Octavian Report: Some both here and in Europe have tried to set the mantle of “leader of the free world” on Angela Merkel’s shoulders. What is your take on that?
Karl-Theodor zu Guttenberg: It's probably, even for herself, the most peculiar overestimation of her character. She is someone who would not and who has never led from the front. She definitely stands for the values of a free liberal order, but it has never been her aim to impose German leadership on other, specifically European, countries. In that regard she is still a, let's say, student of Helmut Kohl -- with whom she grew up and with whom she made her first political steps. Her reaction was quite clear when the New York Times in its now-famous op-ed declared her the leader of the free world. But it just doesn't synch with a traditional German understanding -- a post-war German understanding -- of never, ever giving the rest of the world the impression that Germany would like to launch ideas that have too much of a German handwriting.
OR: How do you assess the view of Germany on the question of the ECB and monetary policy, especially vis-à-vis the views of other E.U. member states?
Guttenberg: Concern over loose monetary policy is definitely is part of a German mindset. Although probably a vast majority of Germans wouldn't even be capable of leading an in-depth discussion about the pros and cons of inflation or deflation. It again has historical connotations and therefore, whenever there is an election looming on the horizon, it is an easy gain for whomever brings it up. But the actions of the ECB show how reluctant Germany actually was to lead in that regard. They would always point at the ECB, declare again its independence, and say: “This is as far as we can go, but we have probably not succeeded with some of our convictions.”
The utmost we have seen in that respect was Germany's argument for more austerity when it comes to the southern E.U. member states. This also showed how limited the government would actually be at the end of the day to contest Mario Draghi's convictions. It might just be another example of accepting and endorsing multinational institutions rather than pushing a German attitude.
OR: Do you see economic union in the E.U.’s future, or do you see Germany continuing to advocate (as it has done) for a middle road?
Guttenberg: The middle road is the path that the Chancellor -- and probably any government in the last 15 years -- has chosen so far. I don't see them changing. The way back to the deutschmark is barred. There are several reasons. One is that they understand the economic consequences of it. They also understand what it would mean to the wider European project if the strongest country actually steps out of the only semifunctional concentric circle within the European Union. At the same time, there's just a dramatic lack of any alternative.
Having said all that, Germany could have done better actually to push forward the missed opportunity before the euro was launched to foster a political union as a precondition for a monetary union. They do realize that a lot of the flaws we're facing right now with the euro project are still tied to the deficits regarding a political union. That's one of the reasons why a good number of people see a lot of hope now in Emmanuel Macron's election. I'd be careful not to overburden him there.
OR: Do you see any future for a “United States of Europe”?
Guttenberg: Not in its current shape. There are too many distinguishing factors. It can start with simplistic things like the linguistic and cultural diversity being just too vast even within European member states. What I can see is the prospect of further deepening in certain areas that could lead to more and more united elements.
One is the idea of Chancellor Merkel to, at one point, shape an economic union. Although she has never actually defined what it would mean, but it is a step towards more what Macron is actually now asking for -- to go further into a financial union. He even launched this old idea of eurobonds again, which will not fall on very receptive ground in Germany. That again explains why we are still far, far away -- just this little example -- from a United States of Europe.
OR: Why didn't they kick Greece out when it was clear that the country was on the precipice of crisis?
Guttenberg: A combination of things. It's, first and foremost, the never-ending political belief in still finding solutions even if there aren't any on the horizon. Secondly, angst around the geopolitical impact. There are a lot of factors that played into that, given the Russian influence in Greece. There is fact that they are still a member of NATO.
There is also the factor that kicking Greece out would have set a precedent difficult not to follow with other nations that are perceived as being stronger countries. What happens if Italy becomes weaker, as it is right now? And it is weak. But what happens if it becomes weaker -- do we need to kick them out as well? What's left over then: just a fragment of the European idea? That was, I think, the main reason. Along with the fact that kicking them out would probably be more costly than keeping them in.
OR: Do you think it’s true that the financial markets don't understand the geopolitical aspect of Europe?
Guttenberg: I'm always astonished how blind the financial sector here in the U.S. is when it comes to connecting its economic thoughts to geopolitical language and at its general lack of knowledge when it comes to core geopolitical questions.
OR: Do you see Europe and particularly Germany doing “whatever it takes” (to use Draghi's phrase) to save the euro, or do you see it eventually falling apart?
Karl-Theodor zu Guttenberg is the Chairman of Spitzberg Partners LLC, a corporate advisory and investment firm headquartered in New York and the youngest Defense Minister in German history.