Germany takes tough line over euro crisis solutions

Andreas Dombret, a board member of the Bundesbank, explains in a rare interview Germany's tough stance over Euro crisis. Photo: Reuters

Germany has been on a bit of a publicity drive today, spreading the word about why it is taking a tough line on some solutions being proposed in the euro crisis.

Andreas Dombret, a board member of the Bundesbank (Germany’s powerful central bank) explains in a rare interview in this evening’s News at Ten that Germans are prepared to step in to help their fellow Europeans – but only if certain strict conditions are met.

“You don’t give someone your credit card if you don’t know what someone is going to do with it,” he says, “you need to know what’s happening."

The entire Eurozone is being asked to consider a banking union and even fiscal union: ever deeper ways of integrating and sharing risk.

They would involve the cost of a failed bank or (in fiscal union) a failed country being shared automatically across the single currency area. The benefit would be the stability stemming from an explicit guarantee.

The trouble is, as the eurozone’s biggest country, Germany would pick up the lion’s share of the tab.

“Germany is very pro-European,” Andreas Dombret tells me later in the interview, “[but] what we need to do is make sure that wherever there is a liability for Germany, Germany has a say.”

And that is the other side of banking unions and fiscal (taxation) unions; they require remarkable degrees of co-operation and a loss of sovereignty or control.

Dr Dombret thinks the German people are willing to give up control of their own budgets to a supranational body for the sake of European solidarity.

But will the politicians of countries already in trouble be able to persuade their electorates to do the same – when many will see it as Germany taking up the reins?

It’s an interesting point but I worry that the changes would take years to make their way through the political wheels of Europe. And time is a luxury no policy maker in Europe can afford.