Follow my advice, not my policy. The Financial Times rejoices about the strength of the euro here, relative to the dollar and to the pound which have been plunging lately.
According to the City’s newspaper: “A strong common currency is better than none at all. Before, dollar strength would set off currency chaos by creating incentives for beggar-thy-neighbour attempts at weakening national currencies. Not only was this self-defeating: it also softened exporter’s market discipline, since relying on policy action became easier than raising productivity.”
Now indeed the pleasures of currency depreciation are reserved for the happy few: the US and the UK. And of course, currency depreciations are all the more effective when the partners in exchange do not retaliate. That’s exactly what has strengthened the German economy competitive position within Europe since the 1990s. Could it be that the Financial Times advice is slightly biased towards British self interest?
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