German chancellor Angela Merkel says there is a problem with the weak euro
German chancellor Angela Merkel has said there is a “problem” with the value of the euro, in an unusual comment at a time when the country has come under sustained criticism over the currency.
At a security conference in Munich Merkel said: "We have at the moment in the Eurozone of course a problem with the value of the euro."
Many economists think the euro is cheaper than the former Deutsche Mark because of its nature as a cross-regional currency. It has also been kept down by loose monetary policy of the European Central Bank (ECB).
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Merkel said: "The ECB is pursuing a monetary policy that is not geared to Germany, but to Portugal to Slovenia or Slovakia.”
She added: “If we still had the Deutsche Mark it would surely have a different value than the euro does at the moment. But this is an independent monetary policy over which I have no influence as German chancellor."
German economists have led pressure on the ECB to tighten monetary policy, with annual inflation rising close to the ECB’s two per cent target in Germany, while remaining listless in other nations in which economic recovery has not taken hold.
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The speech was made in front of an American delegation that included US vice President Mike Pence. The new US administration has been at the forefront of criticisms of Germany in relation to the euro.
Peter Navarro, a trade advisor to Trump, has accused Germany of using a cheap euro to “exploit” the US.
A weaker euro boosts German exports by making them cheaper for foreign buyers. While this makes imports cheaper for consumers such as the US, protectionist economic theory posits that an artificially cheap currency takes jobs from other nations.
On Nato, Merkel described the military alliance as a “project of common interest” which is “also in the American interest”, pre-empting comments by Pence offering an “unwavering” commitment to the alliance.
Merkel also said the EU is in a “difficult situation” because of the UK’s vote to leave the union, while the Single Market is also “challenged” by digitisation.