Germany Does Not Approve Hollande’s Call to Steer Euro Rates

Francois Hollande, the President of France, made calls to steer exchange rate of Euro, however, the same has been dismissed by the German Government. The spokesperson, Steffen Seibert stated that the policy makers believe that currencies should always be determined by market and not manipulated in any possible way.

On the eve of budget talks of the European Union and Angela Merkel, the German Chancellor’s meeting with Hollande, Steffen however has not ruled out the chances of a possible discussion over the warning of the French President on the rising Euro. Incidentally, on yesterday, Hollande made a statement that the shared currency should not be left alone to fluctuate and Euro leaders must come up with ideas to stop it act according to the mood of the market.

Steffen, while announcing German Government’s stand, clearly stated that the exchange rate policy should not be considered as an appropriate instrument for boosting the competitiveness. The exchange rate rather is determined by the short term stimulus through some targeted depreciation, as commented by Steffen. Steffen also added that any sort of manipulation in currency price makes a halt in the sustained competitiveness.

The investors are currently shaking off the concerns over the debt crisis in Europe and in the last 6 months, Euro has actually jumped up by 10%. On 1st February, it reached to a figure of $1.37. A high figure of Euro against Yen and USD makes things tougher for the exporters who compete internationally in a time when the European economy is trying to shake off the sovereign debt crisis problem. Incidentally, Hollande’s statement kind of contradicts the market based approach of Germany as Hollande believes, just like China and US, Euro region should be using the shared currency as an export promoting tool. According to Hollande, it is important for Euro leaders to act at an international level asserting the interests.

Euro, incidentally, in June, 2010, went down to as low as $1.1923, being eight months into the sovereign debt crisis of the region. In this week, it has so far declined by 1% against the USD and is currently priced at $1.3512.

According to Steffen, increase of Euro is not that bad and also reminded of the commitment of Group of 20 and Group of 8 nations for allowing markets to come up with currency levels.