“A Complete Change of the European System – Without Asking the People”

Interview with Professor Dr Wilhelm Hankel about the Euro crisis and the financial emergency packets for Greece and other Euro countries.

Current Concerns: Professor Hankel, at the beginning of May you and four competent colleagues filed a lawsuit to the Federal Constitutional Court of Germany against the so-called ‘Help for Greece’, which had been adopted by the German Bundestag. You also appealed to the public by an advertisement in a large German newspaper. What prompted you to do so?
Prof Dr Wilhelm Hankel: What we asked the Constitutional Court to consider is an affair to all of us, of all Germans, even to all Europeans. Because the help for Greece and also for a lot of countries in a similar situation will – under a humane pretext, a pretext of solidarity – bring to life a monstrosity, a complete change of the European system without asking the people. And this change will be performed on different levels. On the legal level: breaches of law have been committed, which are simply outrageous. But also the political structure of the EU is being changed, which is also outrageous; because this has to be decided by a public referendum, and not in a clandestine operation of a few governments. And what bothers me as an economist particularly is the concern for the welfare of our citizens. These three concerns – these three levels – have to be brought to the general public; additionally we want to make clear to the judges, that such questions are not decided in the legal solitude but have to be made the subject of a public debate where they might even be repelled.

In your newspaper advertisement you are writing about a political situation in Germany, which is comparable to the situation in the years prior to the French Revolution. Do you consider the current situation as politically charged as then?
Above all, I see that our governments dissociate completely from the concerns, experiences and hardships of their people. Take the case of the inflation. In the last century, the Germans experienced two inflations; people suffered, their savings were gone, their future was no longer secured, their pensions were confiscated. But above all, society changed. Suddenly the young German democracy of the Weimar Republic was replaced by a dictatorship of desperation. It has to be regarded as such. Some people voted for a leftist dictatorship, another part, the middle classes, voted for a right-wing dictatorship, but I am convinced that many of these would never have voted neither for one or the other dictatorship if they had lived in safe economic conditions.

Can you tell us about the main legal arguments in your complaint?
The legal arguments relate to the obvious legal violations, especially those referring to the cutback of securing the stability of the Euro, which is so dear to the Germans. The Euro was supposed to be and remain as stable as the DM (German Mark), as our Constitutional Court stated in a fundamental ruling. This is written down in a judgment, which was fought for by my friend K. A. Schachtschneider in 1993. And Germany joined this monetary union while at the same time influential politicians – from the Federal Chancellor to the now retired President, who was the chief negotiator in Maastricht – made a promise: The Euro will be as stable as the DM. Now it has become obvious, in a situation that has nothing to do with inflation – and we can be grateful not to be in such a situation today – that the stability requirements are being ignored as if they were a negligible quantity. For, in the contract there were two legal regulations against inflationary acts of caprice: first the Pact for Stability and Growth which limits national debt. This pact has been breached completely by arguing “we are in an economic crisis and in this crisis we are not able to stick to the stability requirements of this pact. As an economist, I could sympathize somehow with that argument, because in a crisis tax income will be reduced, national spending will rise. But from this follows that the Pact of Stability and Growth has been a fair weather pact. It would work under optimal conditions, but in times of crisis the upper limit for national debts cannot be met. Virtually every economist knows that.
It is much more dangerous, however, that now the second and more important pillar of stability has been broken off, namely the provision that no state can be held accountable for the poor financial policy of another state- the so-called “no bailout clause” in articles 125and 126 of the Treaty on the Functioning of the European Union. (TFEU) And the reasons given for that are exciting. The debts of the southern countries with Greece in the first place, but others will follow; the taxpayers will pay for them. And why? Now they lie publicly so that the states can be helped. But actually every economist can see that the help is not for the states but fort he banks that have pumped this money to the concerned states. This is no help for other countries in dire straits; it is a covert assistance for a banking system that performed unsound business transactions and maneuvered these countries into unsound fiscal politics. And that is publicly veiled. That must be laid on the line – both the breach of law as well as its consequences.

What are the consequences for this breach of law?
The first consequence is that the market economy, which is our foundation, will no longer apply if the state debts are high enough. If the state debts are high enough, the budget will be balanced by the state. This is where a certain philosophy applies which I always thought to have gone lost in Europe long time ago. It is the philosophy of states ruling their own economy, of states being more important than markets, and of states entitled to nullify market decisions which are actually votes by money bills, you could even call them democratic. Behind this, we can see the philosophy of the French statism. France is actually the wirepuller behind this coup in the EU. This coup was not owed to a mere philosophy; if you look at the figures, France finds itself in almost the same situation as those countries that are currently asking for help. This is in fact a revolt of the debtors against their donors. I could also say it is a revolt of the monetary sinners and those with only little responsibility against those with a lot of feeling of responsibility for a stable currency. This is an unacceptable behavior.

If the concept of debtor countries worked out what would be the consequences for the citizens?
The first consequence will show on the currency, the Euro. The Euro will no longer be the strong currency, which it was meant to be. The Euro will no longer meet the Europeans’ dream to be a world currency and eventually replace the dollar. We have to abandon this hope. The consequence for the states and their people are that those states having a well-funded and working welfare system as well as a well functioning social system – Germany is among them – will come under pressure to meet their citizens’ demands. Lenin, who was certainly not a shining light of world history, once said to his revolutionaries, if they destroyed the monetary system they would also destroy civil society. What we experience now is France’s attempt to procure a late triumph for Lenin.

