Monday, 18 February 2013

Is the euro overvalued?

February 14, 2013 

Sixteen other countries have the euro

From Mr Alfred Mifsud.

Sir, Jens Weidmann, the head of Germany’s Bundesbank, thinks that the euro is not seriously overvalued, that any effort to weaken it will stoke inflation, and that while other central banks and governments are pursuing benign neglect of their currency, more colloquially referred to as modern currency wars, Europe should stand idle and continue to sing the virtues of strict inflation targeting and hard monetarism (“Bundesbank head warns against EU leaders talking down the euro”, report, February 12).

Maybe someone should remind him that the euro is the currency of 17 EU nations, not only Germany; that a competitive euro rate for Germany is an uncompetitive rate for other EU nations, which need all the help they can get from the exchange rate to sustain their effort to recover competiveness by drastically painful internal devaluation measures; and that the main macro-economic threat to the eurozone is prolonged recession and a lost generation of unemployed, not inflation.

Alfred Mifsud, Balzan, Malta
copyright: The Financial Times Limited 2013.

No comments:

Post a Comment