France last night demanded a debate about the strength of the euro as global
currency wars threatened to spiral out of control.
French finance minister Pierre Moscovici said exchange rates "should not be subject to moods or speculation" amid fears the single currency's recent surge is damaging exports and the economy.
His comments at a meeting of eurozone finance ministers in Brussels echoed those of French president Francois Hollande who last week tried to blame the deepening economic crisis in his country on the strong euro rather than his own failing policies.
The panic in France was dismissed by other European countries including Germany but marked a new front in the currency wars threatening the global economy. It is feared that countries could embark on tit-for-tat action to weaken exchange rates to keep their exports cheap in a damaging race to the bottom.
Officials are worried skirmishes in the currency markets could lead to a disastrous new wave of protectionist trade policies like those that exacerbated the Great Depression.
"Countries might resort to currency depreciation as a deliberate policy instrument to stimulate exports and economic growth," said Neil MacKinnon at VTB Capital. "If countries then resort to protectionist measures then world trade suffers. In that scenario, there are no winners and the economic outlook then begins to look very similar to the 1930s."
Jens Weidman, head of the German central bank, the Bundesbank, and an influential figure at the European Central Bank, slapped down French concerns about the euro. He said "politically-brought-about devaluations" do not lead to improved economic competitiveness and added that the euro is "not seriously overvalued."
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