:00:16. > :00:22.Germany's pivotal role in resolving the eurozone crisis has sparked
:00:22. > :00:27.international discussion. My guest, Hans-Werner Sinn, is at the heart
:00:27. > :00:36.of that debate. He is an influential and controversial
:00:36. > :00:46.economist. He joined colleagues to oppose any move in relation to the
:00:46. > :01:10.
:01:10. > :01:19.bank debt. There is genuine public Hans-Werner Sinn, Welcome to
:01:19. > :01:24.HARDtalk. Germany's constitutional court ruled last week that the
:01:24. > :01:29.European bailout fund is not unconstitutional. You were one of
:01:30. > :01:35.the plaintiffs who spoke out against it. You have appeared on
:01:35. > :01:45.television in various newspapers as well. Why do you feel so strongly
:01:45. > :01:45.
:01:45. > :01:52.about that bailout fund? I find the fund is to be. The right of losses
:01:52. > :02:01.that have to be covered are even bigger than for the fun. There is
:02:01. > :02:07.no solution imposed on the burden of the tax players. -- payers.
:02:07. > :02:14.There might be an equity swap. Those who hold the debts may have
:02:14. > :02:19.to accept haircuts. They have to accept they will not get their
:02:19. > :02:26.money back. Why should someone else pays the bill? There were many
:02:26. > :02:30.plaintiffs. The kind of language you used in front of the
:02:31. > :02:36.constitutional court, one of the highest courts in the land, you
:02:36. > :02:45.called them a false therapy, a bottomless pit. This is fiery
:02:45. > :02:53.rhetoric. That is the way it is. Actually, I was not a plaintiff but
:02:53. > :03:00.a witness. I gave my opinion. It is not that I am against any liquidity.
:03:00. > :03:06.I will distinguish between liquidity crisis and solvency
:03:06. > :03:11.crisis. If there is a liquidity crisis, we can use money to help
:03:11. > :03:21.countries out for a limited period of time. What we cannot do is
:03:21. > :03:22.
:03:22. > :03:28.replace the capital market and the losses of the investors. We can't
:03:28. > :03:32.impose loss by third parties are not involved. If creditors and
:03:32. > :03:42.investors have a problem, we should not look for the taxpayer to take
:03:42. > :03:48.
:03:48. > :03:54.over. On your website, you you not have a picture, an eagle drowning?
:03:55. > :04:03.That used to be the case. It was an exact calculation of potential
:04:03. > :04:12.losses. We have quite a number of loss of potential risk. What people
:04:12. > :04:17.don't know is the target risk. There are in place and credits from
:04:17. > :04:23.a bank to be central banks of other countries, which use the money
:04:23. > :04:28.printing press to solve problems. If they cannot repay this credit
:04:28. > :04:33.which they were drawing out of the ECB system, losses will be
:04:33. > :04:39.distributed to other European countries. Germany's losses will be
:04:39. > :04:47.in the order of 600 billion euros and more if all the funds which
:04:47. > :04:53.have been put on the table are being used. The total rescue fund
:04:53. > :05:01.that has now been given to the southern countries are already in
:05:01. > :05:08.the order of the magnitude of 1.4 trillion and 1.5 trillion has been
:05:08. > :05:18.awarded in the sense that it can be taken. It will be more than 2.2
:05:18. > :05:19.
:05:19. > :05:24.trillion. These are huge numbers. The public does not know about that.
:05:25. > :05:32.Their arguments that, for example, Germany and other countries which
:05:32. > :05:40.are in surplus should pay. They should take over these sums. Of
:05:40. > :05:44.course. But in what magnitude? Everything has to have limits. I am
:05:44. > :05:53.afraid the public internationally does not know the amount of credit
:05:53. > :05:59.that has already been provided. Germany, alone, has 750 target
:05:59. > :06:06.created which the wonders Bank has been forced to give to other
:06:06. > :06:15.members. He speaks strongly against any notion of Banking Union in the
:06:15. > :06:20.eurozone. No. This is not true. We are not the -- against the Banking
:06:20. > :06:29.Union. We need it for a common supervisory authority. You cannot
:06:29. > :06:35.have a competition of national agencies. This will erode. He wrote
:06:35. > :06:39.with other academics this summer. He published an open letter to
:06:39. > :06:44.announcing moves towards what was seen as a Banking Union in the
:06:44. > :06:50.eurozone. You are not right. You are not fighting this properly. We
:06:50. > :06:55.are not arguing against the Banking Union but against common Pauls,
:06:55. > :07:04.common funds that would shift the burden, the risk from one country
:07:04. > :07:12.to another. It is a different thing. We are in favour of making unions.
