Handelsblatt: For many years Germany had twin policies on parallel lines: commitment to financial and monetary stability on the one hand, commitment to European integration on the other. With the crisis in economic and monetary union, do you think that the two policies are no longer compatible?

Helmut Schmidt: Let me give you an answer first about the general political environment. I don’t know about the British government – they are rather new in office and I do not know the leading people. So I exclude the British from my general answer. But I would say that, in general, Europe lacks leaders. It lacks people in high positions in the national states or in the European institutions with sufficient overview of domestic and international questions and sufficient power of judgment. There are a few exceptions such as [Jean-Claude] Juncker [Prime Minister] of Luxembourg, but Luxembourg is a bit too small to play a substantial role.

More specifically, I do not think that the Germans in general or the German political class in Germany have given up on stability. The circumstances in 2008-10 forced them – like almost everyone else in the world - to violate their stability ideals, but this was not an act of free will, it was the result of economic downturn.

Additionally, the present German government is composed of people who are learning their business on the job. They have no previous experience in world political affairs or in world economic affairs. German finance minister Wolfgang Schäuble is a man whom I wish well and for whom I have great personal respect. He well understands budgetary and taxation problems. But when it comes to international money markets or capital markets or the banking system or the supervision of banks or shadow banks, this is all new to him. The same goes for [Chancellor Angela] Merkel. This is not to say anything negative about Schäuble or anything negative about Merkel, but we need people in high office who understand the economic world of today.

Handelsblatt: But some people would say the problem goes deeper than that. By going into a monetary union without political union, and without the perspective of a political union, some people would say that this was a fundamental birth defect.

Schmidt: This is what the Bundesbank have been repeating it for 30 years. In their innermost heart they are reactionaries. They are against European integration.

Handelsblatt: Who do you mean precisely? Who are you thinking of because people like [former Bundesbank President Hans] Tietmeyer are no longer playing an important role?

Schmidt: But his successors, more or less with one exception, are reactionaries with regard to European integration. They are not really characterized by liberal thinking. They tend to act and react too much under the aspect of national interests and haven’t understood the strategic necessity of European integration.

Handelsblatt: There is this expression: ‘Beim Geld hört die Freundschaft auf.’ [‘Friendship stops with money.’] One has the feeling that the Germans are now being asked as a collectivity to help the poorer states. And the Germans find this very difficult.

Schmidt: The mistake was made around the time of Maastricht, in 1991-92. At this time we were 12 member countries in Europe. They not only invited everybody to become a member of European Union but they also invented the euro and invited everybody to become a member of the euro area. And this was done without changing the rules or clarifying the rules beforehand. This was when the great mistakes were made. What we are suffering now is the consequence of that failure.

Handelsblatt: Should the EU states have decided the euro just for a small group of countries?

Schmidt: This is my view – and also they should have defined more strongly the rules on the economic behavior of the participants. The so-called Stability and Growth Pact is not an instrument of law. It’s just an agreement between governments. And it was not helpful that, early in this century, both France and Germany violated the rules of the pact. Merkel would like to correct these mistake, but her chances of prevailing are rather small, particularly because she is not a very smooth operator.