German Finance Minister Wolfgang Schaueble wants to let Southern European countries borrow from the eurozone bailout fund to strengthen the European Union. According to an Aug 22 story by German newspaper Bild, Schaueble said he is working on a proposal to let eurozone members borrow from the bloc's permanent bailout fund, known as the European Stability Mechanism (ESM), to boost investment during recession. But in exchange for access to ESM money, eurozone countries would have to give the mechanism more say over their domestic finances — which most will be reluctant to do.
There are two main goals behind Schaueble's plans: To make the European Union more independent from foreign institutions including the International Monetary Fund, especially during times of crisis, and to better enforce deficit and debt rules. Schaueble has repeatedly criticized the EU Commission — which has current oversight authority — for being too politicized and lenient with debtor countries. Northern European countries are tired of bailing out and propping up southern European countries and are fighting for more control over the south’s fiscal policies. The south is fighting for the opposite.
Schaueble's proposal, all the details of which have not been released, will be controversial: While southern European countries would welcome more access to funds, they would probably try to influence the fund's oversight powers. Schaueble on the other hand is unlikely to advocate no-strings-attached money to eurozone members and will push hard to impose conditions on the loans. Thus, in trying to strengthen the European Union, Schaueble might actually ignite the fiery conflicts already weakening the bloc.
A previous version of this report, misstated the date and the circumstances of Schaueble's proposal. The error has been corrected.