Everybody against Germany over the expensive euro

Speech by the French President François Hollande, at the podium, in the presence of Martin Schulz, President of the EP, seated, on the right, and José Manuel Barroso, in the foreground, on the left. (EC Audiovisual Services).

Speech by the French President François Hollande, at the podium of the European Parliament, in the presence of Martin Schulz, President of the EP, seated, on the right, and José Manuel Barroso, in the foreground, on the left. (EC Audiovisual Services).

At last Francois Hollande said it. The French President in a strong statement yesterday said the Eurozone must have an exchange rate policy for the euro. It was high time that Hollande said that, because no other Eurozone leader has the weight to demand such a ground-breaking monetary policy change. So far all European Central Bank governors, including Mario Draghi, have repeatedly stated that the ECB does not apply any exchange rate policy over euro’s parities with the rest of the other major currencies.

The yen and the dollar

Similar statements have being issued lately by all major central bank governors, including Masaaki Shirakawa, the governor of the Bank of Japan. But they don’t mean, Draghi does. In reality Shirakawa is currently under strong pressure by the Tokyo government, to ease the BoJ monetary policies and target more inflation, so as the yen becomes cheaper. This is a clearly targeted exchange rate policy, aiming at increasing the country’s external competitiveness. At the same time tough it risks to start a monetary devaluation domino.

Actually the BoJ head offered yesterday to step down earlier than 8 April, when his mandate expires. Obviously he wants to make room for someone else, who would be less hesitant in planning a cheaper yen. In short Japan’s policy makers are now actively perusing exchange rate policies, without saying it but not being able to hide it either.

As for the Americans and their central bank, the famous Fed prints trillions of dollars and dollar denominated securities, without caring much about the exchange rate. In this respects Beijing is more preoccupied about the foreign value of the American money than Washington, because the Chinese hold more than two and a half trillion in dollar denominated values. In short the Americans print as many dollars as they “need”, also facilitating in this way their policy for a cheap greenback in relation to the Chinese renminbi and the Japanese yen.

The euro

In this front however the ECB follows a quite different path, in the form of Deutsche Bundesbank’s tradition. This last central bank enjoys a unique independence vis-à-vis the government, in order to effectively protect the currency from inflation. To underline the independence of its central bank Germany placed it in Frankfort, away from Berlin’s political establishment.

At the time of the Deutsche mark, the Bundesbank never accommodated the federal government by supporting growth or exports. Low inflation and expensive mark was the only rule. The German theory is that if the products are good, they will be selling all over the world. The monetary support can only be short-lived, creating more problems than it solves.

Not to forget that Germany has suffered a lot of hyperinflation between the two world wars. In any case the austere Bundesbank tradition is injected into the functioning of the ECB. Draghi tries hard to fight it but this is not at all easy. However the Teutonic monetary principles that worked well for the exports of the German engineering industry, do not fit at all the rest of Eurozone countries.

The question is not if Berlin understands that, but how it can be persuaded to accept, that monetary policy should help all Eurozone member states. If the German government insists that the ECB cannot accommodate everybody, then Berlin will open itself to the accusation that is trying to conquer Europe, this time not with tanks, but with the straight jacket of a needlessly expensive euro.

Given all that Hollande had seemingly to be strong on this issue. That is why he voiced so openly his demand for the ECB to have an exchange rate policy. No doubt Paris knows very well that such things are not to be told that clearly. Logically Hollande must have had very good reasons for coming out like that, over such a crucial matter.

Actually the appreciation of the euro over the past weeks has already created strong disadvantages practically for all Eurozone members but Germany. Everybody knows that the German exports are not so price sensitive as for example the tourist industry of France, Italy, Spain, Greece and Portugal. Presumably the French President could not remain silent any more. So he decided to put the problem only hours ahead of the Brussels European Council of 7 and 8 February.

Hollande did not say straightaway he wants a cheaper euro. However this is exactly what everybody in Eurozone wants, except Germany. It is quite interesting to watch now for how long Berlin can resist the pressure of all the others. Even Holland, Austria and Finland, the traditional friends of Berlin, may join the cheaper euro camp. In any case the battle for a less strong euro to accommodate everybody has just started.

