Here is an interview with former US Treasury Secretary ROBERT RUBIN,in the first part he is talking about the EU, the 2nd part is about the current US troubles&briefly China/India.
SPIEGEL INTERVIEW WITH ROBERT RUBIN
The chief architect of America's boom years under Bill Clinton gives the German economy a check-up. He calls Finance Minister Hans Eichel a "sensible man" and says Germany needs to undertake reforms and create a more flexible labor market in order to face the challenges posed by emerging economies like India and China.
Between 1995 and 1999, Robert Rubin, 66, was US Treasury Secretary under President Bill Clinton. Today, he is chairman of the executive committee of Citigroup, the world's largest bank. In an interview with SPIEGEL, Rubin discusses Continental Europe's stagnate economies and tells Germany what it needs to do in order to restore its role as Europe's economic powerhouse.
SPIEGEL: Mr. Rubin, Germany was once the driving economy in Europe, but for a couple of years now, unemployment has been rising and the budget deficit is growing faster than ever. Would you fancy to take on Hans Eichel's job - and to overhaul the country?
Mr. Rubin (laughs): Mr. Eichel strikes me as a sensible man...
SPIEGEL:... who would love to save money but never gets around doing it.
Rubin: Perhaps. But your problem in Germany isn't just the budget deficit. Faster growth would resolve this problem easily. You really have a conflict between the desire for a comfortable social system and the need for structural reforms which are needed in order to stimulate the economy. By the way, this is also true for France and more or less for most of Continental Europe.
SPIEGEL: When you became Treasury Secretary under Mr. Clinton, you also had to deal with a huge budget deficit. Was this situation comparable to the issues Germany is facing today?
Rubin: No, the situation was completely different. At the time, we only had a substantial budget deficit. But we were and are a society with flexible labour markets and we have a culture of embracing change. All this is part of our culture and our strength.
SPIEGEL: So, what would the German government have to do?
Mr. Rubin: I am not an expert on Germany, but I do know a little bit about the country. Your labour market laws are very restrictive and the social security benefits are very high. And you do have a demographic issue. These are the problems you need to address.
SPIEGEL: When you were Treasury Secretary, you substantially reduced the budget deficit and even generated a surplus by imposing rigid savings measures and high taxes, if compared with today's levels. At the same time, you are considered the architect of the American economic miracle of the 90s. Are these two sides of the same coin? And if so, should Europe follow this path as well, i.e. start by straightening up their budgets?
Mr. Rubin: It would solve at least some of the problems. The Maastricht Treaty was the right step. The trouble is that nobody cares about it any more.
SPIEGEL: Germany will again be in breach of the stability pact this year. In addition, people increasingly call for lower taxes in order to stimulate the economy...
Mr. Rubin: ... how high are your taxes?
SPIEGEL: The highest income tax is 42%, the company taxes are at 38%.
Mr. Rubin: And why should this be problematic? These rates are similar to those in the US. And our economy is a lot more dynamic and has a higher growth potential.
SPIEGEL: But the US are one nation whereas there is a very unhealthy competition of tax systems in Europe - and this in a free-trade area allowing companies to easily shift their profits to the country with the lowest taxes.
Mr. Rubin: I don't think that the taxes are the real problem. If Germany continues to cut taxes the budget deficit will increase further. Short-term, it is always possible to boost demand and consumption by reducing taxes. But what you really need to do is increase productivity, reduce unemployment and create sustainable growth. You won't be able to achieve this via tax cuts.
SPIEGEL: But you ensure at least that the taxes continue to be paid in your country.
Mr. Rubin: I don't even think that the taxes are responsible for this. Whenever I talk to business leaders, and which I do a lot of in my job, many tell me that they plan to invest in the new EU-countries in order to build a platform from there to deliver goods and services into Germany and Western Europe. But I never heard anyone refer to the taxes in these countries.
SPIEGEL: So, what do your contacts build their investment decisions on?
Mr. Rubin: Their main problem is that if you hire people, it is hard to let them go again if necessary. Or the difficulties they face when building or closing production plants. Investors appreciate the more flexible systems in Eastern Germany - and the resulting dynamics.
SPIEGEL: Was the advent of the Euro, which effectively robbed Germany of its ability to make its own monetary policy, a disadvantage for Germany?
Mr. Rubin: I think that both the Euro as such and the European Union are a good thing. But the common currency in some instances distracted people from the really important tasks - i.e. the structural reforms that create a climate in which companies invest, recruit and thus generate growth. So far, none of the large Continental European economies has undertaken reforms which create a robust investment climate.
SPIEGEL: How do you, as an external observer, see the current political crisis in Europe?
Mr. Rubin: The French would like to retain their labour laws and the current social coverage. At the same time, they are worried about the economic future of their country. Their "no" to the European Constitution was a vote against the system. But Brussels is not responsible for their problems. Therefore, the necessary political steps are further delayed.
