Thursday, July 12, 2007

A strong euro is a good thing - discuss

Der Spiegel reports that there is some disagreement on the subject of the strong euro within the eurozone economies. The euro has hit an all-time high at $1.38 this morning but slipped back somewhat later on.

The politicians think this is a good thing, the businessmen, particularly in Germany, are not so sure.
"That is an exchange rate that we can live with," said German Economy Minister Michael Glos on Thursday at a German-Arabic business conference. "The economy is doing great. There are no worries at present."
This was echoed by Portugal's Finance Minister, Fernando Teixeira dos Santo:
"I don't think ... that we have a problem in exchange rates at the moment," he told a European Parliament committee. "Let's not fall into temptation to resolve our economic problems by devaluing. If we want to gain competitiveness it's not by devaluing our currency."
Fair enough. It is economic reforms that will overcome stagnation not a single currency as some of us insisted on telling supporters of the euro in the early nineties.

Still, German industrialists are not happy:
Despite Glos' equanimity, German industry on Wednesday complained that the strong euro was not good for business. A spokesman for Germany's machinery manufacturing industry told the Süddeutsche Zeitung that a number of company's were having trouble competing against foreign companies this year due to the strong euro. The country's automobile industry likewise told the paper that it has felt the effects of the currency's strength.

"The currency's development is causing us to become more and more concerned," Matthias Wissmann, president of Germany's federation of automakers, told Süddeutsche Zeitung. The strength of the European currency makes products from euro-zone countries more expensive abroad -- or can decrease profits in the US if companies try to keep dollar prices constant. Indeed, the strong euro has Volkswagen thinking about opening up a factory in the United States.
Globalization, anyone?

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