Schauble Agrees With Trump That Euro Is "Too Low" For Germany, Blames Mario Draghi

Tyler Durden's picture

In surprising comments that may rekindle a verbal currency war between president Trump and Europe, German finance minister Wolfgang Schäuble told German newspaper Tagesspiegel that in his opinion the Euro is "too low" for Germany, echoing criticism from Trump's trade advisor Peter Navarro, who last week told the FT that Germany was exploiting its US and EU partners by using a “grossly undervalued” euro to create a vast trade surplus. The comment placed Germany, alongside China and Japan, in a category of countries that the Trump administration has accused of currency manipulation for competitive advantage.

As the FT reports on Sunday morning, Schauble acknowledged that the ECB had to set monetary policy for the eurozone as a whole, but said: “It is too loose for Germany.” A recent chart from Morgan Stanley confirms that on a PPP basis, the EUR is over 40% undervalued for exporting and current surplus powerhouse Germany on a standalone basis, however for many of Europe's peripheral countries it still remains expensive.

What was more curious about Schauble statement is that the German finance minister blamed the European Central Bank for the low exchange rate.

“The euro exchange rate is, strictly speaking, too low for the German economy’s competitive position,” he told Tagesspiegel. “When ECB chief Mario Draghi embarked on the expansive monetary policy, I told him he would drive up Germany’s export surplus . . . I promised then not to publicly criticise this [policy] course. But then I don’t want to be criticised for the consequences of this policy.”

However, as events last week showed, an otherwise hawkish Germany being criticized for ECB's monetary policy is preicsely what happened.

Schäuble pointed out that Germany was not able to set exchange rate policy and pinned responsibility for the euro’s weakness against the dollar on the ECB. The German finance ministry was “not an ardent fan” of the ECB’s policy of quantitative easing that had helped to weaken the single currency.

In other words, if Trump wants to blame anyone for the weak Euro - according to the German - he should direct his anger at Mario Draghi.

As the FT notes, Germany's Ifo Institute recorded a trade surplus of nearly $300bn last year, outpacing China by more than $50bn to hold the world’s largest trade surplus. Critics not only in Washington, but also Brussels have called for Germany to reframe its fiscal policy and stimulate domestic demand to increase imports. So far, however, any European criticism of Germany has been mostly lip service, which is why the arrival of Trump as a vocal critic of German trade policy has sparked renewed concern in Germany.

Additionally, in the interview Schäuble questioned why a US president would want to divide Europe given that the continent “is closer to them than anybody else in the world”. He added he did not believe that Mr Trump was seriously trying to split up Europe, but he was “testing” a lot.

Despite implicitly agreeing with Trump that the ECB is at fault for keeping the Euro too low, Schauble scorned U.S. accusations that Europe’s biggest economy is using an undervalued currency as a tool to gain unfair trade advantages, saying aides to President Donald Trump apparently don’t understand that the euro’s exchange rate isn’t set by the government.

“In America, the savvy advisers to the new president are now concerned with the question of why the German economy is to a certain extent competitive and performing well,” Schaeuble said on Friday in Saarbruecken, cited by Bloomberg. “They have not entirely understood, or at least not everyone, that the German federal government isn’t responsible for monetary policy in Europe, but someone else.”

As per his latest clarification on Sunday, that "responsible someone" is Mario Draghi.

Schauble added that “the problem is that we have a structure in the monetary union, a common currency without a common finance and economic policy, and that member states - the ECB isn’t tiring of saying that - aren’t doing what they committed to,” Schaeuble said. “One of the big problems of monetary policy” is how to begin an exit from the “unusual” stance without “risking bigger economic upheavals in other European countries,” Schaeuble said.

Schäuble’s Sunday comments on monetary policy comprise his latest attack on the ECB’s easy money policies. Last year, the hawkish finance minister blamed Draghi for “50 per cent” of the success of the populist rightwing Alternative for Germany party. Schäuble and others on the conservative wing of Chancellor Angela Merkel’s ruling CDU/CSU bloc are concerned that as well as profiting from the refugee crisis, the Eurosceptic AfD, which wants an end to the common currency bloc in its present form, is winning support from voters worried about the euro’s stability and the low interest on their savings.

Draghi, meanwhile, was on Friday hailing efforts at European unification, defending the common currency and applauding some of Germany’s labour reform policies in a speech given in Ljubljana, Slovenia.

“There are some today who believe that Europe would be better off if we did not have the single currency and could devalue our exchange rates instead,” Mr Draghi said. “But, as we have seen, countries that have implemented reforms do not depend on a flexible exchange rate to achieve sustainable growth. And for those that have not reformed, one has to ask how beneficial a flexible exchange rate would really be. After all, if a country has low productivity growth because of deep-rooted structural problems, the exchange rate cannot be the answer.”