Mrs Merkel claimed that there was no alternative to her administrations’ actions. What do you think about this?
It makes me speechless. A politician saying so shows that he is a dictator in disguise. There is always an alternative to every policy. If Mrs Merkel does not know any, she tends to think that her opinion is the right one. She behaves like Louis XIV who said “L’état c’est moi” (I am the state). This cannot be taken serious and is unacceptable.

And how can it be explained that the German political class is participating in all this, even though it is obviously directed against the German people?
The suspicion grows that the German political class – and this is why we have introduced the ad with this sentence – has lost all contact with the hardships and worries of their people. And this is a dangerous development. Democracy depends on a government representing the interests of the people, but what they represent – I have indicated it – is not the interests of the peoples but the interests of the banks, the interests of the professional Europeans which of course see their sinecures in Europe. In the many years that I have been dealing with these things and these people, it has struck me many times that many of these European officials do not really live for Europe but off Europe. They are fighting for their sinecures, but of course this does not have to be the concern of the ordinary people.

We have a world financial crisis and, according to what we see, nobody has a recipe for a solution. Are there still measures that need to be taken now?
In any economic crisis, there are meaningful measures. And there are always alternatives. Because, other than a tsunami or a volcanic eruption, a crisis is not a natural disaster. Humans can do something about it and after all the humans who should do something about it are the politicians, and they are our delegates. If they seem clueless, this is a problem. But they do not have to be clueless. Since the crisis started there have been alternatives and recipes.

Can you give examples?
Yes. We even have a very interesting example. During the onset of the financial crisis or just after it, a large American bank, Lehman Brothers, went bankrupt. And everybody said: Now we have to support the banks. If we don’t, they will drive us over the abyss. But now, Lehman Brothers is demonstrating the exact opposite. The bank has gone bankrupt, caused by its own mismanagement, but the American and the global money system did not collapse but continued to work. This bank’s functions have been taken over by other banks which shows to me that the argument of “too big to fail” or “banks are system-relevant” is just an ad hoc argument or a kind of blackmail.

That means also big banks should be exposed to market mechanisms?
We could do it. Many years ago, while I was active in the government, I suggested and established something, I am even a little proud of: the protection of depositors. Meanwhile, all depositors in Germany are protected up to a quite substantial limit of 30 000 Euro. This limit has even been raised through self-commitments of the banking system. The reason for this initiative under my boss, the Federal Minister for Economy Karl Schiller, was the idea that savers should not be exposed to the arbitrariness of managers. So our savers are more or less protected against misjudgments of managers. But if now all governments, and particularly the German Government, conclude that we should not only protect the savers but also the managers and the banks themselves, I have no sympathy for this idea. This is unnecessary and redundant.

And what do you think of the claim to ban questionable speculative trade?
I have also certain reserves there. Experiences from the Third Reich in Germany showed us the following: In this period, some of these transactions – short sales which they are now once again banned in Germany – were also forbidden, however with an entirely different reasoning than today. Then, an entire profession which was Jewish was to be outlawed and disdained. It was not the goal to protect the currency. Now, of course the goal is not to condemn a profession, but the argument that this serves to protect the currency is completely wrong, even empirically. For a long time we have known that for example the Black Friday 80 years ago would not have been the catastrophe it grew into if there had been a counter-speculation with such short sales.

With respect to Mrs Merkel, you said before that her language – “without alternative” – reminds you of a dictatorship. Which is the political system that can deal with a crisis best?
In a crisis, you need shrewd heads. And they can become active much better in a democracy than in a dictatorship. The weakness of each dictatorship, and we have an experience of several hundreds of years with such systems, is always the same: if the dictator is a fool or a brute, a killer like Stalin or Ceausescu or Hitler, a dictatorship is a catastrophe. The cases where a good dictator has created something really good are actually the exceptions in history. It is important that democracy takes those people on and allows those persons to rise to the top who can make it. And I think that democracy has good chances in accomplishing this.

We would like to return to your ad in which you wrote that a public sphere is necessary. This was an urgent and important appeal. How can we support this?
In democracy, the public is part of politics. There is no democratic politics without the public. But of course it needs to be informed. There are no good decisions without information, neither in governments nor in democracies. And the goal of the ad was simply to give an orientation and to create an awareness in people of what is happening and to prepare them that they might some day have to stand up against foolish decisions of their own governments. We want to motivate the public.

What kind of support would suit you?
The next thing would be that members of the government and the parliament sit together with the critics. This has not happened so far, never. It is much easier to talk to a few politicians and important members of the parliament than to the wider public. I have received literally thousands of affirmative blogs through the internet and other mail. I have delegated them to an intermediate office since I am no longer able to read all of them. I can not organize the public. I have to resort to the existing structures, and after all the politicians are part of them. And I am very disappointed about the complete lack of resonance to the ad from this sphere.

But couldn’t your ad become the nucleus of a public campaign?
I would be very happy if it were so.

Thank you very much for the interview. •