Arnaud Montebourg, France’s minister of industrial renewal, says the level of the euro is “grotesque”.
Montebourg also claims the current level of the euro annihilates efforts in France to increase competitiveness. His solution: Take over ECB currency policy by political force.
Via translation from a Les Echos interview, Montebourg complains “We Must Bring Down the Value of the Euro”.
LE: What is your view on the level of the euro?
AM: As Minister of Industry, I believe that the euro has become problematic in the eyes of all our businesses. Between 2012 and 2013, the euro has appreciated over 10% against the dollar and more than 40% against the yen. All while between the third quarter of 2012 and the third quarter of 2013, the growth rate was 3.4% accumulated in the United States, 2.3% in Japan and – 0.2% in the euro area! We have the most depressed area in the world and the currency appreciates most in the world. This is grotesque.
LE: A strong euro is not it a good thing for imports?
AM: But our first priority is to export more because we recorded external trade deficit of €61 billion in 2013. The euro penalizes industry instead of supporting the competitiveness of serious crisis we are experiencing. All major European manufacturers in aerospace, in food, transportation, and all economic institutions of the IMF Economic Analysis Council itself to the Prime Minister, through the OECD, defend “unconventional” new policies and to finally bring down the level of the euro. Why should we continue to put our heads in the sand?
LE: What do you actually do?
AM: We need to open a political battle to bring down the euro. The euro must be at the service of our economy and our industry. This is not to devalue but to reduce it to a reasonable and sustainable level. According to the Treasury, a depreciation of 10% would increase our growth rate of 1.2%. This would create 150,000 jobs, improve the trade balance and reduce our deficit of $ 12 billion. The European Central Bank (ECB) can no more play on interest rates since we already have zero interest rates almost, and yet she was unable to fulfill its mandate of inflation at least 2% since we deflation dangerous situation again. The euro is now a political issue that must be seized to imagine more unconventional policies as suggested by the IMF.
LE: Paris will he supported?
AM: France is far from alone. The euro is an undivided co-ownership of member States. We have to wage political battle against the proponents of a strong euro. Our historical efforts to lower the cost of labor on the CICE in France are devoured by the 10% appreciation of the euro now.
LE: But at the moment nothing happens.
AM: The European Central Bank arrives at the end of its ability to act according to the current design of its mandate. We must now leave the conservatism and conformism and put this issue at the heart of the European election campaign. If we do not reform the euro on an emergency basis, the European populations will unfortunately soon be tempted to get rid of it.
LE: Aren’t you afraid to start a currency war?
AM: A currency war already exists! We are the victims and we are the only ones not to react!
LE: Do you feel that France is going too far in terms of competition?
AM: Producers need margins to live and invest. To maintain employment, it is essential to limit the excessive competition. There must be a balance, reconciliation between the consumer and the producer policy. This is the public interest. This policy is to define the right level of competition. Not the so-called independent authorities. These authorities often a purely consumerist vision and legal and does not sufficiently defend the industry and employment in France. In this respect, I think for example that ARCEP excessive powers and forgot employment, industry and made in France, and caused a downward spiral of low cost.
Montebourg is a seriously misguided as well as economically-challenged politician. The very thing France needs is for costs to go down, especially relative to the rest of Europe. A currency devaluation will not and cannot solve relative productivity problems.
He wants to eliminate “excess competition”. Such a construct does not even exist. Nor does the construct of “right level of competition” exist. Even if the “right” level of competition did exist, no government bureaucrat in the world could possibly know that level.
Finally, Montebourg wants to “bring down” the value of the euro. Don’t worry, he doesn’t want to “devalue” it!
Here is the Merriam-Webster definition of devalue: “to lower the value of a country’s money so that it is worth less when it is traded with another country’s money”.
Mike “Mish” Shedlock