Hans-Werner Sinn - German economist HARDtalk


Hans-Werner Sinn - German economist

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Germany's pivotal role in resolving the eurozone crisis has sparked

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international discussion. My guest, Hans-Werner Sinn, is at the heart

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of that debate. He is an influential and controversial

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economist. He joined colleagues to oppose any move in relation to the

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bank debt. There is genuine public Hans-Werner Sinn, Welcome to

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HARDtalk. Germany's constitutional court ruled last week that the

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European bailout fund is not unconstitutional. You were one of

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the plaintiffs who spoke out against it. You have appeared on

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television in various newspapers as well. Why do you feel so strongly

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about that bailout fund? I find the fund is to be. The right of losses

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that have to be covered are even bigger than for the fun. There is

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no solution imposed on the burden of the tax players. -- payers.

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There might be an equity swap. Those who hold the debts may have

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to accept haircuts. They have to accept they will not get their

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money back. Why should someone else pays the bill? There were many

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plaintiffs. The kind of language you used in front of the

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constitutional court, one of the highest courts in the land, you

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called them a false therapy, a bottomless pit. This is fiery

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rhetoric. That is the way it is. Actually, I was not a plaintiff but

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a witness. I gave my opinion. It is not that I am against any liquidity.

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I will distinguish between liquidity crisis and solvency

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crisis. If there is a liquidity crisis, we can use money to help

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countries out for a limited period of time. What we cannot do is

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replace the capital market and the losses of the investors. We can't

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impose loss by third parties are not involved. If creditors and

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investors have a problem, we should not look for the taxpayer to take

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over. On your website, you you not have a picture, an eagle drowning?

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That used to be the case. It was an exact calculation of potential

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losses. We have quite a number of loss of potential risk. What people

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don't know is the target risk. There are in place and credits from

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a bank to be central banks of other countries, which use the money

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printing press to solve problems. If they cannot repay this credit

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which they were drawing out of the ECB system, losses will be

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distributed to other European countries. Germany's losses will be

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in the order of 600 billion euros and more if all the funds which

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have been put on the table are being used. The total rescue fund

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that has now been given to the southern countries are already in

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the order of the magnitude of 1.4 trillion and 1.5 trillion has been

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awarded in the sense that it can be taken. It will be more than 2.2

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trillion. These are huge numbers. The public does not know about that.

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Their arguments that, for example, Germany and other countries which

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are in surplus should pay. They should take over these sums. Of

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course. But in what magnitude? Everything has to have limits. I am

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afraid the public internationally does not know the amount of credit

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that has already been provided. Germany, alone, has 750 target

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created which the wonders Bank has been forced to give to other

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members. He speaks strongly against any notion of Banking Union in the

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eurozone. No. This is not true. We are not the -- against the Banking

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Union. We need it for a common supervisory authority. You cannot

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have a competition of national agencies. This will erode. He wrote

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with other academics this summer. He published an open letter to

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announcing moves towards what was seen as a Banking Union in the

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eurozone. You are not right. You are not fighting this properly. We

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are not arguing against the Banking Union but against common Pauls,

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common funds that would shift the burden, the risk from one country

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to another. It is a different thing. We are in favour of making unions.

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-- banking union. It was 270 economic professors in Germany.

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There have been in various numbers cited in various publications as to

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how many people signed the letter. Angela Merkel disagreed very

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strongly with the claims from the letter. She said that this summer's

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euros an agreement to allow bailout funds was not about additional

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liability but about banking... Better baking cakes -- supervision

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which is what you want. If that is the case, then we are fine. On the

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home page, I was not the initiator of that. I was cited as the other

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269 people of my profession. We will see an English edition and you

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will see it not -- it is not against baking unions but the

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socialisation of bank debt. The banking debt is 9.3 trillion euros.

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Who should be able to bail about? - - about? Who should bear it? The

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If they have aim is investment, they should bear the consequences

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of that. You save the letter you wrote with of a colleague's...

