Mr. Schäuble, we thank you for this interview.

SPIEGEL: Mr. Schäuble, are you familiar with the name Conchita Wurst?
Schäuble: That was the winner of the Eurovision Song Contest. But I haven't heard her song.
SPIEGEL: What does it say about Europe that a bearded drag queen won the contest?
Schäuble: It says something about cultural diversity in Europe. But you also shouldn't attach too much importance to it.
SPIEGEL: You aren't a fan of the song contest?
Schäuble: It is probably a generational thing. Seriously, though: I think her victory isn't a bad thing. It showed many people for the first time that the current dispute with Russia has a political dimension that goes beyond what is happening in Ukraine.
SPIEGEL: You mean the conflict between Western values and those held dear by Russian President Vladimir Putin?
Schäuble: The Ukraine conflict unfortunately shows that the exploitation of nationalist emotions and resentments does not belong to the past. Putin appears intent on belittling the liberal democratic order. It is a good thing when the West counters that effort with its societal model and its values of openness and tolerance. That also increases our appeal.
SPIEGEL: You are speaking of what is often referred to as "soft power."
Schäuble: In a globalized world, soft power is enormously important. We Europeans have to realize that we are much more attractive and powerful than many think we are. We need more self-confidence. Europe has a global mission. And according to international surveys, Europe has by far the greatest degree of soft power.
SPIEGEL: Conchita has been interpreted more as a sign of European decadence in Russia and other authoritarian countries.
Schäuble: There's no accounting for taste. I try not to make my own tastes into generalized norms for others, but that's not the point. Rather, the point is that our understanding of freedom and human dignity demands tolerance and openness from everybody.
SPIEGEL: On one issue, though, Putin has an advantage over the West. European soft power was unable to prevent Russia's annexation of the Crimean Peninsula.
Schäuble: Should we have marched in militarily? Nobody wants that. Eventually it will become clear that Russia made the wrong move in Crimea.
SPIEGEL: Was the period of Russian modernization and the partnership with Moscow just an interim phase? Are we now headed back toward the kind of East-West confrontation we know so well?
Schäuble: I hope not. Putin was just in China and signed a sizable natural gas deal -- but at prices that are below what Russia gets in Europe. That demonstrates that it is not in Russia's interest to become too reliant on China. Russia is dependent on the partnership with Europe at least as much as Europe is. That is actually a solid foundation for a partnership.
SPIEGEL: What is the reason for the crisis in Russia's relations with the West? Was Moscow uninterested in cooperation or was the Western offer of partnership with Russia not credible?
Schäuble: I believe that the Western offer was honest. But perhaps more should have been done to ensure that Russia saw it that way as well. Even the ancient Romans understood that one has to be particularly generous with partners when they are facing difficulties.
SPIEGEL: In an essay for the German daily Frankfurter Allgemeine Zeitung last week, you wrote that the West has to be strong. Were you referring to military strength?
Schäuble: Our soft power is persuasive, but we have to be strong enough militarily that we cannot be attacked.
SPIEGEL: In truth, though, the West couldn't stop Russia militarily in the Baltics, for example, even if it wanted to. In the last 20 years, Western armies have been reduced in size and reconfigured for crisis intervention. They are no longer prepared for the defense of national or alliance borders.
Schäuble: In the NATO treaty, Article 5 states that an attack on one alliance member would be seen as an attack on all others.
SPIEGEL: NATO General Secretary Anders Fogh Rasmussen says that NATO has to prepare for a completely new situation. He has demanded that alliance members spend more money on defense. In addition, he said that NATO might permanently station troops in Eastern Europe.
Schäuble: I don't consider such a debate to be constructive. Ninety percent of people -- not just in Germany or the European Union, but far beyond -- would see such steps as an intensification of the situation.
SPIEGEL: If you want peace, then prepare for war: NATO appears to be applying this principle.
