Athens austerity measures mad, says German opposition leader

DUBLIN CONFERENCE:THE AUSTERITY measures being imposed on Greece are "mad", and indicate that Europe learned no lesson from the rise of the Nazi Party, Germany's main opposition leader said yesterday.

Sigmar Gabriel, the chairman of the Social Democratic Party and potential future chancellor, said the measures were “mad” and amounted to an “evil circle”.

At a seminar organised by the Institute of International and European Affairs in Dublin yesterday, Mr Gabriel cited the example of Weimar Republic chancellor Heinrich Brüning, who cut successive budgets during the Great Depression.

Germany ended up with six million people unemployed. Brüning’s cutbacks contributed to a rise in support for the Nazi Party, which grabbed power in 1933.

Mr Gabriel said it would be “impossible” for Greece to solve its problems without a policy for growth and unemployment.

He accused the European Council of leading the country into a “dead-end street”.

Mr Gabriel signalled that the German people may have to have a referendum of their own if changes to the Lisbon Treaty lead to changes in the German constitution.

He praised Ireland for its measures in dealing with its own bailout and said he hoped they would bear fruit.

He told the audience that the crisis in the euro zone was really a crisis of European unity and it was apparent with “brutal clarity” that successive bailouts were insufficient in the long term.

Mr Gabriel said countries such as Greece and Italy should have taken advantage of lower interest rates when they joined the euro zone to develop their economies and infrastructure and become more competitive.

Instead, they used it for current spending.

He also criticised his own country, which had accumulated about €1 trillion in savings that could have been invested in the real economy, but instead went into high-risk investments and real estate.

He said the solution would involve great fiscal, economic and political union, but he acknowledged that this could be “enormously difficult” for EU citizens.

When asked if that meant there would be changes to Ireland’s corporation tax rate, he suggested that the rate could remain as long as the “fundament of taxes” across euro zone countries remained the same.

Citizens were entitled to ask, he said, who was ruling them – governments or the markets.

He said the fact that finance ministers hold their summits at weekends in between markets opening and closing was a “clear signal” about who was ruling whom.

He proposed the introduction of a tax on bank transactions which would be used for investment purposes across the euro zone.