Wednesday

18th Oct 2017

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.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

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.

Hollande ready to compromise on EU budget

Francois Hollande is ready to accept a cut in the EU budget provided that it does not weaken the European economy and protects the poorest countries, the French President told MEPs.

Opinion

The monetary masquerade

Massive monetary expansion defers vital structural reforms in the advanced world, writes Dan Steinbock.

Hollande receives German opposition leader

French President Hollande will on Friday in Paris receive German opposition leader Steinbrueck after recently admitting there is "friendly tension" with Merkel.

News in Brief

  1. US ready for arms sale to update Greece's F-16 fleet
  2. Austria's Green leaders step down following election failure
  3. Icelandic journalists protest ban on reporting PM's finances
  4. UK to begin registering EU nationals by end of 2018
  5. EU countries want compensation from Israel in Palestine
  6. Spanish Court declares Catalan referendum law void
  7. EU to keep 'Dieselgate' letter secret
  8. No deal yet on Mediterranean alliance for EU agencies

Stakeholders' Highlights

  1. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  2. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  3. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  4. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  5. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  6. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  7. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe
  8. CECEE-Privacy Regulation – Hands off M2M Communication!
  9. ILGA-EuropeHealth4LGBTI: Reducing Health Inequalities Experienced by LGBTI People
  10. EU2017EEEHealth: A Tool for More Equal Health
  11. Mission of China to the EUChina-EU Tourism a Key Driver for Job Creation and Enhanced Competitiveness
  12. CECENon-Harmonised Homologation of Mobile Machinery Costs € 90 Million per Year

Latest News

  1. Tusk summits to create new-model EU
  2. Norway and Poland reach deal on €809 million aid scheme
  3. Member states eye agreement on posted workers
  4. EU rejects UK claim it's slowing Brexit talks
  5. Nepal troops arrive in Libya to guard UN refugee agency
  6. Is Banking Authority HQ the Brexit 'booby prize'?
  7. EU-Russia trade bouncing back - despite sanctions
  8. No sign of Brexit speed-up after May-Juncker dinner