Schaeuble Scorns U.S. Criticism That Germany’s to Blame for Weak EuroBy
German finance chief says stronger euro would be preferable
Says Europe needs to pull together to ‘stay relevant’
German Finance Minister Wolfgang Schaeuble scorned U.S. accusations that Europe’s biggest economy is using an undervalued currency as a tool to gain unfair trade advantages, saying aides to President Donald Trump apparently don’t understand that the euro’s exchange rate isn’t set by the government.
“In America, the savvy advisers to the new president are now concerned with the question of why the German economy is to a certain extent competitive and performing well,” Schaeuble said on Friday in Saarbruecken, Germany. “They have not entirely understood, or at least not everyone, that the German federal government isn’t responsible for monetary policy in Europe, but someone else.”
Schaeuble weighed in days after Peter Navarro, the head of the White House’s new National Trade Council, told the Financial Times that Germany’s excessive surplus is a sign of a “grossly undervalued” currency. The minister’s comments echoed Chancellor Angela Merkel, who said on Tuesday that the exchange rate is influenced by European Central Bank policies, which are set independently.
The spat underscores growing concern in Europe about the direction of U.S. policy as Trump’s presidency sets the stage for increased tension over global trade and currency regimes, threatening to upend decades of economic ties with Europe and Asia.
More than in recent years and “contrary to the international babble that has nothing to do with reality,” Germany’s economic growth is mainly driven by domestic demand as unemployment has declined to the lowest in decades, boosting consumer spending, Schaeuble said.
Trump’s administration will have an opportunity to take its trading partners to task on currency manipulation at the Group of 20 meeting of finance ministers and central bank governors scheduled for March 17-18 in Baden-Baden, Germany, hosted by Schaeuble.
In view of changes in the U.S., European governments must get their act together and euro-area governments need to increase efforts to boost competitiveness because the growing divergence within the bloc is “a problem,” Schaeuble said.
“We in Europe will need to make bigger efforts to stay relevant,” he said. “We won’t be able to rely forever on a having a big brother or a big sister who takes care of us.”
While Germany could stay competitive even with a somewhat stronger euro, others in the currency union would struggle, Schaeuble said.
“The problem is that we have a structure in the monetary union, a common currency without a common finance and economic policy, and that member states -- the ECB isn’t tiring of saying that -- aren’t doing what they committed to,” Schaeuble said. “One of the big problems of monetary policy” is how to begin an exit from the “unusual” stance without “risking bigger economic upheavals in other European countries,” Schaeuble said.