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11th Aug 2022

Stop blaming ECB and euro, Almunia tells France

EU economic and monetary affairs commissioner Joaquin Almunia has said France should stop criticising the European Central Bank's interest rate policy and instead improve its unit labour costs and productivity.

"There are good reasons to be concerned about the development of the euro's exchange rate, but it's not possible to explain all the problems that have to be tackled by the eurozone in terms of the exchange rate", Mr Almunia told the Financial Times on Wednesday (26 September).

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He added that "some member states need to pay attention to the evolution of unit labour costs and productivity" instead.

Mr Almunia's comments come in response to president Nicolas Sarkozy's repeated criticism of the Frankfurt-based central bank – comments that have not been going down well in several EU capitals, particularly Berlin.

The French president keeps pushing the ECB to intervene against the continuing growth of the euro by cutting interest rates, claiming the strong currency is damaging France's exporters.

On Thursday (27 September), the euro has reached a new all-time high against the US dollar - one euro was buying 4.189 dollars.

But France has failed to find allies to push through a change to the ECB statute and to establish political control of eurozone interest rates, with Mr Almunia now objecting by setting Germany as an example.

"One can't explain France's trade deficit vis-à-vis Germany in terms of the exchange rate", the commissioner said, pointing out that German exporters are at present flourishing in global markets despite the euro's strength.

Brussels also gave a veiled warning in response to Mr Sarkozy's decision to draw back from a commitment his country gave in April to balance its deficit by 2010 - something that has become clearer since France unveiled its 2008 budget earlier this week.

"France and Italy are saying they're having difficulty in meeting the medium-term objective agreed in April. We're saying 'yes, it's not easy, but you should stick to the agreement'", Mr Almunia said. But he added that he would not yet take the formal step of issuing a warning notice to Paris on its budget.

Concerns over wealth funds

At the same time, the commissioner indicated that Brussels will respond to fears in some EU capitals, mainly Berlin and Paris, over sovereign wealth funds' investments from Asia or Middle East where assets worth hundreds of billions of dollars world-wide are amassed and possibly threaten the Union's strategic business areas.

"We have good reasons to ask these funds to declare what kind of assets they want to invest in, what criteria they apply to decide their investments, and what the distribution of their investments is", Mr Almunia told the Financial Times.

"If they don't agree to these criteria, we can find good reasons to react in some cases, where these funds try to invest in some strategic sector or try to move towards some specific industries," he added.

He suggested trying to find a balance between transparency and establishing proper control over such funds.

"We should avoid protectionist attitudes against these funds. But at the same time we should request the managers that are governments, or agents on behalf of the governments, to be transparent", he said.

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