- Date 11 June 2018
Spiegel: Mr. Minister, have you complained to the chancellor yet?
Olaf Scholz: Why should I?
Spiegel: Angela Merkel recently responded to the proposals from French President Emmanuel Macron on reforming the eurozone, even though you are responsible for currency policy. Did you let the chancellor steal the show?
Scholz: Nonsense, Ms. Merkel and I developed the plans together over the past weeks. Now it is important to make progress in the negotiations. Ultimately, we in Europe need not only the approval of France, but of all member states.
Spiegel: Many people were rather disappointed by Merkel's suggestions. Macron spoke of a "refoundation of Europe," while Merkel merely listed numerous regulatory adjustments. Don't you think Merkel's reaction to the French president's initiative came across as a bit unambitious?
Scholz: Unlike France, Germany is not a presidential democracy in which the president simply makes a decree. For this reason, there cannot be just a single answer. We need to thoroughly expound on our position in interviews, talks and texts. Ultimately, this is about something important: the sovereignty of Europe, about our European way of life. By the middle of this century, about 10 billion people will live on the planet. If we want the voices of 500 million Europeans to still be heard, it will only be possible as part of the choir of the European Union. Putin, Erdogan and Trump present challenges to which no nation state can answer on their own - only a united Europe can.
Spiegel: Many Europeans have the impression that Brussels is already meddling in too many areas of daily life. Are you in favor of transferring even more power to Europe?
Scholz: The stories about Brussels' supposed regulatory zeal are utterly overblown. The problems have less to do with EU regulations pertaining to the curvature of bananas and more to do with the fact that the European Union hasn't developed a common strategy for coming to terms with the large numbers of refugees. People are angry about this. And that is the focus of Macron's proposals: Europe needs more flexibility to take action, especially in the areas that are crucial today - the protection of our external borders, immigration.
Spiegel: In this country, the question as to whether Europe should collaborate more closely on defense isn't particularly controversial. But Macron's proposals for the further development of the currency union are a different matter. Many Germans again have the impression that Paris again wants to get its hands on our money.
Scholz: Rubbish. Firstly, Macron has always emphasized that every country must first do its homework. Secondly, he is currently implementing exactly the kinds of reforms in France that have long been lacking there. And thirdly, he also points to the special role of Germany in Europe, a role, by the way, that will become more important with Brexit.
Spiegel: What do you mean?
Scholz: When the United Kingdom leaves the EU next year, the relative influence of Germany in the block will grow. Germany is the most populous, most economically powerful country in the EU and is located in the middle of the Continent. This implies a special responsibility. Ultimately, we shouldn't forget that for historical reasons, a considerable number of people in Europe are more likely to be fearful of such a strong position for Germany.
Spiegel: What follows from that?
Scholz: A special responsibility to Europe. German politics has a duty to ensure effective cooperation on our continent, to ensure understanding, compromise and good solutions. Europe is Germany's most important national interest.
Spiegel: In recent years, the widely spread view has been a different one. Namely that Germany is Europe's hegemon.
Scholz: I don't like that term, partly because it doesn't apply. Germany shouldn't just be interested in youth unemployment in many southern European countries, or in the security policy concerns of our neighbors in Eastern Europe, for moral reasons - but also because of well-understood self-interest. Sometimes, I'm concerned by a certain tendency to forget history: Countries like Portugal and Spain were dictatorships long after the end of World War II, and the Warsaw Pact only dissolved about 30 years ago. The European Union is a comparatively recent entity. For this reason, Germany should push forward projects to continue strengthening solidarity in Europe.
Spiegel: That sounds like additional cash flow from north to south.
Scholz: No, that's too simplistic. In social policy, the principle of self-responsibility applies first and foremost. Every eurozone member state should have functioning unemployment protection, a social safety net and appropriate minimum wages. Europe needs to tackle the issue of wage dumping and tax dumping in a determined manner. For that reason, it is also especially important for me that we align rules pertaining to corporate tax rates across Europe, so that big companies can't pit countries against one another. We also need instruments that can strengthen economic convergence.
Spiegel: Could you be a bit more specific?
Scholz: I'm in favor of supplementing national systems for unemployment insurance with a reinsurance for the overall eurozone. A country in the midst of an economic crisis that is resulting in significant job losses and placing a heavy burden on its social-security system could borrow from this joint reinsurance fund. Once the recession is over, the country would pay back the funds it borrowed. At the same time, all countries should make efforts that their safety nets are as prepared for crisis as possible.
Spiegel: And Germany bears the risk.
Scholz: No, Germany profits. The German Federal Employment Agency's reserves would remain untouched, and no debts will be communitized. The financial stability of the overall system will instead be strengthened, without disadvantages for the German unemployment insurance system. It's similar to how things work in the U.S. There, individual states fund unemployment insurance, but pay into a federal fund. In times of crisis, they can borrow money from it to better share the burden - without running into problems.
Spiegel: Among Merkel's conservatives, there will be many who criticize that as a further step into a "liability union." Do you seriously think you can implement such a thing?
Scholz: Among conservatives, many will remember Germany's successful economic stimulus efforts in the wake of the 2008 financial crisis. We were able to save so many jobs by way of our reduced-hours compensation program because we could access the reserves of the Federal Employment Agency, which we had set aside in good times. Why shouldn't we apply this same experience to the eurozone? In my view, we need further solidarity-based elements in the eurozone. Specifically, we should finally get around to implementing the financial transaction tax.
