One of the more surprising announcements of support for a bailout of Greece comes from none other than Theodor Waigel, the former German Finance Minister who invented the Stability and Growth Pact.
While Greece was able to successfully roll over debt today, there still will come a time when they may need financial support. This revelation should give a big shot in the arm to bailout boosters.
He is definitely one of those critically involved in the introduction of the euro. During his time as Finance Minister, Theo Waigel set the rules for the common currency which should have ensured its stability. These include the independence of the European Central Bank as well as the Maastricht criteria which a country must meet to be included in the euro club.
And the no-bail-out clause – the prohibition of bilateral financial support between euro countries – falls into this category. Nevertheless, Waigel is no longer insisting on unconditional compliance with this clause. “I myself introduced it, but today I also say: it must not serve as a holy grail [Monstranz],” said Waigel as a speaker at a conference of financial service companies, the Money Service Group, in Frankfurt.
He referred back to the period before the introduction of monetary union when the majority of EU countries were connected via the so-called European Monetary System (EMS). In the 90s, this system repeatedly ran into considerable turbulence. In 1992, the UK was even forced to exit from the EMS after the financial markets – above all the famous speculator George Soros – speculated against the pound and forced central banks to their knees.
“At that time, the Bundesbank had to spend billions to prop up the others,” said Waigel. The central banks of the EMS countries were obliged to make sure that their currencies fluctuated only within a narrow band. With this as background, the prospect that Germany and other countries may now support Greece appears in a different light.
Waigel makes two other points worth mentioning. The first is one I have mentioned in the past as well.
However, Waigel also had quite a few critical words at hand for his successor. It was a mistake that once Germany and France had problems with the Maastricht criteria, to softens them. The upshot is that now the smaller countries also insist on more lenient treatment.
Exactly right. what’s good for the goose is good for the gander. But his next comments are also telling about the IMF and the resistance to its involvement in the Greece situation, especially given some recent comments by Nicholas Sarkozy and Christine Lagarde about the ‘Anglo-Saxon’ model.
And he has some advice: “A single European banking regulator is mandatory,” he says. It is the only way for Europe to be independent from the U.S. model and set a counter of our own to it.
Whenever you hear the term ‘Anglo-Saxon’ or the phrase ‘U.S. model’ in France or Germany, it is a code for ‘the wild west capitalism that we don’t want here in our more egalitarian society that people like Josef Ackermann of Deutsche Bank is trying to insert into our culture.’ It almost always means something bad.
So, you have Waigel saying:
- We supported Greece and other nations before. I should know because I invented the rules. Let’s do it again.
- [Former German Chancellor] Schroeder was foolish. He gave all comers a green light for this kind of thing. What did you expect from the Greeks?
- Above all, the European system is important. Don’t let it fail. We need to set a counterbalance to the Americans and their alien wild west culture and exorbitant pay and risk approach to finance.
Waigel carries a lot of weight. If he is saying this, I anticipate these three points will become a narrative around which those in Germany who want a bailout for Greece will rally.
Theo Waigel wittert Komplott gegen den Euro – Die Welt
Originally published at Credit Writedowns and reproduced here with the author’s permission.