'Bad cop' Schaeuble takes eurozone farewell bow

Alex PIGMAN
 

German Finance Minister Wolfgang Schaeuble, the warhorse of the debt crisis, attends his final meeting of eurozone ministers on Monday as variously the most loathed or loved figures in EU politics.

Schaeuble, 75, is the acerbic architect of eurozone austerity, who over eight years of financial turmoil in Europe imposed his tough-love vision of how to run an economy with hard-up and often desperate partners such as Ireland (Other OTC: IRLD - news) , Portugal and most dramatically, Greece.

One of Germany's most popular politicians, Schaeuble steps down after eight years in office to become speaker of the new parliament following elections that saw inroads by far right nationalists.

An object of hatred at protests across Europe, Schaeuble bows out of the Eurogroup, the monthly meeting of eurozone finance ministers, immensely respected by his minister partners and already a political icon who has left an unquestioned mark on Europe.

"Schaeuble in a way personifies German brutality and seriousness, but he is also a delectable character," said former French finance minister Michel Sapin, who expressed admiration for the man's wit and love of Europe.

"And he is the only one in the room who could say: I know the Greek debt crisis since day one," added Sapin.

- 'Hates the markets' -

Sapin represented France in 2015 at the darkest moments of the eurozone debt crisis, when Schaeuble openly called for Greece to leave the eurozone temporarily, breaking a taboo and shocking many.

A close ally of German Chancellor Merkel, it was she who pulled Athens from the precipice, playing good cop to Schaeuble's bad one in what had become a regular routine by Germany throughout the debt crisis.

Although never the official leader, Schaeuble sat as the real boss inside the group's closed-door meetings, keeping a sharp eye over Eurogroup chief Jeroen Dijsselbloem of the Netherlands or Luxembourg's Jean-Claude Juncker before him.

Paralysed from the chest down since an assassination attempt in 1990, Schaeuble is also known for his disarming ways.

As protector of Germany's interests, Schaeuble's philosophy was simple, said Holger Schmieding, chief economist at Berenberg bank.

"Germany helps struggling neighbours with generous amounts of money if recipients sign up to tough conditions to get their house in order for good," Schmieding said.

This was the same "pitiless" stance he held for his management of Germany's public purse, and he expected the same from the eurozone.

For Greece, this became three bailouts of painful medicine: waves of cutbacks and reforms that some economists compared to the ravages of war, with the country's economy shrinking by a quarter in just five years.

Unbeknownst to many, Schaeuble is not an economist, but in fact "a lawyer through and through", said Glenn Kim, an advisor to former Greek finance minister Yanis Varoufakis who also consulted Germany on designing Schaeuble-inspired bailouts.

Schaeuble "absolutely hates the markets, (which he thinks) should be controlled by technocrats. He practically relishes being the bad cop," Kim said, according to the Varoufakis memoir 'Adults in the Room'.

Minister for six months, Varoufakis quickly became a nemesis for his eurozone counterparts, with Schaeuble taking the lead in swatting away the leftist academic's radical proposals.

Recalling their first meeting, Varoufakis said that Schaeuble's "opening line was friendly enough, insisting that we address each other by the first name".

"But immediately thereafter he proceeded to make clear that he had no interest in anything I had just said."

- 'Staunchly pro-European' -

Weaving through Schaeuble's stubbornness was an equally intense belief in the European project, that in his mind depended on nations playing by the rules.

"Despite being an austerity hawk, Schaeuble is staunchly pro-European," said Mujtaba Rahman of the Eurasia Group, a consultancy.

That is why Schaeuble's departure may weigh negatively on a call for deep reform and further integration of the eurozone by French President Emmanuel Macron.

"All the plausible candidates to replace Schaeuble are less well known and less well-established figures... They will therefore be more beholden to the views of the German bureaucracy ... which is even more conservative and hardline than Schaeuble was," said Rahman.

Whatever happens next, "there will be a before and an after, for the Eurogroup and for the eurozone", said Pierre Moscovici, the EU's Economic Affairs Commissioner, and former French finance minister.

"His departure is an earthquake for the Eurogroup," Moscovici said.

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