“The ambition has to be competitiveness in global markets. Take Ireland or Greece or Italy — they are coming back because of the reforms they have made over the past few years to improve competitiveness.”
Mr Oettinger was speaking to the Irish Examiner at an event organised in Stuttgart by the German Irish Chamber of Commerce.
He said in the 1990s, Germany was known as the “sick man of Europe” because of the sclerotic state of the economy.
However, the then German chancellor, Gerhard Schröder, implemented a series of painful reforms that turned the economy around.
But during the period that Germany was introducing these reforms, it was also running budget deficits and investing heavily in the economy.
Last Thursday, when ECB president, Mario Draghi, was unveiling the latest interest rate cut and large-scale purchases for asset-backed securities to boost economic growth, he said that monetary policy had to be complemented by fiscal policy. Italy has called for more fiscal stimulus throughout the eurozone to stoke economic growth.
However, Mr Oettinger, who was previously the Christian Democrat (CDU) head of state for Baden Würrtemberg, said when Germany undertook its reforms, debt-to-GDP was only 40%. All of the periphery eurozone economies have debt-to-GDP ratios well over 100% and even among core member states, debt levels are also high.
“Back then, it was feasible. Now it is not feasible. This is not about austerity. On the one hand, it is about regaining competitiveness and on the other hand, it is about regaining credibility.”
However, also speaking to the Irish Examiner at the same event, the Baden Würrtemberg Minister for European Affairs, Peter Friedrich, who is with the Social Democrats, said that there should be increased levels of investment, but these had to be accompanied by structural reforms in the labour markets and by reducing bureaucracy.
“So the common position could be more spending for reform. In Germany, it is important for the federal Government to understand that our reforms were combined with an investment programme and we should give this possibility to other European countries.”
Mr Friedrich also said it would be better for the Irish Government to invest inthe economy’s long-term growth potential rather than give tax breaks to low and middle-income earners in the next budget.
“I don’t know if tax cuts will lead to consumption because private sector debt is very high. So just because people pay less taxes does not mean they spend more money on consumption. So I think it is better to have more public investment in education, innovation and infrastructure.”