than the dollar zone, a huge trade surplus and a well-managed central bank. Its current exchange rate to the dollar is above the introductory exchange rate in 2002. Why all the doubt?

Schmidt: Every day some kind of doubt is sown. But the euro as such is not in jeopardy. There is no reason why it should cease to exist.

Giscard: We are the victims of a smear campaign that has its origins in the American banking system. We are in the middle of a communication battle that is fueling speculation.

SPIEGEL: The euro zone lacks political and economic uniformity. How can a union with such diverse members endure?

Schmidt: When the Maastricht Treaty was signed in 1992, the EU had 12 member states. And these 12 made the mistake of inviting everyone in Europe to join, and even to become a member of the monetary union. The currency wasn’t actually born until 10 years later. Now, the EU has grown to 27 members, the majority of whom decided to adopt the euro.

SPIEGEL: Was that the common currency’s birth defect, if you will?

Schmidt: Not the only one. It was a mistake to invite 27 countries and subsequently accept 16 or 17 of them.

SPIEGEL: Are 17 still too many today?

Schmidt: In any case, 17 were far too many.

Giscard: To be perfectly frank, it was a mistake to accept Greece. Greece simply wasn’t ready. Greece is basically an Oriental country. Helmut, I recall that you expressed skepticism before Greece was accepted into the European Community in 1981. You were wiser than me. The Euro Group cannot be allowed to expand endlessly.

SPIEGEL: Do you favor a freeze on new memberships in the euro zone?

Giscard: I hope that we won’t be so quick to accept any additional members — perhaps with one exception: Poland. I am confident that this country has the capability and the willingness to take this step. That could work. But we cannot accept anyone else.

Schmidt: That is also my opinion.

SPIEGEL: Were the founding member states too naïve in Maastricht?

Schmidt: The governments were spoiled by the fact that the preceding European Monetary System had worked relatively well. They thought that things would work out similarly with the euro and that everything would sort itself out. They overlooked the fact that this also requires making economic agreements and coordinating economic and fiscal policies.

SPIEGEL: There were quite strict conditions placed on membership. Limits were placed on budget policy and government debt.

Schmidt: The Germans didn’t look closely enough. They were busy with German reunification. As far as they were concerned, there was no European problem. They faced the necessity of unifying the former East Germany with the existing West German economy. This has succeeded to some extent, but it has been a struggle.

Giscard: It is not as if no provisions had been made. It is simply that nothing was done. The problem was not the text of the treaty, but rather its non-application. That is a curious development. The European Commission, which is tasked with monitoring compliance, did not do so for a long time and issued no sanctions. This absolved the governments of all risks. They were able to spend money hand over fist with no fears of devaluations or financial penalties.

SPIEGEL: Back when the monetary union was established, should they have also immediately pushed through a political union?

Schmidt: That is going a bit too far. A political union is not absolutely essential to overcoming the government debt crisis, the bank crisis and the economic crisis, in other words, the three-fold crisis that we currently face in Europe. Over the medium term, it is entirely desirable, but it is not a conditio sine qua non — in other words, something that we absolutely need in order to emerge from the current three crises.

Giscard: The Euro Group simply doesn’t have the organization that it needs. We have to stop mixing up the large European Union with the smaller monetary union. It is not possible for all 27 EU members to constantly intervene when the 17 euro-zone members discuss their concerns. They don’t speak the same language in both circles.

SPIEGEL: Does the Euro Group need its own institutions that function in parallel to those of the EU? After all, it already has a chairman, Luxembourg Prime Minister Jean-Claude Juncker.

Schmidt: It would have been desirable to give the Euro Group its own staff in addition to a chairman from Luxembourg. This need has been neglected.

Giscard: Of course, one needs institutions — how else can the fiscal and economic policy coordination be expected to work? When the Euro Group meets under Juncker’s chairmanship, there is not even a secretary general, not even a written record of the meeting. That is absurd. The Euro Group council needs its own structures, independent of the large European Council. For some time now, a decision has been pending on the successor to Mr. Juncker as chairman of the Euro Group. This is an incredibly important position. It may even end up being a German. In addition to him, a secretary general should definitely be appointed to stand by his side. Every council in the world has a secretary general.

SPIEGEL: Doesn’t this run the risk of creating a big institutional mess?

Giscard: On the contrary, it is precisely the confusion between the 27 EU member states and the 17 members of the monetary union that has to be avoided. That is why I am urging that the small euro council should meet in Strasbourg, not in Brussels. The summit venue should make the distinction clear.

SPIEGEL: Wouldn’t both camps then irreversibly drift apart?

Giscard: There is already a Europe of integration, which is more or less rapidly making progress: the Euro Group. And there is the Europe of the internal market, with the countries that are only interested in the EU as a free-trade zone. The institutions of one are too unwieldy for the other, and unwieldy institutions are powerless. In the Euro Group, there are those who pay, and there are those who seek aid. Those who pay should also monitor those who submit applications for assistance. It doesn’t work with the European Commission, which is responsible for the entire union.

Categories: Economics, Europe, France, Germany

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