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Wednesday, July 21, 2010

Schaeuble Denied Twice by Merkel Defies Doctors to Save Euro With Germany‏

Bloomberg News

German Finance Minister Wolfgang Schaeuble defied doctors in March after an operation, traveling to Brussels for a European Union debt crisis meeting. The EU was preparing a financial package to avert a Greek default as traders placed bets against the euro.

Wheelchair-bound Schaeuble, 67, and his peers from the other 15 euro countries crafted an emergency loan bailout in case Greece’s efforts for tax increases and wage cuts failed. The rescue plans, opposed by more than half of Germans, were hatched before Chancellor Angela Merkel endorsed the initiative.

“He came right out of the hospital to the meeting and was a very active member in our discussions,” Luxembourg Finance Minister Luc Frieden said in an interview. “He showed his commitment to public service in a way that maybe others wouldn’t have done.”

Fighting for the EU has been a cornerstone of Schaeuble’s politics during his four decades in parliament. His path has been made more difficult by his relationship with Merkel, 56, who twice denied him the chance to lead Germany.

“We are the country in the middle of Europe,” Schaeuble said in a July 8 interview with Bloomberg News. “Germany has always been at the center of every major war in Europe, but our interest is not to be isolated.”

Less than a week after Schaeuble left his hospital bed, Merkel told reporters that EU leaders should discuss allowing the International Monetary Fund to aid Greece, publicly disagreeing with Schaeuble. She told Deutschlandfunk radio that a March 25 summit was unlikely to produce an aid package for Greece and that the EU shouldn’t create “illusions.”

Cost Burden

European governments said on April 11 that they were prepared to lend at least 30 billion euros ($39 billion) to Greece, complementing IMF aid. The total bailout package was raised May 2 to 110 billion euros over three years, with Germany shouldering more than 25 percent of the euro countries’ cost.

“His goal has always been for Germany to be recognized and anchored in Europe, with less national political responsibility, and an acceptance of Germany paying the EU’s bills,” said Carl Graf von Hohenthal, a management adviser at public-relations firm Brunswick Group Inc. in Berlin. Merkel is “pro-EU, but she wants a bigger political voice for Germany in Europe and she doesn’t want to pay all the bills anymore,” he said.

Schaeuble, a lawyer, has served in Germany’s Bundestag, parliament’s lower house, since 1972. He gained a reputation as a troubleshooter after five years as then-Chancellor Helmut Kohl’s chief of staff and minister for special affairs from 1984 to 1989, the year the Berlin Wall fell. He also held the post of interior minister twice before becoming Merkel’s choice of finance minister in October.

Inside and Out

“Schaeuble knows the EU inside and out because he did the heavy lifting on Europe for Chancellor Kohl in the 1980s and 1990s,” said Ulrich Deupmann, the author of a Schaeuble biography and director of Berlin-based political advisory company Ideas.ag. “He’s been helping construct the EU since his time as Kohl’s chief of staff and in his role in getting the euro approved.”

His relationship with Merkel is complex because of her role in undermining him as Christian Democratic Union leader during a party financing scandal in the late 1990s. Schaeuble admitted taking a donation of 100,000 deutsche marks ($66,000) from an arms dealer who later fled the country before being convicted of tax evasion and sentenced to eight years in prison.

Schaeuble resigned as CDU chairman in 2000, meaning he would never become chancellor. His departure paved the way for Merkel’s ascent. Merkel blocked Schaeuble’s path again in 2004 by ruling against his candidacy for the mainly ceremonial office of German president.

‘Wealth of Experience’

Merkel appointed Schaeuble as her finance minister on Oct. 24. After debates over who would serve in her cabinet ended at 2 a.m., Merkel cited Schaeuble’s “wealth of experience” and said he had her confidence.

“Schaeuble is the person everybody assumes would have been a great chancellor,” said Gary Smith, executive director of the American Academy in Berlin. “Merkel can’t not have him. He’s the figure in the cabinet who gives her gravitas.”

It was Schaeuble who negotiated the unification treaty that brought East and West Germany together in 1990. That was when he first encountered Robert B. Zoellick, then chief U.S. negotiator in international talks that led to German reunification, and now World Bank president.

“Schaeuble served Germans and all the rest of us so well with his steadiness,” Zoellick said in an e-mail.

University Days

Hans-Peter Repnik, a former parliamentarian and a friend from university days, said Schaeuble has always used his “sharp intellect” to convince others of his views.

“If he feels he has to throw a stone very far into the water, he lets the waves ripple for a bit and in the end he mostly reaches his goals,” Repnik said in an interview.

He doesn’t always act multilaterally. The finance minister caused ripples in markets in May with a surprise ban on naked short-selling, which involves investors speculating on declines in companies that they don’t own. Frankfurt-based Deutsche Bank AG, Germany’s biggest bank, dropped as much as 3.7 percent the day after Schaeuble’s May 18 announcement and the euro slid to a four-year low.

Three weeks later, French President Nicolas Sarkozy lent his voice to the German campaign in a joint letter with Merkel to the EU, urging faster curbs in the 27-nation bloc on financial speculation. In response, the European Commission said it would accelerate proposals to regulate short selling and credit-default-swaps.

‘It Works’

“Sometimes one has to go ahead at a unilateral level and others will follow,” Schaeuble said in the interview in Berlin. “You see, it works.”

The minister grew up in Freiburg, a southwestern German city in the wine-growing region that borders France and Switzerland. It was this experience that honed his vision of an integrated Europe with Germany firmly anchored at its core, Repnik said.

“The Franco-German tension from the past was omnipresent until the great mood of optimism and reconciliation with France came about in the 1950s and 1960s,” Repnik said. “German unity and Europe. These are the two topics that have kept Wolfgang Schaeuble busy as long as I’ve known him.”

After an assassination attempt by a deranged man in 1990 left him paralyzed from the chest down, he returned to work within three months. Schaeuble, a chess player and music lover who used to play the violin, is regularly seen around Berlin exercising on a hand bike. Married with four children, he carries a battered 10-year-old briefcase to work.

Directing by Phone

The March EU session wasn’t the only time Schaeuble jeopardized his health for the EU. During a May 9 crisis meeting, the minister was rushed to the hospital in Brussels after reacting to medication. From his bed, he directed negotiations by phone, the Finance Ministry said, helping the EU craft an unprecedented $1 trillion loan package and bond purchases.

His rapport with U.S. Treasury Secretary Timothy F. Geithner, who offered advice in a phone call the day before, helped Schaeuble convince European finance ministers that the EU had to make a show of force on Greece, the ministry said.

He has earned the respect of Geithner, who refers to Schaeuble as one of the “adults” at the policy table.

Urged on by Schaeuble, the German parliament backed loan guarantees of 22.4 billion euros for Greece, more than a quarter of the euro region’s contribution of 80 billion euros, complemented by 30 billion euros from the IMF. German guarantees for the euro rescue package, totaling 750 billion euros, amount to as much as 147.6 billion euros.

No Specialist

He “makes no pretense of being a financial specialist, but he nevertheless cuts to the core of issues in common sense terms,” Zoellick said. “His words carry great weight with his colleagues.”

Schaeuble’s approach to the EU differs from that of Merkel, who grew up in communist East Germany and speaks some English and fluent Russian after study trips to the then-Soviet Union.

It was Schaeuble, who is comfortable in French and English, who floated the idea of a European Monetary Fund, modeled after the IMF to lend to troubled euro members states in return for a say in their budgetary affairs. Merkel adopted the idea, highlighting the envisaged expulsion of euro zone members as a measure of last resort.