BERLIN : The euro is not currently overvalued and exchange rates should not be used to try and boost competitiveness, the German government said Wednesday, rejecting French calls for ways to cap the single currency's recent rise.
"The German government is of the conviction that the euro, historically speaking, is currently not overvalued," government spokesman Steffen Seibert told a news briefing.
"What we're currently seeing is a rise in the value of the euro which is a counter-reaction to the massive depreciation in the wake of the eurozone crisis," Seibert said.
Earlier in Paris, French Finance Minister Pierre Moscovici had said an overvalued euro hurts economic growth and the issue should be discussed among eurozone finance ministers and the group of 20 leading economies.
But Berlin sees no cause for alarm.
The latest rise in the euro "shows that financial markets' confidence in the euro is returning. That's not a bad thing," government spokesman Seibert continued.
Germany believes that a currency's exchange rate should reflect its economic fundamentals "and flexible exchange rates are the best to way to achieve this," he said.
"I can only point out that both the G8 and the G20 separately agreed that it made sense for the markets to set exchange rates," the spokesman noted.
French minister Moscovici said that while the euro's recent rise was partly explained by the abatement of the eurozone crisis, the monetary policy of other countries was also to blame.
Moscovici said it is "legitimate" to discuss with European finance ministers what could be the fair value of the euro and the right way to get there.
But while Seibert acknowledged that the topic would likely be discussed, "from our point of view, exchange rate policy is not an appropriate tool to boost competitiveness.
"The effects of things like targeted devaluation tend to be rather short-term. You can't use it to achieve a lasting boost in competitiveness," Seibert said.
A day earlier, French President Francois Hollande had said the euro's value cannot not be left to the whims of the market.
Speaking to European Parliament in Strasbourg said "a single currency zone must have a foreign exchange policy otherwise it will see an exchange rate imposed on it (by the markets) which is out of line with its real competitive position."
The euro has strengthened sharply in the past few months as the eurozone appeared to have finally got the better of a debt crisis which at one stage looked likely to sink the whole project.
On Friday, the single currency hit US$1.3711, a level last seen in mid-November 2011, stoking concerns that it could begin to hurt exports, a key growth driver at a time when the overall eurozone economy is struggling badly.
For several months some emerging countries have objected that monetary policy by leading central banks, in injecting liquidity into their own economies, tends to depress their currencies and amounts to a policy of competitive devaluation.
Analysts say that the policy of the European Central Bank is showing signs of being somewhat less relaxed and this is one factor tending to push up the euro.
- AFP/ch
Euro not currently overvalued, Germany says
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