Sigmar Gabriel, the Chairman of the main German opposition party, the SPD, today told Berliner Zeitung that his party was prepared to change its eurozone policy by accepting collective debt liability in exchange for stricter budgetary oversight, claiming that the Merkel government’s current strategy had failed. Gabriel acknowledged that for such a move to be possible, the German constitution would need to be altered and put to the public in a referendum.
So far SPD has broadly supported Merkel’s dual strategy of bailouts and savings/reform packages, albeit with additional emphasis on some mild stiumulus measures. And despite scathing rhetoric about the government’s political management of the crisis, when it came to it, SPD MPs have consistently voted with the government in the Bundestag.
The interview follows lengthy essay in Saturday’s FAZ by the philosophers Jürgen Habermas and Julian Nida-Rümelin, and economist Peter Bofinger, in which they argued that an EU political union with a core currency area was necessary to “win back at European level the sovereignty stolen by financial markets”. They argued that this would entail mutual fiscal, economic and welfare policies, the alternative to which would be a market-conformist facade democracy”. The essay has been widely linked to Gabriel’s comments in the German media today, not least because Gabriel has invited Habermas to help draft the SPD’s manifesto ahead of next years’ federal elections.
Should we get excited? Not yet. While the comments are significant, Gabriel did not explicitly say what form this debt pooling would take. In fact, Berliner Zeitung merely paraphrases Gabriel so it's not entirely clear exactly what he said. Along with the Greens, the party had previously indicated that it could accept a debt redemption fund – a time limited pooling of a certain portion of eurozone states’ debts – while appearing to rule out ‘full’ debt pooling / eurobonds. In addition, also Gabriel seems to support the classical German quid pro quo for debt-pooling - strict German-style budget oversight across the eurozone. As we've argued repeatedly, such oversight is very difficult to achieve. In addition, SPD lacks a single leader - Gabriel is only one part of a 'leadership troika' - so it is far from clear whether this is/will become official party policy. Former Finance Minister Peer Steinbrück's rhetoric on the crisis has for example been tougher than Gabriel's.
One thing is for sure - expect a continued vibrant debate both within the SPD and the country as a whole...