Germany is well-positioned to help its neighbors emerge from the eurozone crisis, but throwing money at the problem can only do so much to help, a top German businessman told a gathering at a Washington think tank Monday.
Speaking to the Peterson Institute for International Economics, Hans-Peter Keitel, president of the Federation of German Industries, said Germany feels a sense of responsibility for helping countries, including Greece, Italy and Spain, recover from the crisis.
“Germany is the only one in a position [to help],” he said. “We have to do as much as we can to bring Europe back into excellent shape.”
That may not be so easy. Germany historically has favored tight money policies, has prioritized keeping inflation low and has produced high savings and investment rates, while many other eurozone nations, especially in the southern part of the continent, have pushed the opposite.
But after decades of government overspending, Mr. Keitel said these countries need more than just money to get back on the right track.
“They will ask each and every day for more money,” Mr. Keitel said. “In the long run, it’s the European economy itself which has to become competitive in world markets.”
“I’m not against financial umbrellas,” he added. “But we have to clearly acknowledge these are not the final solutions. These are solutions on the way to get back to competitiveness.”
Mr. Keitel pointed to the importance of private investment — German companies investing abroad and foreign companies investing in Germany.
“We are asking for the possibility to invest private capital, to invest our brand, to be innovative,” he said.
Moreover, Germany’s market needs to stay open for business to benefit other European nations.
“In Europe, the economy is growing in those parts where they are exporting to Germany,” he said. “Many of these countries at this moment are relying on their exports to Germany.”
And while the German economy may be doing well now, it relies on other strong European markets for exports. As the eurozone crisis drags on, this business model is threatened.
He suggested public-sector consolidation and growth will both have roles in lifting the eurozone out of its crisis.
“We all know that we have to do both,” he said. “Consolidation has to reduce the sovereign debt. On the other side, there is no consolidation” without a return to economic growth.
“Either Europe plays a role as a whole, or none of the countries play a role,” Mr. Keitel said.
The biggest challenge, he said, remains the Greek economy, which he said is the only one of the heavily indebted countries with no short-term hope of recovery.
“I think, first of all, we clearly have to address Greece,” Mr. Keitel said. “Greece is the only country that is and in the near future will not be able to get out of this crisis. So we are clearly committed as Europeans to finding a way for Greece.”
He said this may require “bringing Greece into intensive care.”
Germany and such other eurozone nations as the Netherlands and Finland have warned that while there can be negotiating on the details of bailout packages, Greece must live up to the austerity promises in them and there will be no eurozone-wide assumption of each others’ sovereign debt.
“We cannot kick them out,” he said. “Legally it’s impossible, and they will never leave the euro. So let’s find a way to help Greece.”
• Tim Devaney can be reached at tdevaney@washingtontimes.com.
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