Departure of Germany's Mr. Austerity is end of an era
FRANKFURT, Germany (AP) - German Finance Minister Wolfgang Schaeuble, a key figure during the eurozone's struggle to survive its debt crisis and an often-resented advocate of spending cuts in troubled member countries, appears ready to leave his post.
A successor might be less tight-fisted with spending at home but there's no indication the next German finance chief will be any more lenient when it comes to dealing with eurozone partners.
Leaders of Schaeuble's party, Chancellor Angela Merkel's Christian Democrats, said Wednesday that they plan to nominate the 75-year-old for speaker of Germany's lower house of parliament in the wake of Sunday's national elections.
As finance minister, Schaeuble ran budget surpluses and pushed for tough spending cuts in bailed-out countries like Greece. He was a key advocate of the eurozone crisis strategy of giving bailout loans only in return for deep budget cuts and commitments to reduce bureaucracy and red tape. The eurozone held together, but the austerity approach helped deepen recessions by withdrawing the stimulus of government spending from economies.
Under Schaeuble, Germany has also opposed reducing the principal amount of Greece's bailout loans, although it has supported other steps to ease the country's burden, such as repayment over longer periods and lower interest rates.
He was frequently lambasted by Greek politicans, on protest banners, and in newspaper cartoons. A pro-government daily portrayed him wearing a Nazi uniform.
His policies, however, found widespread resonance among legislators, economists and news media back in Germany. On the domestic front, he opposed new borrowing to fund investment in infrastructure despite criticism largely from outside Germany that such fiscal restraint was holding back the recovery of the currency union as a whole. Schaeuble spent 130 billion euros less than would have been allowed under the constitution's debt rules, according to Christian Odendahl, chief economist at the Centre for European Reform. That frugality may, however, leave a successor more room to loosen fiscal policy, either through tax cuts or more spending, or both, he said.
Economist Holger Schmieding at Berenberg Bank said that Schaeuble's departure was "the end of an era. He was the face of German austerity and of Germany's tough-love approach to the eurozone."
Schmieding said that while Schaeuble's successor might settle for a merely balanced budget instead of running surpluses, his departure would not change much in Germany's approach to the eurozone. That's especially true if the post goes to a member of the Free Democrats, one of the parties in talks to join Merkel's next government.
The Free Democrats' approach to eurozone questions is "pretty much identical" to Schaeuble's, Schmieding said.
Free Democrat leader Christian Lindner has even spoken - while in opposition - of allowing Greece to leave the eurozone.
Carsten Brzeski, chief economist for Germany at ING, said that with a Free Democrat finance minister, "debt relief could be even harder to achieve than under Mr. Schaeuble."