German Central Banker Will not Weaken Euro

iscussions about an overvaluation of the euro are simply a diversion from governments’ task of sorting out their economies, European Central Bank policymaker Jens Weidmann said on Monday, resisting political pressure to weaken the currency.

The ECB has already done a lot to curtail the crisis and should do no more as the measures it has taken have stretched the central bank’s mandate, added the Bundesbank chief – the only ECB policymaker to oppose the new ECB bond purchase plan.

French President Francois Hollande last week raised the possibility of political interference in exchange rate policy when he called for a medium-term target for the euro’s value, a move to counter its recent appreciation.

“The Eurosystem (of euro zone central banks) cannot solve the crisis,” Weidmann said in the text of a speech for delivery in the southern German city of Freiburg.

“Only governments can solve these problems, the central banks cannot,” he added. “In this respect, the discussion about a supposed overvaluation of the euro’s exchange rate simply deviates from the real challenges.”

The euro hit a 15-month peak of $1.3711 on Feb. 1, before easing slightly.

ECB President Mario Draghi said last Thursday the central bank will monitor the economic impact of a strengthening euro, feeding expectations the climbing currency could open the door to an interest rate cut.

But Weidmann said the euro was not overvalued.

via Reuters

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