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Informative Program for Latin American Financial Politicians about the “Euro Crisis”

Berlin and Brussels

There is almost no other topic that causes so much unrest to Germans than the debt crisis in the Eurozone. Our international counterparts also worry about Europe and want to learn how to better assess local developments. Therefore, the Friedrich Naumann Foundation for Freedom invited a group of delegates from the Latin American Liberal Network (RELIAL, for its Spanish acronym), comprised by liberal parties and think tanks, to visit Brussels and Berlin for a discussion about the Euro and the crisis impacting the European institutions. The group of high-ranking parliament members was composed by, among other, Ricardo López Murphy (former Minister of Treasury and presidential candidate from Argentina) and Gabriela Núñez (former Minister of Treasury and chairwoman of the Honduran Central Bank), as well as congressmen representing national and regional parliaments from Guatemala, Nicaragua, Paraguay, Brazil, and Argentina.

After a successful agenda carried out in Brussels, participants held discussions in Berlin with congressmen and representatives from several ministries and banks.

Dr. Alexander Groß, Division Director at the Federal Ministry of Economy and Technology, described the reasons why, compared with other European countries, the economic scenario in Germany evolved so positively. Reforms in the labor market and a responsible behavior from the social partners enabled the currently high competitiveness, especially in the small and medium-sized enterprises. Groß highlighted that a growth rate is not the only decisive indicator for a country’s success, but its economy’s nature and stability. In this case, Germany also benefits from the dual education system; therefore, when compared with other nations, the unemployment rate in the youth segment is low and some federal states in Germany even record a manpower shortage. Regarding the Euro crisis showing a high indebtedness rate and high state budget shortfalls in Eurozone countries, Groß stated that the underlying and concurrently causative problem lies in those nations’ lack of competitiveness.

A critical picture regarding the current situation was drafted by German congressman Frank Schäffler (Free Democratic Party, FDP). The initiator of the FDP member decision sees no possibility for Greece to become competitive as a Eurozone member. The high indirect liabilities of Germany’s balance of payments to the European Central Bank (ECB) and, therefore, to countries such as Greece, Spain, and Italy, entail a complex problem. Schäffler considers that the principle of surety liability of the market players has been interrupted and demanded a return to a surety liability policy that constitutes the basis and operational condition of every market economy. Schäffler fears that the debt cut for Greece may face emulators and that the European Union may become an unlimited surety liability community that could also overwhelm Germany. A signal to citizens who, imitating the State, reach the conclusion that a savings culture is not profitable would be fatal; that would ultimately destroy our civil society.

With German congressman Frank Schäffler
With German congressman Frank Schäffler

Helmut Herres from the Federal Ministry of Treasury summarized the evolution and learning processes as of the Maastricht Treaty of 1992, which ended up being too weak to ensure a budgetary discipline of the member states. He considered the fiscal compact of February 2012 very positive, since it succeeded in calming down the financial markets and -based on the obligation of establishing a debt break with constitutional status- thus building a strong instrument, since national legislation on budgetary matters has a greater mandatory nature and efficiency than supranational agreements. The Federal Ministry of Treasury bets on preserving the disciplinary strength of markets and that solvency differentials in form of interest spreads remain operative. Now a genuine enforcement of the Fiscal Compact and the implementation of reorganization and consolidation programs intended to the recovery of growth in those countries experiencing crises are necessary. Herres also addressed differences in terms of political and stability cultures in the Eurozone. He described the need to reform the legal systems in other EU countries, such as a taxpaying culture or a cadastral system, which for example is inexistent in Greece. In order to also support such issues, Germany sends government officials to Greece to serve as advisors.

With Helmut Herres at the Federal Ministry of Treasury
With Helmut Herres at the Federal Ministry of Treasury

Claus Tigges, chairman of the Board of Directors of the German Federal Bank in Berlin and Brandenburg, explained the tasks of the German Federal Bank and its integration into the European Central Bank system, as well as the European Financial Stability Facility, which in the summer of 2012 will permanently become the European Stability Mechanism. Through these instruments, more time will be available to implement the necessary reforms in those countries in crisis. An exciting discussion arose from the participants’ inquiries about the criteria regarding an optimum currency region (OCR), such as mobility of the labor force - not entirely achieved in the Eurozone- and a joint fiscal policy to ensure budgetary discipline, that does not occur in the Eurozone either. Skepticism towards the fulfillment of rules of the fiscal compact and towards an even greater indebtedness, in order to fight the already high existing debt, was apparent in the Latin American contributions; after all, the problem regarding the lax handling of legal rules is widely known in that continent.

With Claus Tigges at the headquarters of the German Federal Bank
With Claus Tigges at the headquarters of the German Federal Bank

Oliver Parche from the DAHK presented the Latin American Initiative of the German Economy, which not only highlights and raises awareness on the huge economic potential which Latin America represents for German entrepreneurs, but also enables very real commercial contacts and intends to attract Latin American students and young labor force to German universities and companies, in order to attenuate the aging process of the domestic labor market.

At a renowned location next to the Brandenburg Gate the Liaison Office of the Commerzbank AG in Berlin is situated. Heiner Herkenhoff, the director, explained to the participants the perspective and history of the 2nd largest bank in Germany, which due to a merger with the Dresdner Bank in 2009 was severely impacted by the financial crisis, but was able to restructure and stabilize after a short time. Herkenhoff considers that the German domestic market is stable and mainly attracts foreign investors who use German banks to invest in German medium-sized enterprises. At the same time, Herkenhoff also predicted a cross-border tidal of bank mergers, since they also have to broaden their market basis. The new Banking Regulation Round “Basel III” also forces the adjustment of entrepreneurial models, in which the classic account deposits approach regains attractiveness.

At the end of the visiting agenda and at the headquarters of the Friedrich Naumann Foundation for Freedom, the delegates met Dr. Irmgard Schwaetzer, a member of the board of directors of the Foundation, and former federal minister, and Mr. Wolfgang Müller, a member of the board of directors of the Berlin Manhattan Institut für Unternehmerische Freiheit (Berlin-Manhattan Institute for Entrepreneurial Freedom). Müller addressed the lack of tax discipline in countries of the European Union, and the restrictions to economic freedom in Germany. Dr. Schwaetzer represents, as only few politicians, the composition of the German unity, and through her unique experiences, drew the participants’ utmost interest. The attendees also fully understood the difficulties a truly liberal party encounters; therefore at the end, an amicable exchange took place about the paths to emerge from inevitable crises.

by Sabine Landscheidt / Ulrich Wacker

1963 - 2013


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