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