:07:12. > :07:17.-- banking union. It was 270 economic professors in Germany.
:07:17. > :07:22.There have been in various numbers cited in various publications as to
:07:22. > :07:30.how many people signed the letter. Angela Merkel disagreed very
:07:30. > :07:34.strongly with the claims from the letter. She said that this summer's
:07:34. > :07:39.euros an agreement to allow bailout funds was not about additional
:07:39. > :07:48.liability but about banking... Better baking cakes -- supervision
:07:48. > :07:55.which is what you want. If that is the case, then we are fine. On the
:07:55. > :08:01.home page, I was not the initiator of that. I was cited as the other
:08:01. > :08:08.269 people of my profession. We will see an English edition and you
:08:08. > :08:16.will see it not -- it is not against baking unions but the
:08:16. > :08:26.socialisation of bank debt. The banking debt is 9.3 trillion euros.
:08:26. > :08:27.
:08:27. > :08:37.Who should be able to bail about? - - about? Who should bear it? The
:08:37. > :08:43.
:08:43. > :08:50.If they have aim is investment, they should bear the consequences
:08:50. > :08:58.of that. You save the letter you wrote with of a colleague's...
:08:58. > :09:04.Sorry, again, wrong. I did not write the letter. You put your name
:09:04. > :09:09.to the letter. Did you agree to the contents? Yes. But I did not write
:09:09. > :09:16.it. There was almost an equal number of academics he wrote a
:09:16. > :09:21.counter letter in Germany, disagreeing with the contents.
:09:21. > :09:25.The other letter is not a counter argument but a complement. It
:09:25. > :09:32.stressed that we needed regulation which was not mentioned in the
:09:32. > :09:41.first letter. The first group agrees to the second group. There
:09:41. > :09:47.is now a third letter. It is now being published by the Institution
:09:47. > :09:53.to collect the majority of opinion of the German economists. That was
:09:53. > :10:00.signed by myself and the writers of the other matter. There you will
:10:00. > :10:04.see there is no disagreement. What I realise... If you see there is
:10:04. > :10:12.full agreement, how come the German media was picking up a bar-room
:10:12. > :10:16.debate among economists? A long forming chairman condemned that
:10:16. > :10:22.letter. He said there were questionable arguments in it and
:10:22. > :10:30.national cliches. It is not enough to sharply criticised risk. You
:10:30. > :10:37.have 2.2 alternatives. That was not agreement. That was not part of the
:10:37. > :10:43.other group. His letter was signed by nine people. 470 economics
:10:43. > :10:52.professors in Germany signed the two other letters. It agreed that
:10:52. > :10:58.we do need a common supervisory authorities -- authority. But we
:10:58. > :11:02.should not socialise the bank debt. His story has been distorted by the
:11:02. > :11:08.press. It is unbelievable what kind of things they make up. Let us move
:11:08. > :11:14.on to what you have definitely said. You were one of the first prominent
:11:14. > :11:21.voices to say that Greece has to leave the eurozone. What then?
:11:21. > :11:27.that is not right. That is not true. I never said they have to leave.
:11:27. > :11:31.This is the decision of the Greek government. No-one should tell the
:11:31. > :11:40.Greek what to do. It is their decision. They cannot expect to
:11:40. > :11:49.receive more money to stay in. There must be limits. Greece has
:11:49. > :11:56.received 360 billion euros. That includes haircut. Per person,
:11:56. > :12:03.42,000 euros, or four families, 100,000 euros. For a family of
:12:03. > :12:08.three. How long do you want to go? This procedure makes little sense.
:12:08. > :12:13.At some stage, the help given from one country to another must be
:12:13. > :12:20.limited. We are not living in a land of cocaine were everything is
:12:20. > :12:26.available. We are having limited budget constraints. Therefore,
:12:26. > :12:31.these budget constraints need to be shown. What happens in the moment,
:12:31. > :12:37.the poor money to countries with Hooch account deficits. It is
:12:37. > :12:45.useless. Should Greece stay in the eurozone? I would advise them not
:12:45. > :12:53.to stay. I don't claim that they exit. It is their decision. Why?