Spiegel: Good luck. Generations of finance ministers have tripped over that issue.
Scholz: We should take the French president at his word. Macron has raised the prospect that revenues from a tax of this type on all kinds of stock market transactions should flow into the EU budget if it is imposed in all countries. Brussels could, for example, use those revenues to finance development work.
Spiegel: Thus far, most countries in Europe have vehemently resisted the idea of allowing the EU to generate its own tax revenues. Do you want to break this taboo?
Scholz: If we don't just want to spout empty words about European sovereignty, then we need to draw the necessary consequences. In Germany, we have long been profiting from a federal tax system in which the federal government and the states decide on the arrangement together. A European financial transaction tax could be a first step to a similar process in Europe.
Spiegel: It seems unlikely that you would find a majority in the eurozone for such a proposal.
Scholz: I have a different view, because the idea of turning the tax into a source of European revenue hasn't previously been discussed. The timing is good for a project like this. In the EU, we are currently discussing the budget for the next several years, and there is a significant revenue shortfall because the UK's financial contributions will soon be missing because of Brexit. We are also discussing the creation of an additional fund for investments. As such, it makes sense in this context to consider whether funding for these efforts should be collected at the European level.
Spiegel: How much money do you think can be brought in by such a tax?
Scholz: For all of Europe, it could add up to between 5 and 7 billion euros. That is not enough on its own to cover the financial requirements, but it is a substantial contribution.
Spiegel: You could then add revenues from the planned EU digital tax, which would bring in an additional 5 billion euros.
Scholz: I think it's a good thing that we have launched a discussion as to how large internet-based companies can be made to stop evading the tax authorities. Through their use of these services and the relinquishing of their data, the citizens of Germany and other EU member states contribute to the immense profitability of these internet giants. It is right and proper to think about how the money these companies earn in the EU should be taxed. In this way, Apple, Facebook and co. could do their part in financing our community - just as companies in the real economy have been doing for a long time.
Spiegel: Do you intend to use the money to fill the investment fund announced by Chancellor Merkel? The tax revenues from those companies would certainly be enough to meet the level Merkel has suggested.
Scholz: Either way, we have a whole range of tasks to confront on the EU level that we can only take on together and all of which cost money.
Spiegel: For example?
Scholz: I am thinking of two areas, transportation infrastructure and digitalization. We need a massive investment in digital development so that we in Europe also have companies in the digital economy that can compete on the same level with American and Chinese companies.
Spiegel: Would it not help to consolidate the combine finance and economy ministers from the eurozone in a single "jumbo council" as Merkel recently proposed?
Scholz: As a Social Democrat, I have never believed in government-by-council. There is a tried-and-tested division of tasks among the European bodies.
Spiegel: The chancellor wants to further develop the ESM backstop fund into a European Monetary Fund. Such a fund could provide countries with shorter-term aid should it become necessary. What do you think of the proposal?
Scholz: As you know, I have been calling for such an instrument for quite some time. There are countries that actually have good economic fundamentals, but which could run into problems as a result of unfortunate circumstances and then no longer be able to borrow money on the market. We should help these countries. That makes the currency union stronger and scares speculators away from betting against the euro. The transformation of the European Stability Mechanism into a monetary fund based on the IMF model is something that we already agreed to in the coalition agreement. In my speech introducing the budget, I explained in the Bundestag how that can work and how a final insurance, a common backstop, can further strengthen the financial system in case of bank liquidation.
Spiegel: Germany and France are talking about strengthening the eurozone, but other countries are striking rather different tones. In Italy, a decidedly euro-skeptic government is preparing to scuttle all of the budgetary demands of the stability pact.
Scholz: I don't share your view. The citizens of Italy have pro-European attitudes, the euro is greatly valued.
Spiegel: In the population maybe, but not in the government.
Scholz: I believe the new Italian government willbehave in accordance with the euro and Europe, much more so in any case than many people in Germany currently expect. In the currency union, the principles of solidarity and individual responsibility need to go hand in hand. And if you don't want debts in Europe to be communitized or for the EU to turn into a transfer union, then every country needs to ensure the stability of its own finances. For Italian politicians, that means they must first determine how much room they have to maneuver. Everyone seeking to govern a country ultimately realizes that there is a complicated reality outside the doors of party headquarters.
Spiegel: The coalition made up of the Five Star Movement and Lega doesn't seem to accept this logic. Instead, they want to dramatically lower taxes and raise social spending, even though Italy is already struggling under a mountain of debt.
Scholz: The amount a country can afford is determined by its financial possibilities. And these are, in turn, limited by its revenues.
Spiegel: Italy is a large economy that cannot be easily called to order by Brussels or other member states. The Italians are already complaining about Germany's austerity diktats.
Scholz: I am also hearing from Rome that they will continue to collaborate on the European project. Look, in Germany there are 16 states with 13 different governing constellations. So, we shouldn't immediately get worked up when one government changes in a Europe that is still made up of 28 counties. It will never be the case that all member states march in the same direction. This diversity is one of our strengths. I recommend a bit more equanimity.
Spiegel: Mr. Minister, we thank you for this interview.