Say nothing or keep silent – so far, this has been how Germany’s new finance minister has conducted European policy. Since taking office three months ago, Olaf Scholz has said not a single word on the subject in public. But after Angela Merkel responded last week to Emmanuel Macron’s Eurozone reform proposals, Mr. Scholz has used an interview with German news magazine Der Spiegel to present his own ideas on the topic. His remarks did not exactly create a sensation. However, if read carefully, they represent a distinct break with the ideas of all Mr. Scholz’s predecessors.
Ironically enough, what Mr. Scholz pitched as a groundbreaking idea is actually not very revolutionary at all. He wants to see new funding for a scheme to combat unemployment on a European scale. Countries faced with an employment crisis would be able to borrow European money, to be repaid when things get back to normal. Mr. Scholz’s suggestion is an overture to southern Europe. Even if the suggestion does not lead directly to the communitization of national debts, it does send a clear signal: we are ready to loosen the purse strings.
But there’s a catch. The new money is completely redundant, because of plans now afoot to turn the European Stability Mechanism (ESM) into a European Monetary Fund (EMF), intended to allow credit lines to be extended to countries in need of assistance. A further safeguard, in the form of common unemployment insurance, would simply be unnecessary duplication. All the more so since unemployment tends to lag behind economic downturns. If you want to fight a major crisis, you need to act as quickly as possible: immediate help from the ESM would be far more effective.
Mr. Scholz is the first German finance minister to argue for EU taxation, a fundamental shift in European politics.
Mr. Scholz’s other proposal is even less revolutionary. The idea of introducing a financial transaction tax has been floating around for many years now, but any European finance minister trying to make it a reality has failed utterly. This makes it all the more surprising that Mr. Scholz has boldly claimed that he will oversee its successful introduction. This is unfamiliar, dangerous grandiosity from Mr. Scholz, normally a very cautious politician. If he fails to steer the transaction tax through the EU’s institutions – and everything suggests he will – that failure will be associated with his name.
What is revolutionary is that Mr. Scholz suggests any funds raised by a transaction tax should go to Brussels. This would mark the beginning of a pan-European system of taxation. This means Mr. Scholz is the first German finance minister to argue for EU-specific taxation, something that would mark a fundamental shift in European politics. Politicians should not constantly invoke European sovereignty without taking some action on the issue, says Mr. Scholz. And he is right. But direct EU tax revenues are still a distant pipe dream: currently, right now, there aren’t even ten EU member states prepared to push through a limited transaction tax.
Martin Greive is a correspondent for Handelsblatt based in Berlin. To contact the author: [email protected]