The European Union must «do its homework» and take advantage of the unprecedented opportunity that is offered to strengthen the global role of the euro to the detriment of the US dollar, urged the president of the European Central Bank Christine Lagade. But is Europe prepared for such a strong euro? The opportunity is given by the current geopolitical instability, Lagarde explained. US President Donald Trump has a lot to do with the current instability, geopolitical, economic and commercial, internal and international. Since the beginning of the year, after the elections by which Trump returned to the White House, the dollar depreciated by almost 20% in relation to the single European currency, especially due to the positioning of investors towards the disruptive policies of the new leader. Unprecedented capital was invested in the assets denominated in euros, the currency being propelled upwards. Thus, the hopes were also propelled that the euro can take on a greater role in world trade and finances. Lagarde, who approaches with fast steps to the end of her term, has insisted several times on this opportunity which, in the end, is an opportunity for the euro area. The monetary union has so far browned through the storm caused by the protectionism and customs duties unleashed by Trump. There was no economic shock, inflation was controlled by the ECB policy, and the conclusion of a commercial agreement with the US has brought the euro area in calmer waters, as they like to show European leaders. The confidence of investors in euros is the maximum of the last four years, according to a Bloomberg survey. But these new powers of the Euro are also a danger to the economic growth of the region, in times when vulnerabilities increase. Strong currencies usually erode the competitive advantages that exporting countries have on international markets and they break the economic growth. The US was accused of leaving the world economic crisis that they also created devaluing their dollar, on the account of the emerging world. China was accused of Washington in 2019 of manipulating its currency. Increasing the gap between dollar and euros this year seems to be related to the efforts of the white house to depreciate American currency to create prosperity in the US economy, notes Bloomberg. In the euro area, where the countries can no longer use the advantages of national currencies, the good is the common one, but it is complicated. Savings devastated by the crisis of debt such as Spain and Greece are in good shape and are praised as a growth model. But Germany and France, which together represent half of the GDP of the Monetary Union, are struggling. Commercial barriers prove to be too great for German exporters, and the German economy has been stagnating for years. France is anemiated by a government crisis and a budgetary one that propagates on the debt market. Investors are discouraged. The last time France GDP increased by less than 1%, and inflation was below 2%, ECB reduced monetary policy interest. The two economic giants need growth, and the euro in front of the dollar helps them. There is also worrying is the depreciation of over 16% of the Yuan, the currency of China, in relation to the euro. The plunger reflects the decision of Beijing to hold its own export engine to maximum speed to the detriment of Europe. The euro area and the EU lose the economic war on both fronts. And the ECB does not seem to rush with an answer. Maybe because the stability of the exchange rate is not in the institution's mandate. Only the stability of prices. A strong euro is a brake for inflation. And a reason for pride for those who see him climbing the backup scene. But all signs show that pressures will grow. Analysts expect the euro to continue their appreciation, which means that the negative effects of the tendency will become more difficult to ignore. Since the spring, several European companies have tried to draw alarm signals in this regard. The Vice -President of BCE Luis de Guindos clearly said that if the euro reaches $ 1.20 per unit, from $ 1.17, «it would make things much more complicated.» The most vulnerable are the unpopular governments, with problems of financing the budgets, which can not be contributed to the vision of Mario Draghi about a faster and faster economic growth, which issues common debts to build the technology, defense and infrastructure of the future. What the ECB should do is stop lying on an ear and further reducing interest, using the maneuver it has available. The central bank of the euro area can still do this, unlike, for example, the National Bank of Switzerland. The interest of Swiss monetary policy is already at zero. The one in the euro area is 2%. The fans of the harsh policies will say that the lower interest will create inflationary pressures. But these will be counterbalanced by the waves of cheap Chinese products that will enter the EU, the effects of disappointing economic data and the power of the euro. These are unusual economic times. Washington surpasses Brussels, while Beijing surpasses Berlin. Coins are now an extension of politics by other means. Exceeding the currency storm will not give too much consolation if European affairs continues to invest billions in the US while Russian drones fly over the EU. While the euro area accumulates geopolitical power, at least allow its currency to be weaker. It can help a bit the crisis in France. Ever since it broke out, the euro has been depreciated by 1% compared to the dollar, although the US government is in budget block. On the other hand, Europe cannot be strong without France. A strong euro, but as a reserve currency and not in the exchange rate, needs a strong economic and on the geopolitical stage. And as things look now, to get power, the euro area and the EU need a weaker euros during the exchange rate.
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