Interview with Austrian Chancellor Faymann: 'Don't Overestimate the Fiscal Pact'

Spiegel
January 30, 2012

In a SPIEGEL interview, Austrian Chancellor Werner Faymann, 51, expresses doubt about Germany's strategy in combatting the euro crisis, discusses the potential need for a larger Greek bailout package and says that the ECB may have to contribute to debt relief for Athens.

SPIEGEL: Mr. Chancellor, head of the International Monetary Fund (IMF) Christine Lagarde has demanded that the permanent euro backstop fund, the European Stability Mechanism (ESM), be enlarged. German Chancellor Angela Merkel thinks this is unnecessary. Who is right?

Faymann: I certainly wouldn't promise my parliament that we could get by on €500 billion. My government is prepared for the present EFSF bailout fund and the ESM to overlap in a way that we erect a higher firewall. My finance minister, incidentally, sees it that way too, and like Ms. Merkel, she belongs to the conservative European People's Party.

SPIEGEL: Do you want the billions that remain in the European Financial Stability Facility to be combined with the ESM?

Faymann: It should move in this direction. That way we would come out with €750 billion. The financial markets are observing us very closely, and judge our strength by the height of the firewall. If it's too low, then we give the markets a reason to speculate against us.

SPIEGEL: At the European Union summit in December, you said the European Central Bank (ECB) must gain "additional flexibility" for market intervention. What did you mean exactly?

Faymann: If we manage to get debt brakes into the constitutions of member states and maintain stricter controls on frugal budgetary policy, then we need to take the next step toward further safeguards. I am therefore in favor of the ESM being granted a banking concession, enabling it to refinance with the ECB.

SPIEGEL: The German government vehemently rejects this.

Faymann: I have a different opinion. One has to also tell the countries that have been forced into this severe corset what the benefits of collective protection will be afterwards.

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