Schäuble: In the current situation, I think the focus should be on avoiding misunderstandings. When you look at the situation in eastern Ukraine, I can understand those who see Vladimir Putin as a sorcerer's apprentice: He can no longer control the powers that he has unleashed.
SPIEGEL: You believe that the lesson NATO should draw from the Ukraine crisis is to merely continue with business as usual?
Schäuble: I would advise those in positions of responsibility in NATO to consider the old saying: Talk is silver, but in such questions silence is likely of a greater value.
SPIEGEL: Do you understand the anxiety in Baltic countries and Poland?
Schäuble: I speak frequently with my colleagues from these countries and I don't have the feeling at all that they are anxious. They know that they are protected by their membership in NATO. The US also belongs to the alliance. Trans-Atlantic relations are more important than some of us might have believed.
SPIEGEL: Germany devotes a much smaller percentage of its budget to defense than other large NATO member states such as Turkey, Great Britain, France and the United States. Have we been too parsimonious?
Schäuble: Everyone has to understand that, due to its history, Germany is more reserved when it comes to the military. Do you read the surveys showing how Germans think?
SPIEGEL: We have never thought of you as a politician who is guided by public opinion surveys.
Schäuble: That isn't the point. But we have to approach our responsibility with sensitivity and intelligence.
SPIEGEL: In other words: Because of Adolf Hitler, we can't increase our defense budget.
Schäuble: Such statements have little to do with serious analysis. Everyone should accept that our military alternatives are a bit more limited.
SPIEGEL: To many partners, that sounds like an excuse.
Schäuble: Increasing the defense budget in the present situation would really not be intelligent politics. That is the opposite of what we need.
SPIEGEL: As Russian or Chinese politicians looking at the West, we would be forced to draw the conclusion that we could push pretty far before provoking a serious response from the West. It doesn't seem particularly capable of action.
Schäuble: You would never make it into the Central Committee of the Chinese Communist Party because your view of the world is far too limited. Moscow and Beijing know that we don't want a military confrontation. Moscow and Beijing are dependent on a functioning global economy. They also know that we are representing our interests.
SPIEGEL: With soft power?
Schäuble: And with our economic strength. Europe's strong position in the world is dependent on its ability to solve its economic and financial problems.
SPIEGEL: Are you not overvaluing Europe's appeal? The fact that populist, EU-skeptical parties are on the rise shows that the EU has lost its power of persuasion internally as well.
Schäuble: Usually, it is as Hölderlin once said: "Where danger threatens, salvation also grows." Perhaps the development will increase the decisiveness among the large majority of democratic powers to push Europe forward.
SPIEGEL: That sounds very abstract. What do you mean specifically?
Schäuble: We have to make Europe more efficient. I know that changing the EU treaties looks difficult from today's perspective. But most experts also didn't believe that we would come to agreement on the establishment of a banking union. And then, in the end, we found a solution that was acceptable to all.
SPIEGEL: You have proposed the introduction of a budget commissioner with the power to reject national budgets. Does that not foster exactly the kind of EU-skepticism that you are interested in combating?
Schäuble: We have European rules, but we don't have effective instruments for enforcing them. We realized that when then-German Chancellor Gerhard Schröder and his French counterpart President Jacques Chirac agreed to turn a blind eye to the deficit criteria. That is how you destroy trust -- also among the electorate.
SPIEGEL: You really believe that voters would find it acceptable if Brussels were to tell their national governments that their budgets were inadmissible?
Schäuble: That is already the case when it comes to competition rules! We have agreed on norms because we have a common market. Everybody ratified them together and we are now adhering to them. What good are rules if we don't have to adhere to them?
SPIEGEL: You want to combat EU-skepticism by giving Europe more power. That sounds like a paradox.Schäuble: The people aren't against Europe. They simply don't understand sufficiently what Europe actually does. It has to be explained. Perhaps foreign crises will help boost enthusiasm for Europe once again. The acceptance of the euro in Germany continually climbed during the euro crisis.
SPIEGEL: Mr. Schäuble, we thank you for this interview.