What is your assessment of the decisions the EU made over the weekend? Has the German Government tossed all of its principles out the window? Are we headed for a European economic government?
No, definitely not.
… and has the European Central Bank caved in to the politicians’ demands?
I strongly deny that as well. The ECB decided on its own to buy up government bonds and it also announced that it would not increase the money supply by selling off other bonds. This is an important message that also helps counter inflationary trends. We have put a safety net in place to protect our currency.
But will it be enough?
We have to learn the right lessons from this crisis. The German Government is working to ensure that the new European directive on stricter regulations for hedge funds is adopted by mid-May. It was the SPD-Greens coalition that first allowed hedge funds in Germany in 2004. We want to make sure that they cannot continue operating under the same lax regulations. Our goal is to curb excessive speculation.
But of course we also have to address the root causes of the speculation: too much new debt taken on by too many European countries within too short of a time period. We therefore also welcome the proposal by Olli Rehn, the EU Commissioner for Economic and Monetary Policy, to introduce a European “debt brake” modelled on the one in Germany.
Would it have been possible to avoid these rescue measures, if Germany had not blocked assistance for Greece?
No, it was absolutely right to prevent the assistance from coming in the form of a blank check. Without the austerity measures aimed at budget consolidation, providing cash to Athens would not have solved any of its problems in the long term. As it stands now, countries that want to take advantage of the protection provided by the safety net, have to take steps to consolidate their budgets.
Can policymakers keep speculation in check? Will they prohibit naked short selling?
Yes, we will. The last government limited the ban on speculative trading with shares you do not even own. We will re-introduce this ban. We will also go after speculative activity in the form of credit default swaps. A free market economy does not imply free reign, playing Robinson Crusoe or survival of the fittest. The state establishes a framework within which a market is free to develop prudently. Whether you’re buying and selling at the outdoor market in Bonn, or in the international financial markets, there are rules that have to be followed.
What is the status of the financial transactions tax that the Social Democrats support and that the CDU is now considering?
Well actually it’s being examined at the European level, but the International Monetary Fund supports a different proposal. The IMF thinks a “financial activities tax” is the better option because, in contrast to the financial transactions tax which can affect ordinary consumers and their savings, it targets those who are profiting from speculative activity.