The Wall Street Journal (WSJ) recently conducted an interview with Wolfgang Schäuble, the Finance Minister of Germany. Germany is a key player in determining the future direction that Europe will go in since it is the wealthiest European country and perhaps the most influential country when determining what direction the European Central Bank (ECB) will go in.
- A key reason why the ECB has not engage in a massive money printing campaign to lessen the burden on heavily indebted European countries is that Germany is highly reluctant to deal with this crisis with money printing. Some experts see an ECB-led massive money printing campaign as the solution to the sovereign debt crisis, but Germany isn’t willing to see if that is true because they fear the possibility of it stoking inflation.
The WSJ reporters asked Wolfgang about the current sovereign debt crisis in Europe and asked him what impact the current crisis might have on the future direction of Europe, particularly fiscal union (the unification of tax and spending policies and a key step towards creating political union-a United States of Europe so to speak). Wolfgang responded that this current crisis will bring further unification in Europe eventually:
“We will certainly have to learn lessons from it. Sometimes it takes crises so that Europe moves forward. In this crisis, Europe will find steps toward further unification. It isn't easy. You can't just command European states and their populations. We have learned democracy – even we Germans, belatedly – and it means the people are sovereign. You have to respect that. You have to win majorities”.
Wolfgang also mentioned in the interview that Germany will do whatever it takes to defend the Euro. Another WSJ article suggests that “whatever it takes” might mean “deeper economic union” in Europe.
Reading the interview I got the impression that Germany would reluctantly accept a move towards fiscal union if they have no other alternative. Germany wants to preserve the Euro because it enables them to enjoy the benefits of a relatively low-value currency (i.e. a great export industry) (if the Deutsche Mark was still around as the currency of Germany it would be worth significantly more than Euro and thus would make the prices for German goods more expensive). Fiscal union appears to be the option of last resort for Germany... they’ll exhaust every other option before they agree to it.
The crisis is still ongoing so it remains to be seen whether we actually see Europe become even more united as a result of the crisis. My sense after reading the comments of Germany’s Finance Minister remains that it is more likely that we see more European unification as a result of this crisis than a complete breakup of the European Union.