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Inside The Euro Crisis with Eckart von Klaeden, Minister of State in the Federal Chancellery

On day two of my fellowship in Germany, our group of 12 American journalists learned more about the organization sponsoring our trip, the RIAS Berlin Kommission.

RIAS stands for "Radio in the American Sector" and is a former radio station based in Berlin.  The original office still stands but it now functions differently than in the past.  Currently RIAS has taken on a role of exchange coordinator for American and German journalists.  Since the fellowship program's inception in the early 1990s, more than 1000 journalists have had the opportunity to visit another country and explore it first hand.

I am fortunate to be one of 12 professionals doing just that, right now in Germany.  I'm joined by 11 very impressive colleagues on this journey who come from a variety of media outlets and diverse backgrounds. Here is a list of those on the trip:

1) Azadeh Ansari, CNN International, Atlanta, GA, Editor
2) John Branch, CNN, Atlanta, GA, Editor
3) Heather Frierson, KCTV-5, Fairway, KS, Anchor
4) Robert Horton, KUOW-FM, Seattle, WA, Reporter
5) Waliya Lari, KTRK ABC, Houston,TX, Producer
6) Sonia Narang, Freelance Multi-Media Journalist, Los Angeles, CA
7) Tonya Papanikolas, KSL-TV, Salt Lake City, UT, Anchor
8) Shoshana Rubin, FOX NEWS, New York, NY, Producer
9) Derrall Stalvey, WRBC-TV, Chattanooga, TN, News Director
10) Shanda Sundstrom, KFSM-TV, Fort Smith, AR, Executive Producer
11) Erika Thomas, KMEG 14 News FOX 44, Dakota Dunes, SD, Anchor/Reporter

Probably the most exclusive and perhaps, important, interview of the trip took place at the German Chancellery in Berlin.  This is the equivalent of the White House in the United States.  It is the building where German Chancellor Angela Merkel conducts the nation's business along with a group of advisors and appointed deputies.

Our group spent an hour with one of those German leaders on the morning of Tuesday, September 4th. We met with Eckart von Klaeden, Minister of State in the Federal Chancellery and in charge of Federal State Coordination.

The general public is not permitted to enter the Federal Chancellery without an appointment, so we gained access to a restricted government building and more importantly, the chance to speak privately with one of the top 5 German leaders during a time of extreme importance in European history.

Mr. Klaeden immediately began discussion of the so-called "Euro Crisis" and was quick to point out that the Euro (the currency used in much of the European Union) is actually more stable than the Deutschmark, which was Germany's previous currency.

Germany, he said, has three principles guiding their Euro policy:

1) Solidity in every nation (nations maintaining strong budgets)
2) Solidarity (helping other nations when they need assistance)
3) Shaping the EU as an order of competitiveness

Klaeden said Germany likes to get the IMF (International Monetary Fund) involved in its dealings within the EU and the Euro.  This is because he believes it lends credibility to deals and structures the situation such that it is not just a German-led idea.  People often see Angela Merkel or Germany behind the ideas coming out of the EU because the nation is such an economic and political power at this time.  IMF involvement can show other nations that it's not Germany standing alone "behind the curtain".  For example, the IMF is led by a French woman, not someone from Germany.  In addition, the European Commission is led by a Portuguese man and the ECB (European Central Bank) is led by an Italian man.

WHAT CREATED PROBLEMS WITH THE EURO

According to Klaeden, the Euro ran into problems when some of the most powerful Euro Zone members lost their ability to implement sanctions.  New members of the Euro Zone used extreme low interest rates for consumption, instead of paring back their spending and implementing reforms, as was the case in Germany.

In contrast to Greece, Klaeden says Germany made sacrifices and reforms during the earlier years of the Euro, circa 2001. 

Mr. Klaeden also stated boldly that "A country like Greece should't have become a member of the Euro Zone".  However, he followed by saying that the solution is not to kick them out of the Euro Zone at this point.  Essentially he said, it's too late the game, to make such a drastic change without suffering severe ripple effects in both Greece and Germany.

The general situation from my understanding is that Germany now faces a major dilemma.  It is the wealthiest country in Europe with a thriving economy.  The problem is it remains tied into the Euro Zone with nations like Portugal, Ireland, Greece and Spain, which some believe acted with fiscal irresponsibility in getting to a point where they are on shaky economic ground.  If Germany plays tough and moves to kick the out of the club, they will inevitably take a big hit with the ripple effect.  If Germany "bails out" these nations, they risk setting a precedent and essentially agree to reward the countries for their mistakes and lack of discipline.  The fear, says Klaeden, is that if a nation like Greece is just pushed out of the Euro Zone, the risk of civil war could come back to the south of Europe and infect other nations. 

It's important to remember that the EU is different than the Euro Zone.  While there are 27 nations in the European Union, there are only 17 that use the Euro as their currency.

GERMANY'S VIEW OF U.S. DEBT

Klaeden says the United States should take a close look at who is buying their bonds.  There is a growing concern, even in Germany he says, about America's dependence on China.  He says inflation is the ultimate result if competitiveness of a nation and funding are not in balance.  Klaeden says that Germany still believes in the creativity of Americans and their ideals.  But, he believes the only reason the US economy thrived at the end of the 20th century was because the country was the "new kid on the block" and one of the few not facing political or economic instability.

Klaeden suggests that we will eventually find out how sustainable China really is sometime down the line.  China's economy is market-based according to Klaeden, an economy with reserves at $3 Billion in the last three years.

"I don't want to think about a world without a strong United States", says Klaeden.

"If democracy and freedom is under pressure - you are the ones who lead others.  You are often criticized for that in Europe, but this is your mission and what makes you important".

US INVOLVEMENT

It's clear to most Americans that the fate of the Euro is closely tied to the fate of the American dollar.  Germany is one of the United States' most important trading partners and allies.  It's also just one of 17 countries part of the "Euro Zone" - nations which feature the Euro as their currency.  The Euro though, in currently enduring a term of great flux and potential instability in Europe.

To help the situation, Germany has suggested that China take on more debt.  But what can the United States do, if anything? 

Mr. Klaeden suggests several things:

1) Encourage the IMF to stay engaged in Europe and use powerful US influence to keep IMF active in Europe
2) Improve common competitiveness with the Asian-Pacific Region - free trade
3) Understand that the way of the American Fed - buying unlimited European bonds - is NOT a solution for Europe

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