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Scholz won't dictate EU members' fiscal policy

February 10, 2018

Olaf Scholz, tapped to be Germany's next finance minister, said Berlin would not lecture other EU states about their finances. His comments hint at an about-face in the eurozone's policy of strict fiscal discipline.

Hamburg Mayor Olaf Scholz
Image: picture-alliance/dpa/C. Charisius

On Saturday, Germany's likely next finance minister, Olaf Scholz, insisted that Berlin would no longer seek to pressure other EU countries on their economies.

In an interview with Der Spiegel magazine, Scholz said Germany "doesn't need to dictate to other European states how they run themselves."

Scholz, who is expected to clinch the finance role in Chancellor Angela Merkel's next government following a coalition deal between her conservative alliance and his center-left Social Democrats (SPD), admitted that "mistakes have certainly been made in the past."

Read more: New members in Germany's SPD may play pivotal role in coalition deal's success

Change in eurozone policy?

Scholz'ss remarks were seen as a criticism of former Finance Minister Wolfgang Schäuble, who insisted on strict austerity in heavily indebted EU member countries during the eurozone crisis.

Schäuble, who led the Finance Ministry from 2009 until last year, put considerable pressure on Greece to rein in its deficits after the country came close to being ejected from the euro single currency.

He also oversaw several years of Germany's ballooning trade surpluses, which were widely criticized elsewhere in Europe for deepening the economic imbalances between EU states.

Read more: Germany's Martin Schulz drops bid for foreign minister job after SPD pressure

The plan for a new coalition, which would see the Social Democrats securing six ministries, still needs to be approved by the party's nearly half a million-strong membership in a postal vote. Results are expected early next month.

Conservatives worried

German media reported growing concerns within Merkel's Christian Democrats (CDU) about the Finance Ministry portfolio being given to the SPD, as they fear that Schäuble's policy of strict budgetary discipline might be at risk. In the Spiegel interview, Scholz, however, said he would present the country with a balanced budget if he were to take over the Finance Ministry.

"The Social Democrats are for solid financing," he told the magazine. 

Read more: Angela Merkel last East German standing in new cabinet

The proposed coalition agreement includes €46 billion ($56 billion) for economic and social development, and there is hope among some economists that Scholz could loosen the purse strings of Europe's economic powerhouse.

But the SPD politician insisted that the new government would not send finances into the red, adding that further investment "would depend on additional growth and the taxes generated from that."

Scholz also reiterated in the interview that Germany would help meet the funding gaps in the EU's budget resulting from Britain's decision to leave the bloc. But he said Berlin can't shoulder the burden alone.

Currently the deputy leader of the SPD, Scholz previously served as labor minister, and since 2011 has held the office of mayor in the northern city of Hamburg. 

Merkel's CDU, the allied Bavarian Christian Social Union and the SPD took heavy losses in Germany's September 24 elections, leading to four months of negotiations to try to a form a new government.

The SPD had vowed not to renew the coalition with the conservative parties that has ruled Germany since 2013, but reversed its decision after Merkel failed to form a government with two smaller parties.

On Friday, SPD leader Martin Schulz abandoned his bid to assume the role of foreign minister following the coalition deal with Merkel.

mm/sms (AFP, dpa, Reuters)