The World

I hope it is not a breach of etiquette to criticise a guest writer in the FT. But I thought that the piece in today’s paper on the euro by Wolfgang Schauble, the German finance minister, was extraordinary. If this really is how Germany is thinking, the euro is in even bigger trouble than I thought.

Behind the careful bureaucratic language, Schauble makes some amazing claims and proposals. Here are just a few.

“All eurozone members must return to adherence to the stability and growth pact as rapidly as possible.” This is just hypocrisy. I was living in Brussels when the pact was gutted the first time – because Germany and France were unable to keep within the 3% deficit limit.

Schauble also seems keen to resurrect the main feature that made the stability and growth pact lack credibility in the first place: the notion that countries that are running out of money need to be shocked back onto the path of virtue and prudence by being fined – a move that would obviously worsen their financial plight. This proposal surfaces twice in this morning’s piece. First, Schauble proposes that countries with excessive deficit “should not recieve EU cohesion funds” (regional aid). Then he suggests that countries that apply for “emergency liquidity aid” from a European Monetary Fund should be hit with immediate “monetary penalties”, which should be enforced “without any recourse to reclaim the fine”. So, essentially, countries would be given emergency financial aid with one hand, and then hit with swinging fines with the other. This is Alice in Wonderland logic.

Schauble suggests that malefactors should lose any say in how the eurozone is run, by “suspending an un-coperative member state’s voting rights in the Eurogroup.” But how will a country (Greece for the sake of argument) feel about being a) fined, b) forced to slash social spending and c)deprived of its voting rights. Might that not feel a tiny bit like colonisation?

Could it be that Mr Schauble might actually want to convince the Greeks and other potential malefactors that the cost of staying in the euro-area is prohibitive? For chucked in amongst the ritual assurances that “there is no alternative to monetary union”, the German finance minister actually raises an alternative – weak countries should be forced out of the euro. He writes – “Should a eurozone member ultimately find itself unable to consolidate its budgets or restore its competiveness, the country should, as a last resort, exit the monetary union.” Not could, you note. Should.

This feels like a significant moment to me. The German government is essentially proposing chucking weaklings out of the euro.

There is an underlying edge of hysteria in the Schauble piece. My favourite line in the whole article is when, after firing off a series of proposals of increasing radicalism, the finance minister pauses for breath and writes – “Greater calm is needed.” Yes indeed. Not least in Berlin.