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ECB’s Weidmann: Euro Not Overvalued, Warns Against Weakening

Monday, 11 Feb 2013 11:31 AM

European Central Bank council member Jens Weidmann said the euro isn’t seriously overvalued and warned governments against trying to weaken the currency.

“Latest indicators don’t signal a serious overvaluation of the euro despite its recent appreciation” and “politicians should hold on to the established division of labor,” Weidmann, who heads Germany’s Bundesbank, said in a speech in Freiburg Monday. “An exchange-rate policy to specifically weaken the euro would lead to higher inflation in the end.”

French President Francois Hollande last week urged government leaders to steer the value of the euro lower to boost growth. His call was rebuffed by German Chancellor Angela Merkel’s government and European Central Bank President Mario Draghi, who on Feb. 7 suggested the ECB could lower interest rates if the stronger euro were to damp inflation too much.

“Experience from previous, politically induced depreciations show that they don’t normally lead to a sustained increase in competitiveness,” Weidmann said. “Often, more and more depreciations are necessary. If more and more countries try to depress their currency, it will end in a depreciation competition, which will only produce losers.”

Weidmann said exchange-rate developments “certainly are taken into account in monetary-policy decisions, given that they influence price developments.”

However, he said the ECB has already done enough to fight the sovereign debt crisis and it’s up to lawmakers to implement structural reforms at the national and European level.

“The problems can only be solved by politics, central banks can’t do it,” he said. “Therefore, the discussion about an allegedly overvalued euro is only diverting attention from the actual challenges.”


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European Central Bank council member Jens Weidmann said the euro isn’t seriously overvalued and warned governments against trying to weaken the currency.
ecb,euro,currency,weaken
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2013-31-11
Monday, 11 Feb 2013 11:31 AM
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