| New York Times | - |
BRUSSELS - Concern over the euro moved to the forefront Monday as finance ministers of the countries using the currency held their monthly meeting.
E.U. Ministers at Odds Over Strength of the Euro
By JAMES KANTER
Published: February 11, 2013
BRUSSELS — Concern over the euro moved to the forefront Monday as
finance ministers of the countries using the currency held their monthly
meeting. But this time, with the European Union’s recession continuing, the topic was the strength of the euro rather than its many weaknesses.
Yves Logghe/Associated Press
Jeroen Dijsselbloem, the president of the Eurogroup,
with Christine Lagarde, managing director of the I.M.F. in Brussels on
Monday.
As confidence has grown that the Union will be able to manage its sovereign debt crisis,
the euro has made significant gains against the dollar and other
foreign currencies. That is making Europe’s exports more expensive, a
factor that could hamper growth.
On Monday, France, which traditionally favors market intervention,
renewed its calls for remedial steps that could include establishing a
target level for the euro’s value.
Exchange rates need “to reflect the economic fundamentals of our
economies of the euro zone,” said Pierre Moscovici, the French finance
minister. “Exchange rates should not become subjected to moods or
speculation.”
Mr. Moscovici made the case to other members of the so-called Eurogroup
of finance ministers, asking for coordinated action to keep a lid on the
value of the euro currency. Before the meeting, Mr. Moscovici said he
wanted the Europeans to present a common plan later this week during a
meeting of finance ministers and central bankers of the Group of 20
nations to be held in Moscow.
In a news conference after Monday’s meeting, Jeroen Dijsselbloem, the
president of the Eurogroup, who oversees the agenda for the monthly
meetings, said the euro exhange rate had been discussed. But like some
German officials, he appeared to give the matter short shrift, saying
that the forum for further discussion should be the G-20 meeting in
Moscow.
"That's where exchange rates, if anywhere, should be addressed," Mr. Dijsselbloem said.
Mario Draghi, the president of the European Central Bank,
warned last week that the strength of the euro could weigh on the
ability of Europe to pull out of its economic doldrums. Those comments
were enough to send the euro down sharply against the dollar — to $1.36
from $1.34 — and the yen.
The euro was trading at $1.339 on Monday after falling to the low $1.20s last year.
The renewed French push for greater scope to control the levers of the
European economy immediately met stiff resistance from a senior German
official, who decried the initiative as a poor substitute for policy
overhauls.
Jens Weidmann, the president of the German central bank, the Bundesbank,
suggested Monday that countries like France were simply diverting
attention from the need to make their economies more competitive.
“Only governments can solve these problems, the central banks cannot,”
he added. “In this respect, the discussion about a supposed
overvaluation of the euro’s exchange rate simply deviates from the real
challenges.”
Mr. Weidmann also warned that an exchange rate policy aimed at weakening
the euro would “in the end result in higher inflation.”
A number of ministers agreed Monday that intervention would be wrongheaded.
“This is mainly decided by the market,” Maria Fekter, the Austrian
finance minister, said in response to a question on the strong euro as
she arrived at the meeting. “I find an artificial weakening
unnecessary.”
The strong euro means some European exports, like cars and wine, become
more expensive abroad, putting European producers at a disadvantage
against foreign competitors. But there are also positive effects.
Imports, particularly oil, become less expensive for Europeans, which
helps stimulate the economy.
The push for intervention by the French is unlikely to make much real
headway. Instead, it may be an illustration of the way that economic
policies in the euro area are a result of a back-and-forth between
states like France and Germany.
“The French have always believed the single currency should be put to
the service of exports,” said Mujtaba Rahman, an analyst with the
Eurasia Group, a political risk research and consulting firm. “But it’s
not a debate they can win, so they are most likely using this to win
concessions on other baby projects, from the pace of its own fiscal
consolidation, to a fiscal capacity to a short-term mutualized debt
instrument.”
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