Neither the (now certified) fall of Portugal nor increased debt pressures on other european peripheric countries have been enough to tumble down the never-ending rise of the euro exchange rate against other significant currencies. This should be very worrying for the heart and engine of the eurozone, Germany. I am sure Germany is already worried about that, what I mean is they should be worried enough to do something about it.
A net exporter like Germany should not allow its currency to be its Achilles heel. Ok, the currency is not really German, but they are its founding fathers and the main reason why it exists... With this in mind, it becomes very difficult to understand why they allow 'their idea' to make their international trades more expensive and complicated. In the actual economic situation, competitiveness and efficiency are key to keep selling and Germany can lose their edge because of this. It is survival of the fittest.
The competitiveness indicators based on consumer prices published by the ECB show this trend clearly, see charts below (where 100% equals the index value in 1999 ) with an obviously sharp decline coincidental with the rise of the euro.
The competitiveness indicators based on consumer prices published by the ECB show this trend clearly, see charts below (where 100% equals the index value in 1999 ) with an obviously sharp decline coincidental with the rise of the euro.
 |
| Harmonised competitiveness indicator for Germany. Credit: Deutsche Bundesbank |
A strong euro is obviously good for debt issuing, for general borrowing and for imports but it can really hurt the muscle of Europe. Maybe you could think of it as eating everyday at McDonalds (no bashing here, just an example): it is cheap, it is easy and convenient as you can find one almost everywhere and it gets you through the day. But in the long-term fats are bad for your figure and, more importantly, bad for your most important muscle, the heart. The European Central Bank (ECB) is damaging the heart of Europe.
