MNI INTERVIEW: German Greens Back Eurobonds With Conditions

A future Green-led German government would promote a permanent European-level fiscal capacity and seek the completion of banking union across the bloc, but it would insist on strict conditions for issuance of joint Eurobonds and secure protection for German banks from any mutualisation of financial risk, the party's economic spokesperson in the European Parliament told MNI.

Speaking as the Greens have taken the lead in several recent opinion polls ahead of September's federal elections, Sven Giegold said the party would seek reform not transformation on the European stage if it emerges at the head of a coalition government.

While desiring a greater fiscal capacity for the European Union, the Greens would also defend limits on borrowing outlined in the Maastricht Treaty, though without making them any tougher, Giegold said in an interview. Germany's constitutionally-enshrined debt brake, limiting the structural federal budget deficit to a maximum 0.35% of gross domestic product, is too strict, and the Greens want to reduce German public debt to Europe's 60% of GDP cap at a more gradual pace.

"We are in favour of a permanent investment budget of the EU, financed by common taxation – we don't want to see such an effort as now with Corona as a one-off – Europe has to invest on a larger scale together in order to be competitive with China, America," he said. "We need shared investment budgets for the financing of large-scale investment projects in public goods."

EUROBONDS, WITH CONDITIONS

While the Greens support proposals for common European borrowing, this would not come without conditions.

"We are not in favour of issuing Eurobonds and then giving member states the fiscal freedom to act irresponsibly – if you issue debt you have to have common responsibility," said Giegold.

The EUR750 billion Next Generation EU Covid recovery plan offers a chance to drive Europe-wide investment funded by very low interest rates, he said, but he added that national recovery plans presented by the bloc's two largest economies to qualify for the money could render it a wasted opportunity.

"France and Germany have basically put forward plans in which all investment is already part of national investment plans – so there is very little value added," he said, noting that 80% of Germany's plan was already outlined in the government's Covid response last year.

The Greens will also push harder for the completion of Banking Union, to which the current government of Angela Merkel has offered "stupid resistance," according to Giegold.

But the Greens do not want fully harmonised deposit insurance, favouring rather European reinsurance for national banking systems along with institutional guarantees for Germany's smaller cooperative banks. They also call for common insolvency rules across the bloc.

PROTECT SMALL GERMAN BANKS

"We cannot do this unconditionally – you can't have a common deposit guarantee scheme if one part of the banks have the right to get people to pay back their loans, while others have to wait for 15 years. This doesn't work. You must have effective insolvency legislation," Giegold said,

"These will be difficult negotiations. it will not simply be that the Commission gets its will with whatever it proposes. We have to protect our small banks in an any insurance system where they subsidise more risky banks."

The Greens are already a party of government. The party has ministers in 10 of 16 German Lander and a prime minister in one of the largest regions.
"We know what government means. We are not outsiders, we know the Germans and the Germans are not radicals and we are not either," Giegold said. "Germans are not good at revolutions – we had one in 1989. That was good, but beyond that, whenever we try and erupt things it goes horribly wrong and, in fiscal matters, we are really not ready for that."