JIM LEHRER: The European view on the economy comes from the economics minister of Germany. Our economics correspondent, Paul Solman, had one of his “making sense” conversations with him earlier this week.
PAUL SOLMAN: Thirty-seven-year-old Karl-Theodor zu Guttenberg, the conservative economics minister of Europe’s largest economy, came to America this week to meet with the Obama economic team.
The U.S. has been pressing Germany to step up its stimulus spending to spur the world economy in advance of the G-20 meeting next month. But zu Guttenberg’s boss, German Chancellor Angela Merkel, and Germany’s main partner, France, have been pushing back hard, urging all Europe to unite behind a plan calling for less stimulus, more regulation.
The global crash has hammered Germany hard. The so-called “workshop of the world,” long dependent on exports, is in shell shock. Long known for its fears of inflation, however, Germany is worried about overspending, on companies like Opel, for example, owned by General Motors.
With some 28,000 German employees, Opel is seeking a domestic bailout, while the American mother ship tries to stay afloat. Thus, zu Guttenberg met with, among others, G.M. boss Rick Wagoner.
Known at home as “up-and-coming” and a “high flyer,” he’s a politician with a pedigree dating back to the 12th century. Baron zu Guttenberg lives in the family castle. His grandfather and great-granduncle were part of the plot to kill Hitler. The latter, pictured here, was tortured and executed for his role.
Guttenberg’s wife, a countess, is a direct descendent of the father of modern Germany, Otto von Bismarck. We sat down with the minister on Tuesday.
PAUL SOLMAN: Welcome.
KARL-THEODOR ZU GUTTENBERG, Germany’s economic minister: Thank you very much.
PAUL SOLMAN: How bad are things in German?
KARL-THEODOR ZU GUTTENBERG: Things are serious. The situation has still not reached the bottom yet. We await the bottom for the second half of the year and hopefully a rising element afterwards.
PAUL SOLMAN: How bad might it get?
KARL-THEODOR ZU GUTTENBERG: I don’t think it might get dramatic, but it will get bad.
PAUL SOLMAN: Not ’30s, not 1930s?
KARL-THEODOR ZU GUTTENBERG: No, I don’t see the ghost of the ’30s spooking around. One is protectionism; the other one is the danger of inflation. If that happens without any counteraction at the very moment, then we may see the ’30s again. But I think we have took some measures nationally, internationally that could lead us out of the way here.
Modest stimulus spending
PAUL SOLMAN: The stimulus money you're spending is, by some peoples' standards, modest. You've got $100 billion or so stimulus package over two years in Germany, yes?
KARL-THEODOR ZU GUTTENBERG: Yes. And in that regard, I'd like to object. It's $100 billion. It's still a rather remarkable amount of money. And its 4 percent of our GDP. We are at the top of the European member states; we are top of the list there. We are number three worldwide, after the U.S., after China, which is taking a serious amount of money in demand.
PAUL SOLMAN: Well, China has the same size economy as yours, but five times as large a stimulus package.
KARL-THEODOR ZU GUTTENBERG: A highly different economy, not as stable as ours, not with as many security factors in its economy as we have for the labor markets, for other things, so there's a lot of history there. And $100 billion, again, 4 percent of GDP in two years. Mentioning the things for three years and other things is still quite something.
We need to see what is caused by this -- by the packages we have offered so far. And then we can talk about any other measures, maybe. But, first of all, we need to see the effect.
Second thing is, we have to, let's say, regain a momentum of sustainability and not to overburden the next generations.
PAUL SOLMAN: Opel, General Motors' famous and very successful product in Germany, made in Germany, can you let Opel fail due to market forces?
KARL-THEODOR ZU GUTTENBERG: It really depends on the validity of the concept that will be offered by G.M. Detroit, which is the mother company, as such. But don't bring us in a situation that we have to take taxpayers' money into our hands and cannot even be sure where it goes to.
We are being asked: How could you dare to help somebody if this help brings us to lose jobs on the other end of the scale?
PAUL SOLMAN: Like, for example?
KARL-THEODOR ZU GUTTENBERG: That means, if you take money we actually need for medium-sized and smaller-sized companies, which were in a good situation before the crisis and which really need help, and that help is missing then, because we just followed, let's say, the amount of noise of the outrage and the cry out from a region, then that cannot be enough.
And there we are on very dangerous grounds, and we have to be very careful not to act in an unusual way.
Public opinion in Germany
PAUL SOLMAN: The crisis, do people in Germany think it's our fault, that is, America's fault?
KARL-THEODOR ZU GUTTENBERG: Some do.
PAUL SOLMAN: How many? What percentage?
