(Bloomberg) -- Lars Feld doesn’t come off as a hardliner.Most Read from BloombergMusk Donates to Trump, Tapping Fortune to Swing 2024 RaceGiuliani’s...
He has a kind voice, a soft handshake, a gentle smile. A stud shimmers on his left ear. In his office at the Walter Eucken Institute, an economic think tank in the western German city of Freiburg, piles of manuscripts and case studies cover half of the room; bookshelves extend up to the ceiling, an unadorned desk sits by the window.But appearances can be deceiving. Feld is one of the leading advocates of a particularly German strand of economics that staunchly opposes public debt.
“It was reassuring to see the spread, it is important that the financial markets have a disciplining effect. It ensures that politicians think carefully about what is fiscally possible,” Feld says, adding that a new Euro crisis can’t be ruled out yet. This controversial mechanism, written into the German constitution, restricts government net new borrowing to 0.35% of the country’s annual output.
If financial markets lose confidence in a Eurozone member, it could create a downward spiral. France and Italy are too big to be bailed out by Germany, Feld says, and one can’t expect the ECB to rush to the rescue.The son of a bank clerk who once specialized in insolvencies, Feld came to appreciate the debt brake around the turn of the millennium, when he became a professor at the University of St. Gallen.
“Lars Feld is the right man in the right place,” said economist Hans-Werner Sinn, who came to international attention in the early 2010s by pushing aggressively for austerity measures against Greece. That is unlikely to happen under the current coalition, and it’s not clear whether the Free Democrats will be part of the next one. With the party struggling to stay above the 5% threshold required to enter parliament, it’s now banking on its ability to tell voters that it stayed true to its core principles and resisted pressure to waste taxpayers’ money. Whether that’s a vote-winning strategy remains to be seen.
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