Germany is well-positioned to help its neighbors emerge from the eurozone crisis, but throwing money at the problem can only do so much to help, a top German businessman told a gathering at a Washington think tank Monday.
Speaking to the Peterson Institute for International Economics, Hans-Peter Keitel, president of the Federation of German Industries, said Germany feels a sense of responsibility for helping countries, including Greece, Italy and Spain, recover from the crisis.
“Germany is the only one in a position [to help],” he said. “We have to do as much as we can to bring Europe back into excellent shape.”
That may not be so easy. Germany historically has favored tight money policies, has prioritized keeping inflation low and has produced high savings and investment rates, while many other eurozone nations, especially in the southern part of the continent, have pushed the opposite.
But after decades of government overspending, Mr. Keitel said these countries need more than just money to get back on the right track.
“They will ask each and every day for more money,” Mr. Keitel said. “In the long run, it’s the European economy itself which has to become competitive in world markets.”
“I’m not against financial umbrellas,” he added. “But we have to clearly acknowledge these are not the final solutions. These are solutions on the way to get back to competitiveness.”
“We are asking for the possibility to invest private capital, to invest our brand, to be innovative,” he said.
Moreover, Germany’s market needs to stay open for business to benefit other European nations.
And while the German economy may be doing well now, it relies on other strong European markets for exports. As the eurozone crisis drags on, this business model is threatened.
He suggested public-sector consolidation and growth will both have roles in lifting the eurozone out of its crisis.
“We all know that we have to do both,” he said. “Consolidation has to reduce the sovereign debt. On the other side, there is no consolidation” without a return to economic growth.
“Either Europe plays a role as a whole, or none of the countries play a role,” Mr. Keitel said.