Wednesday

1st Jun 2016

Germany shoots down Hollande's exchange rate plea

The German government has moved quickly to shoot down a plea by French President Francois Hollande for the EU to agree measures to control the euro's exchange rate.

Government spokesman, Steffen Seibert, said Wednesday (6 February) that Angela Merkel's administration would not support a move away from the euro's floating exchange rate.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

  • Most currencies have had floating exchange rates since the collapse of the Bretton Woods agreement in 1971 (Photo: aranjuez1404)

"We are convinced that exchange rates reflect the economic fundamentals, especially flexible ones. We are open to a discussion with France about it, but the German government doesn't think that an exchange rate policy is an appropriate instrument to boost competitiveness. It may set some short-term impulses, but nothing sustainable," he said.

He added that Hollande is likely to bring the topic up during his dinner with Merkel in Paris on Wednesday night, but noted that most of the discussions would revolve around the EU budget.

Speaking in the European Parliament on Tuesday (5 February), Hollande told MEPs that EU leaders "need to think about our currency the euro. We must have an exchange rate policy otherwise it will have rates that do not reflect the strength of its economy."

Hollande said he wasn't calling on the European Central Bank to set an objective for the value of the euro, but for change in the way the international monetary system works.

"We should begin the necessary reform of the international monetary system," he said. "Otherwise we are asking countries to make efforts on competitiveness that are annihilated by the value of the euro."

Under the EU treaties, the ECB is solely responsible for the euro's exchange rate policy and has taken a strict 'hands off' approach. Governments can give 'general orientations' on exchange rate policies on condition that these must not interfere with the ECB's mandate.

However, the treaties do leave an exemption allowing governments to "conclude formal agreements on an exchange-rate system for the euro in relation to the currencies of third States.

Meanwhile, ING Financial Markets economist Carsten Brzeski dismissed the remarks as an attempt by Paris to pile pressure on the ECB.

"Part of every French president's brief is to attack ECB independence". he said, adding that "the treaties are very clear that member states can't interfere with the ECB's mandate." 

"This implicitly puts pressure to ECB to do something, either through quantitative easing or by cutting interest rates. But they're not going to do it."

Critics have also suggested that Hollande's statements were an attempt to deflect attention from the country's economic struggles.

"It is also an illustration of the fact France didn't do their domestic homework and is struggling to be economically competitive," commented Brzeski.

After suffering heavy falls against the dollar and sterling in 2011 and 2012 at the height of the eurozone crisis, the euro has begun 2013 strongly, reaching a fourteen month peak against the dollar. While this makes imports from outside the EU cheaper, it also increases the price of exports, making it harder for the likes of France and Germany to export their way out of recession.

Most currencies have had floating exchange rates which fluctuate according to the financial markets since the collapse of the Bretton Woods agreement in 1971, which had seen most countries peg their currency against the US dollar and tailor their monetary policies accordingly.

Investigation

EU never used power to scrutinise emissions labs

The commission has had the power to compel states to send assessments of the companies that test car emissions since 2007, but it has never made a single request.

MEPs fast-track EU border guard plan

EU parliament gives thumbs up to controversial plan for new border guard force that can be deployed to EU states even if they do not want it. Force could be operational by autumn.

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceSugar-Sweetened Beverage Sales Barometer Unveils Unhealthy Drinking Patterns in Europe
  2. EJCWelcomes EU Commission Code of Conduct on Countering Illegal Hate Speech Online
  3. Access NowEDRi & Access Now Withdraw From the EU Commission IT Forum Discussions
  4. EJCCalls on EU Parliament to Take Action Against MEP who Compared Israelis to "a rash"
  5. EU Sustainable Energy WeekHave Your Say On Europe's Energy Future At Our High-Level Policy Conference.
  6. CESIUpcoming On June 14: CESI@Noon On ‘Labour Market Integration Of Regugees’
  7. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  8. EPSUTrade Unions Back New Undeclared Work Platform
  9. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  10. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  11. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  12. Swedish EnterprisesNew Rules For Posted Workers - Better Protection or the End of Posting ?

Latest News

  1. Anti-fraud chief: EU was 'wrong' to lift my immunity
  2. MEPs fast-track EU border guard plan
  3. EU never used power to scrutinise emissions labs
  4. EU firms free to ban Muslim headscarves, jurist says
  5. Stop dreaming of integrated EU utopia, says Tusk
  6. Poland questions legality of EU probe
  7. German NGOs want judges to probe EU-Canada trade deal
  8. EU watchdog calls for fines on shady lobbyists