Merkel Says There Is A "Problem" With The Euro, Blames Mario Draghi

Tyler Durden's picture

Two weeks ago, German finance minister Wolfgang Schauble confirmed Donald Trump's charge that the Euro is far "too low" for Germany, but said he is unable to do anything about it and instead blamed Mario Draghi. “The euro exchange rate is, strictly speaking, too low for the German economy’s competitive position,” he told Tagesspiegel on February 5. “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 criticized for the consequences of this policy.”

Then, on Saturday, his boss German Chancellor Angela Merkel echoed her finance minister, and also admitted that the euro is indeed "too low" for Germany, but once again made clear that Berlin had no power to address this "problem" because monetary policy was set by the independent European Central Bank.

"We have at the moment in the euro zone of course a problem with the
value of the euro,
" Merkel said in an unusual foray into foreign
exchange rate policy.

Merkel also confirmed that Germany benefits from not having the Deutsche Mark, whose value would be far higher, and instead piggybacks on the weakness of other European nations, implicitly confirming recurring allegations that Germany benefits from the misery of Europe's periphery.

"The ECB has a monetary policy that is not geared to Germany, rather it is tailored (to countries) from Portugal to Slovenia or Slovakia. If we still had the (German) D-Mark it would surely have a different value than the euro does at the moment. But this is an independent monetary policy over which I have no influence as German chancellor."

We showed this :fair value" divergence two weeks ago in the following chart:

Merkel's comments addressed recent criticism by Peter Navarro, who has accused Germany of profiting from a "grossly undervalued" euro.  The chancellor made her remarks at the previously discussed Munich Security Conference, where Vice President Mike Pence was eager to reassure European allies of American "unwavering" support for NATO even as he asked the organization's member states to pay up.

The euro has fallen nearly 25 percent against the dollar over the past three years, touching a 14-year low of $1.034 in January. But it has since risen to roughly $1.061. In late January, Peter Navarro, the head of Trump's new National Trade Council, said the euro's low valuation was giving Germany an edge over the United States and its European Union partners.

His comments came weeks after Trump himself said the dollar's strength against the Chinese yuan "is killing us", deepening concerns that his administration could pursue a more confrontational, protectionist approach to trade.

Merkel and other German officials pushed back forcefully at the time, however in an odd reversal, first Germany's finance minister, and now Merkel herself admits that Trump is right, at least when it comes to Germany, whose current account has continued to soar, and come to think of it, with Germany's export dominance, so has the current account of Europe, which in December hit a new all time high.

A recent note by Bank of America's Athanasios Vamvakidis confirmed how materially the EUR is undervalued relative to the USD:

Our models suggest that the Euro is undervalued, but only by about 2% in trade weighted terms. It was much more undervalued in the early days of QE, by 7%, and in the early 2000s, by 18%. However, EUR/USD is undervalued by 9.6% (Chart 4). This reflects the strength of the USD, which is overvalued by 13.4% in trade weighted terms. Compared with the rest of G10, the Euro looks cheap against NZD, CHF and JPY and expensive against NOK and SEK (Chart 5).


And so, not one but two strong hints by Germany's most powerful politicians that Trump should take his fight against the "grossly undervalued" euro away from Berlin, and focus on Frankfurt and the ECB, and specifically Mario Draghi, will Trump's inevitable focus on the European Central Bank - and its massive balance sheet...

... change the dynamics of European monetary policy, and prompt an even faster taper of Draghi's asset purchases? We don't know. We do know, however, that we will pay good money for a solid, decent twitter fight between @realDonaldTrump and the @ECB, in other USD or EUR.

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bh2's picture

Poor Germans. Always victims.

mofreedom's picture

The problem with the Euro is that it was not properly screened at birth for defects by the appropriate doctors of economics.

Looney's picture


Hey, Angela, why don’t you replace Draghi with one of your beloved Rapefugees?

Looney   ;-)

freewolf7's picture

There is a problem with the euro.

The EU might have some challenges ahead.

We may have grazed an iceberg.

BetaGap's picture

the biggest problem in the Eurozone is perhaps Merkel itself.

You Only Live Twice's picture

The biggest problem in Europe is not Merkel but the Banking Families that originated in Germany. They have been the problem for centuries now. Merkel, like many of her politician colleagues does what she is told; kind of like an employee of sorts.