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Sorry, again, wrong. I did not write the letter. You put your name

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to the letter. Did you agree to the contents? Yes. But I did not write

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it. There was almost an equal number of academics he wrote a

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counter letter in Germany, disagreeing with the contents.

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The other letter is not a counter argument but a complement. It

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stressed that we needed regulation which was not mentioned in the

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first letter. The first group agrees to the second group. There

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is now a third letter. It is now being published by the Institution

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to collect the majority of opinion of the German economists. That was

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signed by myself and the writers of the other matter. There you will

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see there is no disagreement. What I realise... If you see there is

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full agreement, how come the German media was picking up a bar-room

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debate among economists? A long forming chairman condemned that

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letter. He said there were questionable arguments in it and

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national cliches. It is not enough to sharply criticised risk. You

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have 2.2 alternatives. That was not agreement. That was not part of the

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other group. His letter was signed by nine people. 470 economics

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professors in Germany signed the two other letters. It agreed that

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we do need a common supervisory authorities -- authority. But we

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should not socialise the bank debt. His story has been distorted by the

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press. It is unbelievable what kind of things they make up. Let us move

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on to what you have definitely said. You were one of the first prominent

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voices to say that Greece has to leave the eurozone. What then?

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that is not right. That is not true. I never said they have to leave.

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This is the decision of the Greek government. No-one should tell the

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Greek what to do. It is their decision. They cannot expect to

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receive more money to stay in. There must be limits. Greece has

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received 360 billion euros. That includes haircut. Per person,

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42,000 euros, or four families, 100,000 euros. For a family of

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three. How long do you want to go? This procedure makes little sense.

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At some stage, the help given from one country to another must be

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limited. We are not living in a land of cocaine were everything is

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available. We are having limited budget constraints. Therefore,

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these budget constraints need to be shown. What happens in the moment,

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the poor money to countries with Hooch account deficits. It is

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useless. Should Greece stay in the eurozone? I would advise them not

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to stay. I don't claim that they exit. It is their decision. Why?

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Because it is too expensive. The low interest rates brought an

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inflationary boom to the countries of the south. Greece in particular.

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Governments pay higher wages and employed more people with foreign

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credit. The whole price level all this economy has risen to a level

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which made the country and competitive. The prices increase

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would have to decline by 30.9 % to be competitive. Given these high

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prices, they are simply having a huge current account deficit which

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needs to be financed by someone else. Since the beginning of the

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crisis, they have huge the printing press to solve the problem. -- used.

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You would recommend that they leave but you do not tell them they

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should leave. You have argued for the opt-in, opt out here we for the

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eurozone. Please explain how that will work. We have some countries

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which, through this artificial inflationary boom, which are simply

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too expensive. The prices will have to come down. They will need real

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or devaluation. But this real devaluation is difficult to have.

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You will have an austerity programme which will push prices

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down. The obstacles are huge. You drive countries to the brink of

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civil war. This is not a possibility. Greece has a quarter

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of the work force unemployed. Half of the young people are unemployed.

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How long can a country bear this situation? You sacrifice one

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generation of young people by doing that. It is much better to offer

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them a possibility to temporarily leave the euro, return to the

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drachma, find a new exchange rate, a price level at which they are

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competitive at which new jobs will pop up. Then, after a waiting

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period when the exchange rate has found equilibrium, they can enter

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the entry gate to the eurozone and we enter. They can legally stay a

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part of the eurozone during this process, rather than talk about a

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catastrophe if someone leaves the eurozone. It is better to make it a

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Hughes said Didier would be a catastrophe if they did not. If you

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are warning of a potential civil war. We heard just the other day as

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an exit from the eurozone would be devastating for Greece. No

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democracy could survive such a drop in living standards. I do not think

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this is right. Am not sure if he is an economist. We have strong

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economic or opinions. They agreed that if you need a realignment in

