Germans getting jittery as euro continues to climb
1 day ago
FRANKFURT (AFP) — Until recently, Germany has maintained an air of serenity as the euro spiked higher against other major currencies, even though exports are the motor of growth for the eurozone's biggest economy.
That has begun to change however, as seen in particular through comments by Chancellor Angela Merkel, who told the television news channel N24 last week that the single currency's rising value was a double-edged sword.
"We are happy of course to have a solid currency. But for exports it naturally poses problems," Merkel said.
"We are working on an international level so that currencies balance out against each other in a reasonable manner," the German chancellor added.
Her comments were moderate in comparison with the alarmist tone of French President Nicolas Sarkozy, but they marked a significant shift from German statements made previously as the single European currency pursued its steady climb.
The euro, which is approaching the symbolic level of 1.50 dollars, surpassed early this month the all time high set 12 years ago by Germany's heritage currency, the deutsche mark, several German newspapers noted with concern.
Most German officials had appeared unconcerned by the potential effect on exports, with the notable exception of conservative Economy Minister Michael Glos, until last week.
On Thursday, the German chief executive of Airbus, Thomas Enders, dropped a bombshell, telling a country already shocked by a major restructuring plan for the plane maker that the euro's relentless rise was "life-threatening" to his company.
On Friday, Matthias Wissmann, head of the German automobile federation VDA told AFP: "The exchange rate development makes business more difficult and is not providing us with tailwinds in exports" to the United States and other regions where the dollar is widely used such as Asia and Latin America.
Earlier in the week, one of Germany's most respected economists, Peter Bofinger, called directly on the European Central Bank to intervene on foreign currency markets to bring the euro down.
"We are acting like the evolution of currencies is a matter of destiny, an inevitable natural event," Peter Bofinger said in an interview posted by the German news weekly Der Spiegel on its website.
"That is deplorable. We can intervene successfully," he argued, although many economists say intervention works only when several major central banks coordinate their actions, and even then the effect can be only temporary.
For now, it is not certain that the US Federal Reserve would even join in such an effort.
Another economist close to trade unions echoed Bofinger on Friday, telling the centre-left daily newspaper Tagesspiegel: "I am in favour of foreign exchange interventions.
"The ECB must make it clearly known it will not accept further increases by the euro."
Such comments, even by economists on the left, are rare in Germany, where independence of the national central bank and ECB is seen as a guarantor of economic stability.
Yet many in Germany, including some industrialists, still see little cause for alarm.
The BGA federation of wholesalers and exporters says overall German exports are not as vulnerable to foreign exchange effects as activities such as car making, because of Germany's strong position in areas like machine-tools, which are needed by emerging economies.
"Even at 1.50 dollars, the German economy can still export successfully," BGA president Anton Boerner told the Berliner Zeitung newspaper.
He nonetheless acknowledged that for companies which operate extensively in dollar-focused economies but cannot hedge their positions by locking in reasonable exchange rates, "the situation is getting more difficult."
afp.google.com |
