The best finance minister ever

What a great guy.  Wolfgang Schäuble is still in office, but we are already missing him. Germany’s greatest finance minister ever. One of the few genuine pro-Europeans in the Merkel government. A friend of the French. And of the Greeks.

The sheer hypocrisy of the farewell notes we have read in recent times about Wolfgang Schäuble is sickening. Among those are leading economists, maybe because they need to ingratiate themselves with the new powers, now that the SPD is departing the German government.

Have they forgotten how he managed to extricate the vast majority of German banks from the banking union? How he rejected the ESM as a backstop for the single resolution fund? How he continues to reject the principle of common deposit insurance? Or how he even expressed opposition to the ECB’s policy of quantitative easing?

Have they forgotten that Schäuble proposed a Greek exit from the eurozone, which did not happen only because Angela  Merkel overruled him? That he misled absolutely everybody about Germany’s willingness to accept debt relief?

The eurozone is today in a recovery – which has led some of the more feeble-minded economic analysts and journalists to conclude that the crisis is now well and truly over. But virtually none of the underlying issues have been resolved. The debt of several EU crisis countries is fundamentally unsustainable. Remember “kicking the can down the road”? Non-resolution was the policy. This is not our own caricature of what happened. In the chancelleries of northern European capitals, they are proud of it. Nobody more so than Schäuble himself. If you resolve a crisis, people may end up behaving as they used to. It is the permanent crisis that keeps everyone on their toes. Non-resolution is not a bug, it’s a feature.

As a parting shot, Schäuble gave us a non-paper, written by the finance ministry’s chief economist Ludger Schuknecht, which sets out a vision of a future in which the ESM takes over the economic management of recalcitrant member states and forces government debt restructuring as a quid-pro-quo for aid. While the world focused on the eurozone agenda of Emmanuel Macron, it was the Germans who drafted the true agenda. I have no doubt that this is the agenda that will ultimately prevail, maybe with some of the sharper edges a little blunted.

The irony is that Schäuble considers himself as pro-European. He really does. It would be more precise to call him a core-European, who supports a much smaller, deeper Europe with Germany in the centre. His vision of the EU is one based on German legal, economic, and ethical, principles. His is a hegemonic vision. I have met him on several occasions myself, and have consistently been impressed with his intellect. He has been the dominant figure of the eurogroup for the last eight years. He has been one of Germany’s most formidable post-war political figures, and almost became chancellor himself. He would have, had he not stumbled over an unfortunate party-donations affair, which was not really his deed but that of Helmut Kohl. I wish him the best of luck in his next job as president of the Bundestag. But we should be sufficiently honest with ourselves not to romanticise his tenure as finance minister. These were the worst years in the history of the eurozone – and part of the reason why the crisis did not end sooner were Schauble’s policies and his diplomacy.

When the history of the eurozone gets written, which is not going to happen for some time yet, Schäuble’s role will be subject to greater scrutiny. I suspect that scrutiny will come to a more nuanced conclusion than the sycophantic eulogies today.


2 thoughts on “The best finance minister ever

  1. One should not exclude the possibility that the perspective matters. Suppose all EZ Finance Minsters from the beginning of the Euro had been like Schäuble (including the French and German ones who violated Maastricht for the first time!), as well as the head of the ECB. Perhaps there would never have been a Euro crisis in the first place (even though there might have been less growth). If all EZ Finance Ministers from the beginning of the Euro had been like Schäuble, all those who now talk about debt mutualization, debt forgiveness, national bail-out’s, transfer payments, etc. might today be considered as irresponsible populists.


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