Germany is making its presence felt again, as the former "sick man of Europe" has come back as a "model" to be emulated.
But Germany, forced to find a solution to the European sovereign debt crisis and pushed to the forefront of the issue, appears conflicted and confused. We asked Gerhard Schroeder, the former German chancellor who promoted the reforms that laid the foundations for Germany's recovery, about the steps that Europe and Germany have taken and where they are heading.
Question: Some have indicated that Greece's accession to the euro zone was a mistake.
Schroeder: The decision to allow Greece's accession was made based on advice from the European Commission stating that the country met all the criteria. It would be pretty hard to go against that and say "wait" to the country that is the cradle of European democracy.
It was no problem to save Greece, which accounts for roughly 3 percent of the euro area's economy. But the mistake was at the beginning of the crisis, when governments thought it was just a Greek problem and were slow to respond, causing the danger to spill over to other countries.
Q: Germany has been heavily criticized for opposing assistance to other countries and making the crisis worse.
Schroeder: That used to be a valid critique, but not now. Germany eventually displayed solidarity with Europe. The firewall would not have been created without us.
Q: Has the crisis been contained?
Schroeder: We are charting the right course, with a new compact to tighten fiscal restraints and the 800 billion euro (83.307 trillion yen, or $1.043 trillion) firewall to prevent the crisis from spreading. Later there will be a need for reforms like those we implemented in 2003. Especially in southern European countries. We also need efforts to encourage growth, in addition to fiscal restraints.
Q: The reforms that revived the German economy are admired.
Schroeder: I'm pleased, because it shows that we made the right decision. It took time for the results to show up and in the meantime my party lost power. Even so, doing what's needed is a political responsibility.
Q: But some say that the seams have burst because Germany has already violated EU fiscal spending limits (requiring that fiscal deficits do not exceed 3 percent of gross domestic product).
Schroeder: Germany broke the limits twice, but at those times we undertook reforms that no other country in Europe was taking. People need to understand that it's impossible to be even more frugal while implementing structural reforms of that magnitude.
Q: If thrift alone cannot produce economic growth, is it inevitable that the compact will be violated?
Schroeder: We cannot change the fiscal compact, but I do agree with additional policies to stimulate growth. We can help southern Europe by using the European Investment Bank and a financial transactions tax.
Q: Can the German model be applied in other countries?
Schroeder: Not without carefully examining each country's circumstances and applicable conditions. Right now Europe faces a severe economic situation and reforms may very well create fissures in society. It's not easy. I wanted them to do this 10 years earlier.
Q: Employment instability is on the rise and inequality is spreading in Germany.
Schroeder: We have to fix that. We need further reform, like legally prescribing the ratio of female executives.
Q: Germany has inherited a leadership role in Europe, hasn't it?
Schroeder: The country with the strongest economy in the region cannot avoid a leadership role. The problem is how to carry it out. The leading country (Germany) has to find the middle ground, even if it goes against what you think.
* * *
Gerhard Schroeder was born in 1944. Long engaged in political activities for the Social Democratic Party while working as a lawyer, he became the prime minister of Lower Saxony in 1990. In the wake of a general election victory in 1998, Schroeder formed a coalition government with the Greens and became the chancellor of Germany. He began undertaking the Agenda 2010 structural reforms in 2003. Schroeder lost the 2005 general election and retired from politics.
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