Wolfgang Schaeuble: Germany ‘will do whatever it takes to defend the euro’

JOHN MACDOUGALL/AFP/GETTY IMAGES - German Chancellor Angela Merkel, left, listens to German Finance Minister Wolfgang Schaeuble during a session at the Bundestag lower house of parliament in Berlin in December 2011.

As Greece votes Sunday in an election that will shape Europe’s economic future, Wolfgang Schaeuble, Germany’s finance minister, remembers when decisions on the continent were made at gunpoint, not the ballot box.

Schaeuble, 69, a key ally of German Chancellor Angela Merkel, is one of the most powerful voices shaping Europe’s response to its economic crisis. For him, the European Union is not simply a pocketbook convenience but a project to avoid bloodshed. And through this crisis, he says, the bonds that tie Europe’s countries together can become even stronger.

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With Spain and Italy on the brink of needing full-scale rescues and Greece in open rebellion against the painful austerity diktats that came as a condition of its two bailouts, Germany is pushing for unprecedented steps to transfer sovereign power to the European Union in exchange for sharing the burdens of borrowing and spending. Germany — Europe’s most powerful economy — would shoulder much of the burden of such an arrangement, and Schaeuble may be his country’s most passionate proponent of doing so.

‘Whatever it takes’

“We will do whatever it takes to defend the euro,” Schaeuble said in an interview in the Reichstag, the home to Germany’s parliament that is itself a symbol of the tribulations of Europe’s 20th century. Russian graffiti covers many of its interior walls, left by troops who held the building in the waning days of World War II, and the building stands just feet away from what was once the Berlin Wall.

“If the crisis is severe, you will converge onto the solution faster. That’s the opportunity that lies in every crisis,” Schaeuble said, as staffers and parliamentarians preoccupied with Europe’s ailments bustled through the Reichstag’s vast halls. “Europe is complex, the decision-making as so often in democracies is not always swift, but that’s better than the old way of settling things here, by going to war with one another. . . . If needed, we can act very quickly.”

This is not the first time he has dealt with a crisis. As former chancellor Helmut Kohl’s interior minister when the Berlin Wall fell in 1989, he led the heady and complex work to reunite East and West Germany. But nine days after unification in 1990, a would-be assassin’s bullet left him paralyzed from the waist down. He returned to work just six weeks later, in a wheelchair.

For years, Schaeuble (pronounced SHOY-bleh) waited in the wings for Kohl to retire so that he could become chancellor. But Kohl never did; instead, his popularity plummeted, and his Christian Democratic Union was voted out of power in 1998. Schaeuble took over the party, intending to mount a new challenge for his country’s top job. Instead, a financial scandal in 2000 forced him to hand over the reins to Angela Merkel. Many said he was just the loyal fall guy.

When Merkel won the chancellery in 2005, she made Schaeuble her interior minister, his hair by then gray and thinning. He took over the finance minister’s job in 2009, just weeks after Greece set off the euro crisis by acknowledging that it had vastly understated its budget deficit.

In the 21 / 2 years since, Schaeuble has become the gregarious face of Germany’s response to the crisis, loyal to Merkel but less weighted than she is with the burden of leading a political party. Merkel’s response to Europe’s crisis has been incremental, cautiously gauging domestic opinion before announcing anything new. Schaeuble has called for more sweeping measures, including a directly elected E.U. president, that would strengthen the central power of Brussels.

Good cop, bad cop

At times, he has played the bad cop, especially on Greece, questioning, among other things, why the yachting class hasn’t made more sacrifices, why the country was in such a hurry to hold elections and whether Greeks would keep their commitments.

Although Schaeuble has always expressed sympathy with Greeks who are bearing the brunt of the economic reforms, his comments in February drew an angry response from Greek President Karolos Papoulias, 83, who fought the Nazis as a member of the Greek resistance.

“Who is Mr. Schaeuble to insult Greece?” Papoulias said at the time.

No short-term plans

Schaeuble and Merkel say they would be happy to have Greece in the euro zone but that the currency union would survive without it. They say that they have no new short-term measures up their sleeves and that others are overestimating Germany’s resources when they ask it to supply cash to end other countries’ financial difficulties.

Schaeuble and Merkel speak daily for at least 10 to 15 minutes, his advisers say. Although they were spotted together in April at a movie called “Pretty Much Best Friends,” they call each other Frau Merkel and Herr Schaeuble, and their decades-long working relationship has never blossomed into friendship.

“It’s not like in the Anglo-Saxon world where you call everyone Wolfgang and Angela,” Schaeuble said. “We have good relations, but of course we are different by age, by behavior. But the fact that we know each other for quite some time now is a good basis for trustful and respectful cooperation, as well.”

Merkel, a physicist who grew up in communist East Germany, was born almost a decade after the end of World War II. Schaeuble, a lawyer from the southwestern corner of Germany, just over the border from France, was born in the middle of the fighting, the only member of Merkel’s cabinet to have that distinction.

“That affects everything he does,” said Hans Peter Schuetz, the author of a forthcoming biography of Schaeuble.

“He is, by far, the most pro-European politician in the government, and perhaps in German politics,” said Joerg Asmussen, a board member of the European Central Bank who, until last year, was one of Schaeuble’s top deputies at the Finance Ministry.

And Schaeuble has studied how other countries faced their own problems, a few weeks ago reading the memoirs of former Treasury secretary Henry Paulson — although many in Germany look at the U.S. deficit and debt levels and say it’s not for them.

Lessons learned

Instead, the lessons of Germany’s reunification — which Germans in the former west are still paying for through a “solidarity” surcharge on their taxes — reverberate in policymakers’ understanding of the current crisis. Schaeuble said that East Germany was less like Greece and more like the relatively better-off members of the former Eastern Bloc, such as Poland and the Czech Republic. But the massive transfers of money from west to east — and the commitments that East Germans made in return, along with the difficulties that ensued — still echo through the finance ministry.

“Reunification was a big, fat transfer union,” said Markus Kerber, chief executive of the Federation of German Industries and a longtime Schaeuble confidant. East Germans “knew the future was where they would find jobs. And jobs are where capital is being invested and deployed. This is the truth they already know, deep, deep down, about the European monetary union. More capital needs to go to the peripheral countries, without being denounced as a transfer union.”

Schaeuble says he remains confident that Europe will make it through the crisis.

“If we stick to the decisions we have made, if we implement them, if markets see that, yes, the Europeans are delivering on what they decided, we will convince investors,” he said.

 
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