New bailout won't lead to 'transfer union', says Schaeuble
Published 01/08/2011 | 05:00
Aid package being provided to debt-stricken Greece in a second bailout
GERMAN Finance Minister Wolfgang Schaeuble has denied that the latest Greek bailout deal paves the way for a future 'transfer union' in which eurozone countries are liable for each other's debts.
Mr Schaueble's remarks, in a newspaper interview published yesterday, is another attempt to reassure conservative political colleagues that a new eurozone rescue fund will not have 'carte blanche' to buy bonds of states in difficulty.
Bundesbank president Jens Weidmann warned last week that the €109bn aid package for debt-stricken Greece weakened incentives for eurozone countries to maintain solid finances and led toward a fiscal transfer union.
"I don't like the term as it only leads to misunderstandings and has nothing to do with the outcome of the summit," Mr Schaeuble told the 'Frankfurter Allgemeine Sonntagszeitung'.
"We are not harmonising interest rates. We are not collectivising debt risk. We are creating effective crisis mechanisms -- nothing more and nothing less. The requirement to make savings, which is tied to the aid, exerts a disciplinary effect on the states that receive it."
Economy minister Philipp Roesler has encouraged German firms to invest in Greece, likening the opportunities to those in Poland after the fall of communism.
Mr Schaeuble, who does not get on well with his counterpart in the economics ministry, offered a different analogy.
"Greece now has the toughest job to do," he said. "Just ask people from the former East Germany what it's like to suddenly face the competitive pressure of being in a common currency area."
After German reunification in 1990, and the conversion of their currency at a greatly overvalued exchange rate to the mark, regions formerly in East Germany suffered massive unemployment as high costs and wages meant firms were unable to compete with their more productive western counterparts.
Twenty years later, and after billions of euro in subsidies from the former West Germany, eastern regions are still noticeably poorer.