:12:53. > :13:00.Because it is too expensive. The low interest rates brought an
:13:00. > :13:04.inflationary boom to the countries of the south. Greece in particular.
:13:04. > :13:08.Governments pay higher wages and employed more people with foreign
:13:09. > :13:13.credit. The whole price level all this economy has risen to a level
:13:13. > :13:21.which made the country and competitive. The prices increase
:13:21. > :13:25.would have to decline by 30.9 % to be competitive. Given these high
:13:25. > :13:31.prices, they are simply having a huge current account deficit which
:13:31. > :13:39.needs to be financed by someone else. Since the beginning of the
:13:39. > :13:43.crisis, they have huge the printing press to solve the problem. -- used.
:13:43. > :13:50.You would recommend that they leave but you do not tell them they
:13:50. > :13:56.should leave. You have argued for the opt-in, opt out here we for the
:13:56. > :14:03.eurozone. Please explain how that will work. We have some countries
:14:03. > :14:09.which, through this artificial inflationary boom, which are simply
:14:10. > :14:15.too expensive. The prices will have to come down. They will need real
:14:15. > :14:18.or devaluation. But this real devaluation is difficult to have.
:14:18. > :14:24.You will have an austerity programme which will push prices
:14:24. > :14:29.down. The obstacles are huge. You drive countries to the brink of
:14:29. > :14:34.civil war. This is not a possibility. Greece has a quarter
:14:35. > :14:39.of the work force unemployed. Half of the young people are unemployed.
:14:39. > :14:45.How long can a country bear this situation? You sacrifice one
:14:45. > :14:51.generation of young people by doing that. It is much better to offer
:14:51. > :14:55.them a possibility to temporarily leave the euro, return to the
:14:55. > :15:03.drachma, find a new exchange rate, a price level at which they are
:15:03. > :15:08.competitive at which new jobs will pop up. Then, after a waiting
:15:08. > :15:16.period when the exchange rate has found equilibrium, they can enter
:15:16. > :15:20.the entry gate to the eurozone and we enter. They can legally stay a
:15:20. > :15:25.part of the eurozone during this process, rather than talk about a
:15:25. > :15:34.catastrophe if someone leaves the eurozone. It is better to make it a
:15:34. > :15:39.Hughes said Didier would be a catastrophe if they did not. If you
:15:39. > :15:45.are warning of a potential civil war. We heard just the other day as
:15:45. > :15:52.an exit from the eurozone would be devastating for Greece. No
:15:52. > :15:59.democracy could survive such a drop in living standards. I do not think
:15:59. > :16:09.this is right. Am not sure if he is an economist. We have strong
:16:09. > :16:13.
:16:13. > :16:17.economic or opinions. They agreed that if you need a realignment in
:16:17. > :16:22.the currency union you'll have difficulty. You cannot have it
:16:22. > :16:29.through cutting wages and prices. This attempts to cut the wages and
:16:29. > :16:34.prices through austerity programmes leads to an enormous resistance of
:16:34. > :16:40.the unions. That makes the difficulty. Once UN is that
:16:40. > :16:45.everything is fine. Everything will become cheaper in proportion. Even
:16:45. > :16:52.the debt contracts in Greece will be converted to drachma. The
:16:52. > :16:58.balances of companies would stay in order. Much has been spoken about
:16:58. > :17:04.about what it would cost the other members of the eurozone if existing
:17:04. > :17:08.members will leave the eurozone. It is predicted by the German Council
:17:08. > :17:17.of economic experts that it would cost the German taxpayer 3.3
:17:17. > :17:24.trillion euros. That is 4.3 trillion dollars. That could well
:17:24. > :17:31.be the case. Let us hope that he does not happen. I do not advocate
:17:31. > :17:35.the collapse of the eurozone. This is by no means my intention. We
:17:35. > :17:45.have to strengthen EU wrote. We give our standards against the loss
:17:45. > :17:45.
:17:45. > :17:55.of Economics. In the eurozone, if the price level is 60% above its
:17:55. > :18:02.competitors, as is the case in Greece, they have to decline by 39%.
:18:02. > :18:12.It is not possible. All the politicians may wish it and may
:18:12. > :18:14.