While it remains to be seen if Trump will pivot his attacks away from Germany and to the rightful source of Europe's weak currency, the European Central Bank which continues to monetize a record amount of debt instruments, now owns over 10% of Europe's entire stock of corporate debt, and whose balance sheet has ballooned to over 36% of the Eurozone's GDP...


... it would certainly make for a welcome change for Trump to launch an occasional twitter attack at the ECB, instead of focusing all his social media energy on the US Judicial System, although with his cabinet being comprised of numerous former coworkers of Mario Draghi, who would rather keep the ECB's role in facilitating Germany's surplus under wraps, it does not appear too likely.

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Newsboy's picture

Strange bedfoellows these days. Fog of war. Wassappinin?

CuttingEdge's picture

In his next interview, Schäuble will blame Draghi for the +40% youth unemployment in Italy and Spain, and the woes of Greece...

Son of Captain Nemo's picture

Yeah it came from this "hole" more than five years ago that never got "plugged" (

But no worries IT'S A BIG OCEAN!

JRobby's picture

If Draghi and Yellen were shot into space as the The Super Bowl half time entertainment, I might watch it.

rmopf2010's picture

What we see in Germany with Martin Schultz coming to SPD

is TPTB/NWO don't want the new comunism to end in Europe so they use the twin card play (SPD and CDU) to divide and the end result will be the same.


Afd Will have no chance of winning. I think it is time to bet on Schauble as Prime Minister he is the only one in Germany, who tells the truth:

1) About rafugees (shy criticism)

2) About QE+NIRP ruining economy  (well visible always criticizing ECB)

and Schauble is in a good position to win some election. Time to AFd try to get HUGE man (Schauble) to their sides if they want to win against the NWO globalists (Angela Merkl, Martin Schultz)

run boy's picture
run boy (not verified) rmopf2010 Feb 5, 2017 3:47 PM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do,...

VD's picture

the EU is so egregiously broken, and from day 1 it was a joke; for eg Germany vs France? or Germany vs Italy? Spain? all the elites are doing is beating a decaying horse corpse here while extracting the very last bits of lifeforce from the citizenry before it all blows up...


The EU was pushed through by RIGGING all the GDP trade etc data of all the countries and this is well known to insiders that had to have fake numbers to make it "work"....


global ponzi v3.0 ripe for a crash far worse than 2008.

JRobby's picture

It's all lies

It's all rigged

The elite's are preparing to run for their lives or have already done so.

Useful idiots like Draghi will swing, his corpse abused by rampaging mobs. 

bh2's picture

No, blame the country that benefits the most for this policy. Put enough pressure on Merkel and she'll put pressure on the ECB. As it is, the finger pointing only excuses everyone from any responsibility as the game goes on.

And blame our previous president for having ignored the effects of this policy on the U.S. and his duty to protect his own country.

max2205's picture

36% ?  Just the beginning 

falak pema's picture

Schauble now facing the German conundrum : solidarity or austerity to dry the Club Med swamp that leads to populist Armageddon all over Europe; including Deutschland.

Your choice Mutti; already it may be too late.

But the Duck's ultimatum and about turn is making German austerity all the more fragile...

Looks like Schauble is now in the hot seat as the Duck puts the screws on EU's very survival.

TheGardener's picture

wrong,wrong and again but just about right my amargedon friend . This Germany will not to  survive by populist vote alone.

As a fellow ZH`er I trust you to put your very body against those levers of suppresion against the people who run it...

Afd is the very and last hope of the Germanites, Just like our lovely Marine.



falak pema's picture

Sorry but I am a ZH heretic ...not in the mainstream.

RattieNomNom's picture

maybe balme the FED for inflating the dollar 1st?

LetThemEatRand's picture

I wonder why Central Bank policies that are touted as necessary and important to the health of the entire system always seem to make a small few very wealthy, while impoverishing everyone else.  

I haven't given up on Trump, but so far I haven't seen the slightest evidence that he intends to take on the central banks.  If anything, he seems to be taking the opposite approach.

dogfish's picture

Maybe it depends on the feds next desperate move and how much it will hurt the average person on the street.

Stormtrooper's picture

Maybe because Trump understands that only Congress has the legal authority to terminate the charter (which expired in 2013) of the Federal Reserve Bank not the President.

LetThemEatRand's picture

I don't expect Trump to wave a wand and end the Fed.  But he's surrounded himself with bankers, including his Treasury Secretary who is expressly against even auditing the Fed.  His one executive order dealing with bankers is to roll back the fidicuiary rule.  That is not suggestive of someone who plans to push for serious banking reform, or make it an issue with the public.  I hope I'm totally wrong about his intentions.

