Jens Weidmann, the head of the Bundesbank. Image via European Central Bank
Jens Weidmann, the head of the Bundesbank, Germany’s central bank responded to allegations of currency manipulation last week. In a sharp statement, the head of the Bundesbank called the allegations “more than absurd†and “unsettling,†joining other central bank officials from around the region, including the ECB president Mario Draghi, who said the day before that the European Central Bank did not intervene in the currency markets since at least 2011.
“The charge that Germany exploits the U.S. and other countries with an undervalued currency is more than absurd,†Mr. Weidmann said, noticing that the U.S. enjoyed the benefits of a weaker exchange rate for more than a decade.
The reaction from the German officials came as Peter Navarro, the head of the U.S. National Council commented that the euro was “grossly undervalued†giving German firms an unfair advantage over other foreign competitors.
Mr. Weidmann said that the recent appreciation in the U.S. dollar against other currencies was on account of domestic issues such as making political announcements that drove the exchange rate higher and not because other central banks were attempting to weaken their respective currencies.
The German finance minister Wolfgang Schäuble was however very blunt as he reacted to the allegations by shifting blame onto the ECB. “When ECB chief Mario Draghi embarked on the easy-money policies, I told him that he would drive up the German trade surplus,†the German finance Minster said, noting that he didn’t want to be blamed for the consequences of the policies undertaken by the ECB.
Germany’s trade surplus tells a different story
While Mr. Weidmann defended the monetary policies and deflected the allegations of benefiting from currency manipulation, the economic data released last week had a different story to tell.
