German Finance Minister Wolfgang Schaeuble said he plans to set up a joint program with Spain to spur investment in Spanish companies, helping Prime Minister Mariano Rajoy’s government to overcome recession and record unemployment.
Schaeuble, addressing members of his Christian Democratic Union party in Berlin late yesterday, said that he’ll use a meeting in Spain on Monday with Spanish Economy Minister Luis de Guindos to push for a program that sidesteps the European Commission. If it works, Schaeuble said he was “pretty sure” it could serve as a model for other countries scarred by the crisis in the euro area.
“I’ll suggest, after having spoken with businesses and the banks, let’s not wait for the commission,” he said. “Let’s have a bilateral program right away. How can we in Germany promote investment and financing of small and medium enterprises in Spain in a partnership to advance more quickly?”
The plan, announced on the same day that Rajoy said he was seeking a two-year extension to meet European Union deficit rules, is further evidence that Chancellor Angela Merkel’s government is adapting its crisis stance as the 17-nation euro area confronts a second year of recession. While not disavowing austerity, Merkel’s government is showing a greater degree of flexibility.
“Of course, you have to react to economic developments, we do so in Germany,” Schaeuble said. “We are not bureaucratic, we are not stupid.”
Schaeuble signaled understanding for Spain’s call for more budget leeway, suggesting that Germany will support Rajoy’s push. The commission has already done so. “If the economy deteriorates, you don’t reinforce the economic downturn through deeper cuts,” Schaeuble said.
Germany has shifted fiscal policy in accordance with changing economic reality before, and doing so now “is not all that new,” he said. All the same, the decision to grant more time to meet targets is a matter for the commission, he said. The euro’s guiding rules as laid out in the European Stability and Growth Pact “provides this flexibility,” he said.
“If a member country needs more time to fulfil the objectives, the commission must consider: does this country do what it needs to do?” Schaeuble said. “And if it does, it can say: ‘well, then you need a bit more time if that’s what the economy is like.’ This is a matter for the commission.”