German Minister of Finance, Wolfgang Schauble, has managed to achieve a balanced budget in Germany. The main saving grace in achieving this was thanks to the European Central Bank’s low interest rates, writes Prince Michael of Liechtenstein.
In a speech to the German Savings Banks Association this week, Mr Schauble warned that the policy of low interest rates will have dramatic social consequences in damaging pension funds’ savings. In fact, Germany’s balanced budget was achieved at the expense of savers, especially pensioners.
But this is not just a German problem. It faces the whole of Europe generally, and is an issue GIS has addressed and highlighted for a long time.
GIS has also pointed out - and Mr Schauble has finally made clear - that only strong structural economic reforms can bring the European economy back on track. This will not be achieved through low interest rates and quantitative easing.
The minister also said - again analysed repeatedly by GIS - that the Greek situation is no longer a major threat to Europe. And he asked for fiscal discipline and respect for agreements, offering Greece help to strengthen its fiscal controls.
Europe can only function if agreements are respected, according to Mr Schauble. We can only agree with the minister.
Europe's economy will deteriorate further without robust structural reforms. Social cohesion and democratic structures will be jeopardised and the policy of low interest rates will complement the misery of youth unemployment in many countries with poverty among the elderly right across Europe.
The consequent disregard for any principles - as the Greek government drastically demonstrates now - and the lack of reform in many other member countries, is a danger to Europe as a whole.