April 10, 2017
Nein, nein, nein, und nein
People always say that Wolfgang Schäuble is a European integrationist because of a paper he wrote in the 1990s - the Schäuble/Lamers paper. If you dissect his comments from Malta about the future of the eurozone, there is really not a glimmer of European spirit, if there ever was any.
FAZ offers a useful and long list of all the proposals Schäuble is rejecting. He says any institutional changes would require treaty change, and this won’t fly politically. The treaty change argument is indeed the German government's legal interpretation, but it is not universally accepted, not even among German constitutional lawyers.
Schäuble rejects Valdis Dombrovskis’ idea of a common eurozone budget, either for investments or for unemployment insurance. The Commission has already given up on unemployment insurance given Germany’s opposition. We think this is a shame, since it makes a lot more sense to harmonise unemployment insurance than to create yet another ineffective fund for investments. The whole idea is to have a cyclical shock absorber.
The reason Schäuble is opposed is the shift in competences from the ministers to the Commission and the European Parliament. This is why he is proposing a European Monetary Fund - a kind of strengthened ESM - because the ESM is an inter-governmental institution. Schäuble said any eurozone governance reforms had to be inter-governmental. He also backed the idea of a sovereign insolvency mechanism.
Schäuble rejects the idea of a permanent eurogroup chief after the departure of Jeroen Dijsselbloem. The paper writes that Schäuble wants an existing finance minister to occupy this office, which means that there will be no space for Dijsselbloem after the formation of the Dutch government. The Germans expect this to happen after the German federal elections in September.
Schäuble also rejects the idea of European Safe Bonds - the idea to bundle existing sovereing bonds into eurobonds - a proposal that will not be seriously discussed by ministers, according to Schäuble. The German government sees the danger of debt mutualisation through the back door. The problem of bank holdings of national sovereign debt has to be solved differently.
Schäuble also rejects the idea of a eurozone bad bank, as proposed by Andrea Enria. This was not a sensible proposal, he said. It would be better to create a secondary market for bad debt.
As we have been writing for several years now, there is no way the eurozone will achieve deeper integration without extreme pressure. The only thing we believe could persuade Germany to accept institutional reform is a credible threat by a large member state to exit. We see no fundamental difference between a CDU-led or and SPD-led government. On the contrary, if Schulz were to become chancellor, Schäuble would most likely remain finance minister and dictate the next German government’s financial policy. If Merkel wins, and the SPD came second, it is possible that the SPD would grab the finance ministry, but none of the heavy hitters, like Martin Schulz or Sigmar Gabriel, are interested in the job. And the SPD has other political priorities. The bottom line is that eurozone governance reform requires either a crisis, or blackmail, or both.