 

 

 

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

EU Parliament: The surplus countries must support growth

The world is too complacent about epidemics. Here’s how to change

3 vital steps to a new gender equality playbook

From low-earth orbit, ‘envoys’ of humanity join UN space forum

ECB to play down IMF’s alarms for deflation danger in the EU

Colombia: Santos thanks the EU for its support to the peace process

As Saudi women take the wheel, UN chief hopes end of driving ban creates more opportunities for kingdom’s women and girls

Aid teams respond to escalating southwest Syria conflict: 750,000 civilians are at risk

Here’s what keeps CEOs awake at night (and why it might be bad news for your next job)

Free trade agreement between EU and India?

EU unveils plan to accelerate Capital Markets Union ahead of London’s departure from the bloc

The developing countries keep the world going

Safe drinking water, sanitation, are ‘basic human rights’: new UN Water Development report

Parliament wants to suspend EU accession negotiations with Turkey

AIESEC @ European Business Summit 2014: European Youth, Change Now Patiently

Rise in number of children killed, maimed and recruited in conflict: UN report

How to tap the talents of refugees – one student at a time

Four ways innovation can help to beat heart disease

Brazil’s hopeless future of science

Feeding families remains complex task in war-torn Syria – UN relief agency

Google strongly rejects EU antitrust charges and now gets ready for the worst to come

‘Global trust’ declining, ‘our world needs stepped-up global leadership’

G20 LIVE: “United States and Turkey stand in solidarity with France and its people in handing the perpetrators of this crime and bringing them to justice”, US President Barack Obama underlines from G20 in Antalya Turkey

MEPs call for decisive action to fight inequalities in the EU

The global issue of migration in 2017

What can the private sector do to alleviate the refugee crisis?

Brexit update: Will Theresa May’s last-minute desperate efforts procrastinate Brexit?

Obese people more likely to smoke, says new gene research: WHO

This Dutch company has devised an innovative way to deal with food waste

UN chief welcomes prisoner exchange between the Russia and Ukraine

UN emergency relief fund has ‘never been more critical’: Guterres

The US will impose tariffs on Mexico, says President Trump

How to beat gender stereotypes: learn, speak up and react

Hunger in Yemen: WFP considers aid suspension in face of repeated interference by some Houthi leaders

Depression is the no. 1 cause of ill health and disability worldwide

Multilateralism must weather ‘challenges of today and tomorrow’ Guterres tells Paris Peace Forum

Facebook and Google to treat Europe as the 51st State of the USA

Why economic growth depends on closing the interview gap

“For my children Italy will be an innovation lab and not a museum”; the Sting reports live from World Economic Forum 2015 in Davos

Four years on and half a billion dollars later – Tax Inspectors Without Borders

The world’s coastal cities are going under. Here’s how some are fighting back

Gender Equality Index 2019: Still far from the finish line

Mergers: Commission approves Varta AG’s acquisition of Energizer’s divestment business, subject to conditions

The Fourth Industrial Revolution is redefining the economy as we know it

Assembly of European Regions @ European Business Summit 2014: Made in Europe – Made of Regions

No barriers to free flow of non-personal data in the EU

Trump beats Clinton but Americans will learn the hard way that the US can’t change with an election

More beehives and beekeepers thanks to EU support

Alarming number of Ebola deaths in DRC a ‘rallying cry’ to scale up treatment

This is where people work the longest – and shortest – hours

UN chief sends condolences to families of Malawi flood victims

How to get ageing populations to invest in their health

MEPs list conditions for new EU-Azerbaijan deal

Top UN court rules it has jurisdiction to hear Iranian claim against US over frozen assets

Netherlands: Budget MEPs back €1.2m in job-search aid for 450 redundant workers

Crop yields are up in Syria, but higher prices still cause major strain: new UN report

Factories are no longer the sure route to prosperity. Here’s why

Spending another 3 billion euros on Turkey feels better than admitting EU’s failure

Canada leading the way on women’s inclusion and empowerment, says OECD

Irish Presidency: Not a euro more for EU budgets

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s