:18:14. > :18:18.proclaim it, some things are not possible. Keeping to the laws of
:18:18. > :18:25.economics, what concerns the German taxpayer is what the eurozone
:18:25. > :18:32.crisis is costing them. You say a lot in your television appearances
:18:32. > :18:36.as Germany is paying too much in the current crisis. A German member
:18:36. > :18:40.for the Christian Democrats says he believes Germany is paying the same
:18:40. > :18:45.as everyone else. He says it just happens to be that there are more
:18:45. > :18:51.Germans then there are then other countries. It is a big country.
:18:51. > :18:56.That is true. I never denied that. He said Germany is playing to Les
:18:56. > :19:04.Murray is paying too much. finish pay more in per capita terms.
:19:04. > :19:11.The Dutch pay the same. They are not arguing that we should not pay,
:19:11. > :19:17.of course we should pay. They should not be unlimited payments.
:19:17. > :19:22.You're coming from Britain, why don't the British pay? Britain is
:19:22. > :19:27.not in the reserve. Germany has become... It has nothing to do with
:19:27. > :19:30.the eurozone, he has to do with helping banks. There are a lot of
:19:30. > :19:38.financial connections between the City of London and the rest of the
:19:39. > :19:44.reserves. Everyone else should pay, why not you? Influential financial
:19:44. > :19:48.figures have described the scenario where they say Germany should lead
:19:48. > :19:53.to all leave for the reserve. It has become a subject of debate
:19:53. > :20:01.across the eurozone. Germany needs to show more leadership. If they do
:20:01. > :20:10.not they should lead, is as an option? Winnie's as leader he means
:20:10. > :20:18.repaid. -- when he says leader. When investors speculate that
:20:18. > :20:24.Germany should open the purse, this is well understandable. Do not take
:20:24. > :20:30.this as an unbiased opinion. array cultural question? Looking at
:20:30. > :20:38.German public opinion, is there an uncomfortable sense of taking
:20:38. > :20:44.Ladyship because of the World War II past? -- taking leadership. For
:20:44. > :20:53.decades Ladyship by Germany was the last thing the world wanted. The
:20:54. > :21:03.world leader was taboo. It caused the tongue to not. Is it because of
:21:03. > :21:09.the history that Germany is reluctant to lead? He means
:21:09. > :21:12.everything but leadership, he means payment. I agree that Germany
:21:12. > :21:20.should not lead. Because of the history this is not the country
:21:20. > :21:30.that can have a leading role in Europe. Because of its last iOS
:21:30. > :21:31.
:21:31. > :21:37.Nazi past, Germany has asserted itself. Germans have taken it on
:21:37. > :21:41.the chin for far too long, they have spent too much money on Europe.
:21:41. > :21:45.Why? Because they swooned over the idea of the United States of Europe
:21:45. > :21:48.in the hope that people would forget that they were Germans.
:21:48. > :21:58.Deleting that Germans now might be tempted to turn their back on
:21:58. > :21:59.
:21:59. > :22:04.Europe? At some stage it could happen. The polls show that more
:22:05. > :22:11.and more people become nervous about what this development. This
:22:11. > :22:16.is one of my concerns. I am very much concerned that the policy of
:22:16. > :22:25.making private debt contracts and private debt contracts is dangerous
:22:25. > :22:30.for Europe. The strength of the market economy - the difficulty
:22:30. > :22:37.between a debt or adequate tour is being a resort. There is a tension
:22:37. > :22:44.between these two groups. It would be a mistake to make private credit
:22:44. > :22:54.contracts public. One country becomes degraded or another. That
:22:54. > :22:56.
:22:56. > :23:00.is what we're doing. Our children, Germans will become clear the doors.
:23:00. > :23:05.They would have to go to the other countries and reclaim the money. I
:23:05. > :23:10.cannot imagine this as a peaceful process. At the moment you were
:23:10. > :23:16.going on every poll puts, sending your message. He said that when you
:23:16. > :23:20.were a boy the Dewar tended to be a missionary. Your wife has so that
:23:20. > :23:30.you are. If he has been quoted by a magazine as being an Economist
:23:30. > :23:31.
:23:31. > :23:41.propagandist. Had you see yourself? When I was 14 years old I was under
:23:41. > :23:46.
:23:46. > :23:53.the influence of a priest. He told us nice stories about things in
:23:53. > :23:58.Africa which the Church had done. Are you and economists missionary