OverTheHedge's picture

Entertaining myself by watching the BBC weekend liberals floundering today, one of the "journalists" explained the banking rollback as Trump making sure to give all of his supporter groups something that was promised, so no-one gets upset (well, no-one other than the democrats, the entire ruling western elite, China, etc). It is no sillier a theory than any other, and I suppose that Wall St. put something into the Trump campaign - they would have been nuts not to cover all basis, even though Hillary was a shoe-in, as they say in that part of the world. So, once all Trump's supporter base each gets a prezzie, what does Trump do next?

jewish_master's picture

good cop bad cop routine.  China gona play the Bad cop....

dogfish's picture

Most of the population does'nt even know anything about the Fed,if i even mention it at work i get blank looks.

small axe's picture

the wolves are beginning to eat their own



Reaper's picture

Schäuble remembers when the mark had higher relative value and Germany still prospered. Central bankers manipulate Fx rates with short term goals, ignoring long term consequences. Central bankers are a fatal flaw in long term market induced corrections.

Sudden Debt's picture

The west needs 7 to 8% inflation each year to cover it's expenses.

But you can't have such an inflation without destroying the wealth pyramid and that's also why the middelclass is destroyed. Destroyed as in past sence because there's not much left of it.

We're all way past of the point of return. The point of no return was in the middle of the 90's. And it's there that our governments decided that debt was the only way out.

So we've took a loan of about 100 years into the future to fund our "wealth" for the last 20 years.



We destroy the system and start over and we can rebuild in the next 20 to 30 years.


We struggle for the next 100 years without any deficits for that time.



None of these 2 options are even on the table. We're still on the "put head into sand and if we don't see it, nobody sees it" tactic.


Yen Cross's picture

 I guess I should cover my usd/jpy hedge?

  I'm long eur/usd from 1.05 macro.

  ^ Bonus comment, Schauble is A degenerate, crony water carrier.

deplorablerepublic's picture

Anything about 0.00 eur/usd is too damn high for what that currency will be worth within 10 years.

LibertarianMenace's picture

Germany isn't a problem, it's the club the Frenchies conned them into joining that is:


When you've thrown in with a group where Spain, Portugal, Greece, Poland, Slovakia, Czech Republic, Hungary(!), Bulgaria, Romania, and Ukraine knocking at the door, are no better and actually worse perps than China, it's "MAGA, we've got a problem."

Data from 2015, the map may take some time to load. This map is the reason for nationalism, and NO AMOUNT OF COOPERATION among the happy statist clubs and the know-it-all shitheads that frequent them can fix this.

richCat's picture

Schäuble ... his opinion the Euro is "too low" for Germany. Too late old boy;  put that comment on Greece's ground-hog plate and see how they swallow the increased amount of debt repayments. Another BIG riot would be on the cards. The Euro system is in a gyratory loosing orbit let alone many Germans are also hard-up. Time for Spero to leave.

LibertarianMenace's picture

 "The Euro system is in a gyratory loosing orbit let alone many Germans are also hard-up."



Reduction, dispersion, decentralization, and simplification of .guv authority at all levels is inevitable. The center NEVER holds - that's the secret, holds only just long enough for the racketeers of all stripes to line their pockets.

Let's hear that Tower of Babel tune one, more, time!

nibsy's picture

Schäuble has been defensive lately, kind of unusual for him.


I think the Germans just guessed wrong on Trump, and now have to convince the industrial players to give them another chance.  Thus, the " I had it all the way, but didn't want to embarass anyone.", comment.


I also think it's too late. Merkel's going to get jacked. Murmurs I pick up are that it's time for a change.

brianshell's picture

This is great. Even Schauble(Germany), the main beneficiary of the EU experiment, now agrees that the Euro is a failed system.Trump the provincial cousin with mouth of babe has once again coaxed the truth to be told. If Le Pen wins, the EU will go Poof.

caesium's picture

Le Pen will lose heavily just like her father before her. The ball will be back in Bannon's court and he will attempt to terminate the EU.

hooligan2009's picture

and if proof were ever needed that draghi is a full card carrying member of the communist party and that he believes that all prices should be determined by the libtard ECB politburo, here you have it in this quote:

"one has to ask how beneficial a flexible exchange rate would really be. After all, if a country has low productivity growth because of deep-rooted structural problems, the exchange rate cannot be the answer.”

draghi believes in fixed exchange rates and, by extension, fixed interest rates and fixed production.

a libtard commie asshole, already insane and not in an (italian) strait jacket. i wonder how his fellow italians feel about ECB polciies bankrupting Italy by refusing a comeptitive devaluation to allow it to at least have jobs of some sort for its 50% youth unemployment

Herdee's picture

Various economic opinions on video from USA Watchdog:

miszczuk's picture

Poor, poor Schäuble. The biggest economy, the biggest net payer of the EU has no leverage, has no power against the mighty Draghi.

Herdee's picture

March is critical with a vote in Holland then another vote comes in France and in Germany. Mooches that support Merkel are corrupt as hell.