German Economy Minister: "Greek Default Can't Be Ruled Out" And "We Need A Bankruptcy Procedure For Countries"

Greece may not file for bankruptcy this weekend... But its time is coming - it is a 100% certainty. And throwing just that little more fuel into the fire is Germany's Economy Minister Philipp Roesler who in an op-ed posted in Die Welt, is once again planting the seeds for the inevitable day when that perpetual transgressor Greece (which just announced yet more tax hikes, and as a result can now shut down its economy as the tsunami of 24 hour strike will be unprecedented) is finally kicked out of the union. The question then, as now, will be: what next?

From Bloomberg:

An “orderly insolvency” for Greece must not be ruled out for the sake of stabilizing the euro, Die Welt reported, citing German Economy Minister Philipp Roesler.


“To stabilize the euro there must be no taboos,” the newspaper quoted Roesler as saying in an article to be published in tomorrow’s edition. “If need be, that also includes an orderly insolvency of Greece, provided the instruments needed for that are available.”

And the full Roesler op-ed, Google translated:

Europe needs a bankruptcy procedure for countries

Instead communitising government debt, private creditors have become more involved. We also need the possibility of an orderly bankruptcy States.

The idea of ??a common currency for Europe was and remains both necessary and right. We Germans have benefited from the advantages of the common currency area - with more growth, more jobs, more stability. The euro has advanced the integration of Europe as a whole and depth far beyond economic issues also.

Without doubt we are currently facing difficult challenges. In countries like Greece , there is still insufficient consolidation efforts. The people's trust and undermined market in our common currency. The Greek government must know that we will make the planned aid dependent, that Greece committed itself reformed. Basically, in order to stabilize the euro, it must also give no thought control more quickly. Necessary to also include a secondary insolvency of Greece, when the necessary instruments are available.

Europe does not grow by centralized bodies diversity

In addition, however, the rules must also be determined for our new common currency permanently. Important stability instruments of the early years, about the rules of the Maastricht debt criteria, were soaked to red-green government irresponsible times. Lasting solutions can only succeed if we stabilize the euro at this central point. The short-term measures necessary for euro rescue EFSF and ESM stabilization mechanism are therefore only a first step. They do not replace a long-term goal of integration, can be based on the lasting confidence in the euro. The crucial question is: How can this be achieved in more integration?

Many - far into the Christian democratic camp - answer this question by placing a striking faith toward a centralized European planning and control of the day. Anyone who thinks only of new institutions like a European economic government, writes the mistakes of the past continue. Europe is growing together not by centralized bodies diversity, but by shared beliefs.

Europe needs a stable code

We need a consensus on values, on the long term, building up a European economic and financial condition. Europe must establish a policy foundation of values, are stable to withstand storms and be able to. This includes not only the goal of stability in the price level, but also competitiveness and fiscal soundness. The roots of the culture of stability in the Member States and in perspective in an economic and financial condition essential.

I'm for a Europe of democracy and subsidiarity, and against a Europe from above. Spain has these days with the anchoring of a debt brake shown that progress can be self-responsible. Each Member State is invited to go down this path. Europe needs a stable code of the Member States must set an example in their national regulations and their own economic and financial policy. This can arise democratically legitimized fixed rules and sanction mechanisms.

We need binding sanctions proceedings

On the way to the stability of the Union plays a crucial role in market pressures. Interest rate differentials on government bonds, promote fiscal discipline. In particular, there can be no Euro-bonds and hence no pooling of sovereign debt. We need binding sanctions proceedings. Wherever possible, to a system of automatic sanctions be established to avert the danger of political dilution. For violations, it must be hard constraints, such as a conditional approval for the disbursement of EU funds from Structural Funds. For continuing violations may also be necessary, a temporary withdrawal of voting rights in the EU Council of Ministers no longer taboo.

We also need the possibility of an orderly bankruptcy States. Tellingly, the term "Resolvenz" is. Because the goal of this process is to restore the functioning of the State concerned, possibly by the temporary limitation of sovereignty. The Resolvenzverfahren should be conducted by an independent body, such as a continuously developed stabilization mechanism (ESM), the act would then be comparable with the International Monetary Fund.

Important elements are objective rules for the determination of debt sustainability, a clear recovery prospects for the economy affected by the restructuring program and for example, automatic term extension of government debt. Also, a substantial involvement of private creditors is one of them. The path to a Staatenresolvenz is only the last step, but it must be determined in advance credible. Europe is at a crossroads. It is now important, a constricting centralism a Europe of people who oppose the values ??and rules. A Europe of economic rationality. This is our future.

The author is the Federal Minister of Economics and Chairman of the FDP.


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