Wednesday

23rd Aug 2017

Worst of euro crisis over, says German minister

  • For the German economy, the situation is 'better than expected', says Schaeuble (Photo: World Economic Forum)

Confident that France will "fulfil its obligations" and with Greece off the hook for now, Germany's finance minister Wolfgang Schauble has cast a glimmer of hope for 2013.

"I believe the worst is behind us," Schaeuble told the daily newspaper Bild in an interview previewed on Thursday (27 December).

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Economic projections show most of the eurozone will linger in recession next year, but Germany is likely to keep growing. "The situation is better than expected, also because trade with the US and Asia is picking up," Schaeuble said.

His comments come at the end of three years of intense drama over the survival of the euro during which several red lines were crossed with Greece. It was the first country to receive a bailout and the first to have a partial debt restructuring within the eurozone.

"The government in Athens knows that it cannot financially overburden other eurozone countries. So they are pushing forward with the reforms," Schaeuble said.

Earlier this month, the International Monetary Fund pressured Germany into accepting that Greece will need a further debt cut at the expense of eurozone governments in the coming years, but Schaeuble has managed to postpone such decision until after general elections in Germany next fall.

France falls in line

In his Bild interview, Schaeuble stroke an optimistic tone about France, the second-largest economy in the eurozone where Socialist President Francois Hollande has challenged the German austerity drive and sought to bring the public finances in order by increasing taxes rather than cutting pensions and wages.

"I am certain that France will fulfil its obligations," the German minister said. "The government is very much aware of the fact that every country has to permanently pursue reforms to remain competitive."

The International Monetary Fund on Wednesday repeated concerns about France falling behind Spain and Italy, where market pressure has forced the governments to decrease labour costs and make deeper reforms.

With Spanish exports rebounding, "pressure on France" is further increasing, Edward Gardner, the IMF director in charge of France told journalists in a conference call.

But Gardner also said it would be wrong for Paris to pursue harsh austerity measures in 2013, when growth is expected to be very feeble, even if this meant to slightly miss the EU deficit target of 3 percent of GDP.

This is in line with the IMF's latest change of course about the negative effects of too much austerity in recession-plagued countries like Greece, Spain and Portugal.

"Whether the deficit is 3 or 3.5 percent next year matters less as long as France can give reasonable and credible assurances about the direction of policies," Gardner said, noting that the EU commission has also signalled openness on this front.

As for the tax-hike policy Hollande has pursued, the IMF said there should be no further tax increases but rather spending cuts once the economy is back on a solid growth rate.

"We think that France is hitting a limit where there is very little scope for raising taxes further without dampening initiative and economic activity," Gardner said.

The message seems to have arrived in Paris.

"Over the next five years, there will be more cuts in spending than increases in taxes and that will bring in €60 billion,"French finance minister Pierre Moscovici wrote in the German business daily Handelsblatt.

He also sought to reassure the German public that his government is serious about bringing down the deficit to 3 percent next year and reducing the country's debt.

"In the past 30 years, France has not been able to pass a balanced budget. State debt rose to an unacceptable €1.7 trillion in 2011. It is our duty to reverse this," Moscovici wrote.

ECB unveils new €5 note

The ECB launched a new €5 note on Thursday with a topical joke on the crisis and British euroscepticism.

Airbnb too 'different' to pay EU tax

US home rental firm said its “model is unique” because most of the money stays in pockets of local people, as France and Germany prepare EU tax crackdown.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. US will ask Nato allies to send more troops into Afghanistan
  2. Greece to be absent at event on Communism and Nazism
  3. Czechs want observer status in Eurogroup meetings
  4. Putin sends EU-blacklisted ambassador to US
  5. Austria has begun checks at Italian border
  6. Slovenian PM: Brexit talks will take longer than expected
  7. Merkel backs diesel while report warns of economic harm
  8. UK to publish new Brexit papers this week

Stakeholders' Highlights

  1. European Jewish CongressEuropean Governments Must Take Stronger Action Against Terrorism
  2. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  3. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  4. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  5. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  6. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  7. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  8. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  9. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  10. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  11. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  12. ACCAAnnounces Belt & Road Research at Shanghai Conference