April 11, 2017
What to expect, and not expect from Schulz
It has been our experience that the only thing capable matching the promise of a German Social Democrat in opposition is the disappointment of a Social Democrat in government. We got a glimpse of a future chancellor Schulz yesterday at his first press conference with foreign journalists who noted with horror that Schulz is still committed to the stability and growth pact. How could this be otherwise, since Germany has an even stronger constitutional commitment to a balance budget over the economic cycle - a rule change that was proposed by an SPD finance minister?
What struck us as interesting is that Schulz now sees eurobonds as irrelevant because of the ESM. That is mildly surprising, given his strong support for eurobonds in the past. And it misses the point of why eurobonds are necessary for the stability of the eurozone in the long run. We were also interested to hear about his denial of the 2% Nato defence spending commitment. He said Germany would have to grow its defence budget €20bn or more each year for the next few years, which was too big a financial burden. We haven’t heard a "can’t pay, won't pay" line out of Germany for a while. We are looking forward to the moment when chancellor Schulz explains his deep thinking on this issue to Donald Trump.