KARL-THEODOR ZU GUTTENBERG: Many don't. Let's say it that. What probably everybody can quote is a "housing bubble," but if you ask the German people, "Could you please explain such a thing or could you please try to explain what happened in the U.S. and what led to the situation?" Lehman Brothers was and other things. Nobody could probably answer that question, or just a few.
They tend to, more or less, blame a whole scenery, which -- a financial scenery which we have in Germany, as well, which we have in Europe, which is closely tied together, which shows, again, the global aspects we are talking about.
So it's not a mutual finger-pointing. And I think, from the German side -- and I hope it isn't the other way around -- maybe talk about AIG and other things, so we're in similar situations. We have to answer to this crisis together with common structures, probably with new structures, as well.
The G-20 meeting offers chances here. We should use the opportunity not only to talk about, as we did at the beginning, not only to talk about stimulus packages, but to talk about better regulation, better coordination. We have to talk about early warning systems. We have to talk about strengthening global institutions, like the IMF, like the World Bank, other things to have instruments to tackle that very challenging situation were in.
PAUL SOLMAN: I think many Americans commentators, many American economists are saying, look, that's all obviously true, but if we don't do enough soon enough, we have the danger -- we're running the risk of the downward spiral worldwide continuing down and down. And the problem with the G-20 is there isn't enough action, there isn't enough massive commitment of funds to replace the individual and business spending that isn't being done.
KARL-THEODOR ZU GUTTENBERG: We have to look critically at those countries who don't do enough, and I wouldn't point at Germany in this regard, and I certainly don't point to the U.S. and to others. But within the European Union, there are some who could do more. There are globally some who could do more...
PAUL SOLMAN: "Some" meaning, like, France or England...
KARL-THEODOR ZU GUTTENBERG: Oh, you always have to be careful whom to blame, but...
PAUL SOLMAN: You can't blame anybody. Not on television, right?
KARL-THEODOR ZU GUTTENBERG: But look to the southern borders and other things, so there is...
PAUL SOLMAN: The southern borders?
KARL-THEODOR ZU GUTTENBERG: Let's say the southern borders, but you have to cross two borders at least to come to one of those. And there could be done more.
Fears of inflation
PAUL SOLMAN: Is one of the ghosts that spooks Germany, as it long has, the, you know, Weimar hyper-inflation of the '20s? And is that possibly making you more conservative than you would otherwise be?
KARL-THEODOR ZU GUTTENBERG: Inflation is -- I don't -- not only on the horizon. It is a threatening part and one we have to tackle together, as well.
PAUL SOLMAN: Isn't this fundamentally a psychological crisis? I mean, we have as many people in the world as we had before. We have the same resources we had before. Are people trusting enough in the system and in other peoples' promises, their credit, to make the kind of effort they were making before? And isn't that fundamentally psychological?
KARL-THEODOR ZU GUTTENBERG: Excellent point. To a certain extent, yes, but it's not only the way -- it's not only the -- it's not a one-way road. Can people trust the system, but also can the system trust itself? And for instance, talking about the inter-banking trust, as such, which is still -- this is the mildest expression I can find -- disturbed.
PAUL SOLMAN: "Disturbed"?
KARL-THEODOR ZU GUTTENBERG: "Disturbed," and this is the best euphemism I can find.
PAUL SOLMAN: In other words, my bank won't lend to your bank because my bank is afraid your bank is going to go under.
KARL-THEODOR ZU GUTTENBERG: Exactly. Now, we're talking about toxic assets and other things which haven't been resolved yet.
But there's a lot about trust, certainly. There's a lot about the question, do we offer, then, when thinking about psychological effects, do we offer a certain amount of optimism? Do we offer the people -- I'm not quoting Obama here, but some things are quite true for Germany, as well. Are we just being part in the race for the worst message of the day, again and again? And that won't be helpful at all.
PAUL SOLMAN: But as you're sitting here now, I mean, you're weighing, presumably, your answers to every question in that way. "Is this too negative? Is this falsely positive? What tone am I striking here and what effect will it have on viewers in the United States, even?"
KARL-THEODOR ZU GUTTENBERG: Well, I think we can allow ourselves a good amount of positive thinking, and I do know that some Americans...
PAUL SOLMAN: Encourage, you mean, not just allow...
KARL-THEODOR ZU GUTTENBERG: Encourage, as well, encourage positive thinking, but allow ourselves, and I think that's needed, and to tie it together with realism and pragmatism that we need in those times.
PAUL SOLMAN: Baron zu Guttenberg, thank you very much.
KARL-THEODOR ZU GUTTENBERG: Thank you very much.