Merkel suggests euro is too low for Germany

MUNICH • German Chancellor Angela Merkel has suggested that the euro is too low for Germany, but made it clear that Berlin had no power to address this "problem" because monetary policy is set by the independent European Central Bank (ECB).

The remarks - made yesterday at the Munich Security Conference, as United States Vice-President Mike Pence looked on - seemed aimed at addressing recent criticism from a top trade adviser to US President Donald Trump who has accused Germany of profiting from a "grossly undervalued" euro.

"We have, at the moment, in the euro zone, of course, a problem with the value of the euro," Dr Merkel said, in an unusual foray into foreign exchange rate policy.

"The ECB has a monetary policy that is not geared to Germany. Rather, it is tailored (to countries) from Portugal to Slovenia or Slovakia. If we still had the (German) D-mark, it would surely have a different value than the euro does at the moment. But this is an independent monetary policy, over which I have no influence as German chancellor."

The euro has fallen by nearly 25 per cent against the US dollar over the past three years, touching a 14-year low of US$1.034 (S$1.47) in January. It has since risen to about US$1.061.

Late last month, Dr Peter Navarro, the head of Mr Trump's new National Trade Council, said that the euro's low valuation was giving Germany an edge over the US and its European Union partners.

Yesterday, Dr Merkel said she did not want to delve into the causes of Germany's trade surplus, noting that this was sure to be a continuing topic of discussion with US officials. But she said that both countries were proud of their products and Washington had no reason to be unhappy about the level of German imports.

"When you look around the room and see how many iPhones and Apple products are in play, I think the Vice-President can be completely satisfied - and Fifth Avenue is still underpopulated with German cars," Dr Merkel said, drawing applause from the audience.


A version of this article appeared in the print edition of The Sunday Times on February 19, 2017, with the headline 'Merkel suggests euro is too low for Germany'. Print Edition | Subscribe