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the currency union you'll have difficulty. You cannot have it

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through cutting wages and prices. This attempts to cut the wages and

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prices through austerity programmes leads to an enormous resistance of

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the unions. That makes the difficulty. Once UN is that

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everything is fine. Everything will become cheaper in proportion. Even

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the debt contracts in Greece will be converted to drachma. The

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balances of companies would stay in order. Much has been spoken about

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about what it would cost the other members of the eurozone if existing

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members will leave the eurozone. It is predicted by the German Council

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of economic experts that it would cost the German taxpayer 3.3

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trillion euros. That is 4.3 trillion dollars. That could well

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be the case. Let us hope that he does not happen. I do not advocate

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the collapse of the eurozone. This is by no means my intention. We

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have to strengthen EU wrote. We give our standards against the loss

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of Economics. In the eurozone, if the price level is 60% above its

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competitors, as is the case in Greece, they have to decline by 39%.

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It is not possible. All the politicians may wish it and may

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proclaim it, some things are not possible. Keeping to the laws of

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economics, what concerns the German taxpayer is what the eurozone

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crisis is costing them. You say a lot in your television appearances

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as Germany is paying too much in the current crisis. A German member

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for the Christian Democrats says he believes Germany is paying the same

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as everyone else. He says it just happens to be that there are more

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Germans then there are then other countries. It is a big country.

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That is true. I never denied that. He said Germany is playing to Les

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Murray is paying too much. finish pay more in per capita terms.

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The Dutch pay the same. They are not arguing that we should not pay,

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of course we should pay. They should not be unlimited payments.

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You're coming from Britain, why don't the British pay? Britain is

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not in the reserve. Germany has become... It has nothing to do with

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the eurozone, he has to do with helping banks. There are a lot of

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financial connections between the City of London and the rest of the

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reserves. Everyone else should pay, why not you? Influential financial

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figures have described the scenario where they say Germany should lead

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to all leave for the reserve. It has become a subject of debate

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across the eurozone. Germany needs to show more leadership. If they do

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not they should lead, is as an option? Winnie's as leader he means

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repaid. -- when he says leader. When investors speculate that

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Germany should open the purse, this is well understandable. Do not take

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this as an unbiased opinion. array cultural question? Looking at

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German public opinion, is there an uncomfortable sense of taking

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Ladyship because of the World War II past? -- taking leadership. For

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decades Ladyship by Germany was the last thing the world wanted. The

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world leader was taboo. It caused the tongue to not. Is it because of

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the history that Germany is reluctant to lead? He means

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everything but leadership, he means payment. I agree that Germany

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should not lead. Because of the history this is not the country

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that can have a leading role in Europe. Because of its last iOS

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Nazi past, Germany has asserted itself. Germans have taken it on

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the chin for far too long, they have spent too much money on Europe.

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Why? Because they swooned over the idea of the United States of Europe

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in the hope that people would forget that they were Germans.

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Deleting that Germans now might be tempted to turn their back on

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Europe? At some stage it could happen. The polls show that more

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and more people become nervous about what this development. This

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is one of my concerns. I am very much concerned that the policy of

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making private debt contracts and private debt contracts is dangerous

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for Europe. The strength of the market economy - the difficulty

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between a debt or adequate tour is being a resort. There is a tension

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between these two groups. It would be a mistake to make private credit

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contracts public. One country becomes degraded or another. That

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is what we're doing. Our children, Germans will become clear the doors.

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They would have to go to the other countries and reclaim the money. I

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cannot imagine this as a peaceful process. At the moment you were

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going on every poll puts, sending your message. He said that when you

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were a boy the Dewar tended to be a missionary. Your wife has so that

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you are. If he has been quoted by a magazine as being an Economist

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propagandist. Had you see yourself? When I was 14 years old I was under

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the influence of a priest. He told us nice stories about things in

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Africa which the Church had done. Are you and economists missionary

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