Larry Elliott and Julia Kollewe in Berlin
March 18, 2011
Germany's finance minister has waded into the country's simmering row over multiculturalism, saying it had been a mistake to bring in so many Gastarbeiter , or guest workers, from Turkey during the economic boom years of the 1960s.
In an interview with the Guardian, Wolfgang Schäuble said Germany had expected its 3.5 million Turkish minority to integrate better in the decades that followed the wave of immigration.
"We made a mistake in the early 60s when we decided to look for workers, not qualified workers but cheap workers from abroad, Turkey," said Schäuble. Some people of Turkish origin had lived in Germany for decades and did not speak German, he said.
"When we decided 50 years ago to invite workers from Turkey, we expected that their children would integrate automatically. But the problems have increased with the third generation, not diminished, therefore we have to change the policy," Schäuble said.
Chancellor Angela Merkel's plain-speaking finance minister was adding to comments she made last year, claiming multiculturalism had been a disaster for Germany. More recently her new interior minister, Hans-Peter Friedrich, stoked the debate by saying that Islam did not belong in Germany. The foreign minister, Guido Westerwelle, has also spelled out the new, tougher message from Berlin, declaring that children of immigrants should learn German before the language of their parents and grandparents.
Immigration leapt to the forefront of political debate in 2010 after Central Bank board member Thilo Sarrazin published a bestselling book that argued German culture was at risk from Muslims who, he said, were a drain on state coffers.
Schäuble said Germany's past experience was no obstacle for further immigrants, but the country was now mainly looking for highly skilled people. Germany has one of the lowest birthrates in Europe and relies on steady immigration to maintain a workforce large enough to pay for its rising numbers of pensioners. Its labour force of 41 million is expected to decline by 5 million over the next 15 years.
Schäuble is the elder statesman of Merkel's government, the most traditional of politicians, albeit with a dry sense of humour. Born in Freiburg in the Black Forest 68 years ago, he embodies the Protestant work ethic, being notoriously tough on himself as well as his staff. He joined the right -of-centre Christian Democratic Union in 1965 and spent much of his career working for Helmut Kohl, the chancellor who engineered reunification in 1990.
It was in that year that Schäuble was the victim of an assassination attempt that left him in wheelchair. Heir apparent to Kohl in the late 1990s, Schäuble's hopes of becoming chancellor were thwarted when the CDU lost the 1998 general election to Gerhard Schröder's Social Democrats and their Green party allies. He was replaced as the CDU's leader by Merkel in 2000 and was taken aback when he was offered the key job of finance minister after the CDU shrugged off the impact of Germany's most serious postwar downturn to win re-election in 2009.
"I was surprised when Angela Merkel asked me to take this portfolio but I'm self-confident enough to say it was the right decision. I told her: 'You know what you're doing. I am loyal but I'm not cosy.' She got what she wanted and the result is not bad."
Others agree with this assessment. Schäuble was voted finance minister of the year by the Financial Times in 2010 and presided over Germany's fastest year of growth since the immediate aftermath of reunification.
He had plenty of advice for his UK counterpart, George Osborne: stick to your austerity plan, pay more attention to manufacturing, join other European countries in slapping a transaction tax on big finance – and think seriously about joining the euro.
Schäuble's view of the UK economy is simple: it has too big a financial sector and too small a role for manufacturing. "What Osborne is doing he's doing remarkably well and he's very impressive," he said.
"When I had my first meeting with George Osborne after he became chancellor of the exchequer, I told him, if you were to ask me for advice, I would say any economy needs a balanced mix of services and industrial production."
Like Osborne, he sees no contradiction between cutting the budget deficit and maintaining economic growth.
"I had discussions with the American secretary of state, Tim Geithner, last year and told him: 'I don't know what's right for the US but, in Germany, if you want to encourage more internal demand, you have to regain the confidence of the public by reducing deficits.'"
Schäuble said he wanted to see Britain more closely involved at the heart of Europe. "We need not just leadership by Germany and France but by the UK as well. We'd like the UK to be in the euro; of course we'd be very interested."
Asked whether that was ever likely to happen, Schäuble smiled and said: "Not this week and not next week but definitely before the end of the world."
Like France, Germany wants tighter controls on the financial sector, including hedge funds and the shadow banking system. "We need regulation for all innovative products, derivatives and so on and we need regulation for all participants. For every product, there have to be rules to prevent them destroying themselves."
The most controversial proposal is for a financial transaction tax, first proposed by the US economist James Tobin in the 1970s. Tobin envisaged a small tax on currencies, but Schäuble said he wanted to tax all financial transactions across the European Union, for three reasons.
"The financial sector has to contribute to the costs of the last crisis," he said. "It's not only a question of the economy and the budget but of democratic legitimacy.
"Second, it raises money and it does so in a fair way. And third, it would limit a little the room for manoeuvre of financial markets. We must prevent the markets from destroying themselves."
These views are likely to be seen as dangerously radical by the City of London. But Schäuble estimates he could raise €2bn (£1.75bn) a year for Germany from the tax, which he would be prepared to spend on international aid or fighting climate change as proposed by the French president, Nicolas Sarkozy.
"I'd prefer to have it in my budget but it's better to have it for climate change or development aid than to have nothing. I'm ready to make compromises."
Schäuble said he hoped to persuade the UK to back the FTT but had a fallback position should that not happen.
"I would prefer a European solution but if this doesn't happen right away, I would be willing to go ahead with the eurozone. But we would work to convince the UK to join. It's in the real interest of the UK to be in the game rather than out.
"In the short term maybe we will lose some business to London. I believe in the framework of European legislation but I don't want to wait for decades."