SPIEGEL INTERVIEW WITH ROBERT RUBIN
The chief architect of America's boom years under Bill Clinton gives the German economy a check-up. He calls Finance Minister Hans Eichel a "sensible man" and says Germany needs to undertake reforms and create a more flexible labor market in order to face the challenges posed by emerging economies like India and China.
Between 1995 and 1999, Robert Rubin, 66, was US Treasury Secretary under President Bill Clinton. Today, he is chairman of the executive committee of Citigroup, the world's largest bank. In an interview with SPIEGEL, Rubin discusses Continental Europe's stagnate economies and tells Germany what it needs to do in order to restore its role as Europe's economic powerhouse.
SPIEGEL: Mr. Rubin, Germany was once the driving economy in Europe, but for a couple of years now, unemployment has been rising and the budget deficit is growing faster than ever. Would you fancy to take on Hans Eichel's job - and to overhaul the country?
Mr. Rubin (laughs): Mr. Eichel strikes me as a sensible man...
SPIEGEL:... who would love to save money but never gets around doing it.
Rubin: Perhaps. But your problem in Germany isn't just the budget deficit. Faster growth would resolve this problem easily. You really have a conflict between the desire for a comfortable social system and the need for structural reforms which are needed in order to stimulate the economy. By the way, this is also true for France and more or less for most of Continental Europe.
SPIEGEL: When you became Treasury Secretary under Mr. Clinton, you also had to deal with a huge budget deficit. Was this situation comparable to the issues Germany is facing today?
Rubin: No, the situation was completely different. At the time, we only had a substantial budget deficit. But we were and are a society with flexible labour markets and we have a culture of embracing change. All this is part of our culture and our strength.
SPIEGEL: So, what would the German government have to do?
Mr. Rubin: I am not an expert on Germany, but I do know a little bit about the country. Your labour market laws are very restrictive and the social security benefits are very high. And you do have a demographic issue. These are the problems you need to address.
SPIEGEL: When you were Treasury Secretary, you substantially reduced the budget deficit and even generated a surplus by imposing rigid savings measures and high taxes, if compared with today's levels. At the same time, you are considered the architect of the American economic miracle of the 90s. Are these two sides of the same coin? And if so, should Europe follow this path as well, i.e. start by straightening up their budgets?
Mr. Rubin: It would solve at least some of the problems. The Maastricht Treaty was the right step. The trouble is that nobody cares about it any more.
SPIEGEL: Germany will again be in breach of the stability pact this year. In addition, people increasingly call for lower taxes in order to stimulate the economy...
Mr. Rubin: ... how high are your taxes?
SPIEGEL: The highest income tax is 42%, the company taxes are at 38%.
Mr. Rubin: And why should this be problematic? These rates are similar to those in the US. And our economy is a lot more dynamic and has a higher growth potential.
SPIEGEL: But the US are one nation whereas there is a very unhealthy competition of tax systems in Europe - and this in a free-trade area allowing companies to easily shift their profits to the country with the lowest taxes.
Mr. Rubin: I don't think that the taxes are the real problem. If Germany continues to cut taxes the budget deficit will increase further. Short-term, it is always possible to boost demand and consumption by reducing taxes. But what you really need to do is increase productivity, reduce unemployment and create sustainable growth. You won't be able to achieve this via tax cuts.
SPIEGEL: But you ensure at least that the taxes continue to be paid in your country.
Mr. Rubin: I don't even think that the taxes are responsible for this. Whenever I talk to business leaders, and which I do a lot of in my job, many tell me that they plan to invest in the new EU-countries in order to build a platform from there to deliver goods and services into Germany and Western Europe. But I never heard anyone refer to the taxes in these countries.
SPIEGEL: So, what do your contacts build their investment decisions on?
Mr. Rubin: Their main problem is that if you hire people, it is hard to let them go again if necessary. Or the difficulties they face when building or closing production plants. Investors appreciate the more flexible systems in Eastern Germany - and the resulting dynamics.
SPIEGEL: Was the advent of the Euro, which effectively robbed Germany of its ability to make its own monetary policy, a disadvantage for Germany?
Mr. Rubin: I think that both the Euro as such and the European Union are a good thing. But the common currency in some instances distracted people from the really important tasks - i.e. the structural reforms that create a climate in which companies invest, recruit and thus generate growth. So far, none of the large Continental European economies has undertaken reforms which create a robust investment climate.
SPIEGEL: How do you, as an external observer, see the current political crisis in Europe?
Mr. Rubin: The French would like to retain their labour laws and the current social coverage. At the same time, they are worried about the economic future of their country. Their "no" to the European Constitution was a vote against the system. But Brussels is not responsible for their problems. Therefore, the necessary political steps are further delayed.
