Old wine in new bottle

DNUM_AEZACZCABH 15:06

(Baonghean) - Recently, a senior advisor to the new US President Donald Trump declared that the common currency of Europe - the euro - will only play the role of Germany's own currency, allowing this economic locomotive to "fully exploit" its partners in the European Union and the United States. However, in the end, for Berlin, this is just a story of "old wine in a new bottle"...

Bà Merkel đã lên tiếng phản pháo những cáo buộc từ phía Mỹ. Ảnh: Internet.
Ms. Merkel has spoken out against accusations from the US. Photo: Internet.

Accusations and counter-claims

In an interview with the British business daily Financial Times, Peter Navarro, a senior adviser to the new White House owner Donald Trump, “accused” Germany of profiting from a “grossly undervalued” euro, which is harming its European partners and the US. According to Navarro, Germany is exploiting these countries through a “disguised Deutsche Mark”.

These accusations are not new, they are simply repeated in a different tone. The reason they are not new is because they have been raised many times before by American economists, officials such as the head of the International Monetary Fund Christine Lagarde, and even Trump's predecessor, former President Barack Obama.

Of course, the German media and politicians are not willing to sit still and take the blame. Some reputable German television channels and press agencies have stressed that no matter how many times the accusations are repeated, it is impossible to “shut up the child” or “turn black into white.”

Earlier this week, German Chancellor Angela Merkel firmly rejected Navarro’s claims, stating that Germany was not responsible for the euro’s devaluation against the dollar. “When it comes to the euro and its valuation, Germany is the country that has always pushed the European Central Bank to pursue an independent policy, as the Bundesbank did before the euro was created,” she said.

It can be seen that, with this statement, Mrs. Merkel is resolute and wise, strongly "counterattacking" those who accuse her government as well as the European economic locomotive, indirectly drawing a clear line and affirming that Germany has no influence on the choices or decisions of the European Central Bank. The German general cannot and does not want to change anything in a direction that is unfavorable to the EU.

“Side effects”

According to a commentary in Deutsche Welle, it is undeniable that the European Central Bank's actions have contributed significantly to the decline in the euro exchange rate. This financial institution is applying a zero-interest rate policy and has faced a wave of criticism from German savers.

The European Central Bank is also pumping huge amounts of money into the economy, trying to buy time for countries like France and Italy that are struggling to reform their troubled economies. And the massive money printing is undoubtedly putting heavy pressure on the value of the common currency.

In fact, this has the “side effect” of making German goods relatively cheaper and gaining a competitive advantage in the global market. However, this was never the intention of the European Central Bank, but simply an unintended consequence of its “ultra-low” interest rate policy.

Furthermore, German exporters have never relied on exchange rate factors to sell their products on the world market. It is clear that they have continued to sell well even during periods when the euro has strengthened significantly against the US dollar.

The secret behind the success of German exporters lies not only in the price of their products, but above all in the quality of their goods. It is obvious that the demand for German car and machine manufacturers to produce lower quality products is only to “adjust” the world trade balance and “appease” selfish minds with a different understanding of economics and trade relations.

Cố vấn của Trump cho rằng Đức làm lợi từ việc định giá đồng euro quá thấp. Ảnh: dpa.
Trump adviser says Germany benefits from undervaluing the euro. Photo: dpa.

Share responsibility

Meanwhile, the US has also contributed to the strengthening of the dollar and the weakening of the euro. The US Federal Reserve's interest rate hike has pushed up the dollar, and the US central bank is expected to continue raising interest rates at least three more times this year. Analyst Rolf Wenkel said that this will further widen the currency gap between the two major currencies and could push the euro lower against the dollar.

If this scenario pans out, it would not be the first time the euro has fallen below the dollar. The euro was worth just 95 cents when Greece announced it had met the criteria to join the eurozone on January 1, 2001.

In retrospect, it was a decision that did not benefit the southern European country at all. Moreover, the time when European countries, especially Germany, gained an unfair competitive advantage by adopting the euro was not met with any criticism.

The question now, therefore, is whether this exchange rate dynamic will continue and, if so, for how long. On the other hand, the focus should be on the medium- and long-term implications of possible scenarios.

Unfortunately, the European Central Bank's interest rate outlook and its cash flows into markets are likely to continue on their current course, at least until the end of the year.

And that means a growing divergence in monetary policy between the Eurozone and the US. However, it must be admitted that the German government or central bank are not involved in the planning of the monetary easing policy of Europe's leading financial institution.

As for the US, there is no doubt that Mr. Trump is not “pleased” with the large trade deficit of the number 1 economy. However, that deficit is not only due to the exchange rate, but also has its roots in the consumer protection nature of American society. And in fact, the US public debt has increased by about 10 trillion in just the past 8 years.

Trump also sees competition in the global marketplace as nothing more than a zero-sum game and a zero-sum game, where one loses and the other wins.

And on the bright side, Germany’s being targeted by the US President and his associates could be a compliment to the European country. The federal government in Berlin can simply ignore the rhetoric coming from Washington, treating accusations from across the Atlantic as normal!

Thu Giang

RELATED NEWS

Featured Nghe An Newspaper

Latest

x
Old wine in new bottle
POWERED BYONECMS- A PRODUCT OFNEKO