Stuck on Zero's picture

If Donald thinks that the dollar is overvalued then the simple solution is to quietly and anonymously purchase huge quantities of gold with printed dollars. That puts a lot of dollars in the market driving the price down while at the same time not devaluing it.

You Only Live Twice's picture

Very good in theory, except that the US government borrows from the Fed, and the Fed decides monetary policy. They is more interest in the creation of money and therefore larger interest payments to them then reducing the money supply through the purchase of Gold. The US has no real money, sadly, only debt issued by the Fed on which it pays interest to the Bankers...

xtndmedia's picture

they want something similar in EUSSR


xythras's picture
xythras (not verified) xtndmedia Feb 18, 2017 11:54 AM

Looks like she's starting to bully the Italian in order to get some support for the coming elections.

Let's wait and see who the MSM will chose to bully or support rapefugee Merkel or hlicopter Draghi

Meanwhile they are bussy with the most successfull (and white) man on YouTube

How the MSM Bullied the Biggest Youtube vlogger PewDiePie

monk27's picture

Merkel is fucked up ! She is losing the general elections. Euro is the last of her problems right now...

847328_3527's picture

When Merkel's Caliphate takes final control, the problem will be solved by Mohammed the Invincible.

All first born Christian infants will be sacrificed as appeasement to the Invaders.

It's only fair and the politically correct thing to do.

mind reset's picture
mind reset (not verified) 847328_3527 Feb 18, 2017 5:49 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...

robertsgt40's picture

Let the blame games begin. Love it.

So It Goes's picture

Stuck on Zero - wrong.

The US buying gold will drive the value of the USD up.  When Russia bought more gold, the Ruble got stronger.

Sylvan's picture

but they are all joooezzz not germans

Sylvan's picture

mine iceberg is toooo litleeee

bh2's picture

The entire intention of the Euro was to undervalue German currency relative to other European countries to facilitate a trade advantage for the Germans, which naturally led to an economic impoverishment of other nations in the "union". This was a completely predictable result which long ago came to pass.

What has happened is that that the marginal scalping of unearned profit by Germany has now become so out of proportion that citizens of a number of other countries now see clearly that their economies are being systematically raped. It's no longer just the Greeks.

So helpless Germany blames the central bank it helped create to facilitate the fraud it now disowns.


auricle's picture

Replace Draghi with gold.

ArgentoFisico's picture

Replace Draghi with Goldman Sachs .. ehm, no, wait ... 

Kaeako's picture

Sure thing buddy. Except France demanded German commitment to a monetary union in exchange for supporting a German reunification, which both France and the United Kingdom opposed and even tried to get the Soviet Union onboard to oppose it. Germany was suspicious of a single currency from the start and for good reason, by the mid 90's when it was agreed a currency union would be launched heated debates in parliaments around Europe were focused on the exact issues we are seeing now.

EHM's picture

This time without firing a single shot.

scraping_by's picture

The United States has always had an uneven economy, wealthy states vs poor states. Part of the New Deal was to even this out a bit by direct transfer payments to individuals, subsidies for agriculture, public works, etc. The Eurozone has gone the opposite direction, making the uneven economies worse by its policy of the sacredness of debt and austerity for the citizens. FDR saved the US, the ECB will destroy Europe.

Al Tinfoil's picture

"So helpless Germany blames the central bank it helped create to facilitate the fraud it now disowns."

This is called "Inversion of reality" - decrying what you have done while virtue signalling that you would never do such a thing.  Obama and Hillary built their speeches on this.

TeamDepends's picture

Oh there's a problem alright, Angela. It's the Merkel Twerkle!

Al Tinfoil's picture

Gawd, I wish I had not clicked on that link. 



Thordoom's picture

Victims? You probably have never smelled a history book  in your life. Germans just like Poles were alwasy the problem of Europe

Giant Meteor's picture

Must be all that thinking inside the box ..

Was it over when the Germans bombed Pearl Harbor!? No!

Rubicon727's picture

Just more confirmation in how Germany has conquered Europe. This time, not by military/authoritarian rule, but by financial/authoritarian Blood & Iron.

Wake up Europeans!

post turtle saver's picture

king dollar, bitchez... what did they think was gonna happen...

made for a great trip to Belgium this past week, that's for sure... $USD was swingin' its big dick all over the place, wife and kids were happy with what daddy brought home... food / lodging / transportation was nice and cheap, good times...

small axe's picture

we're coming to get ya, Mario. Better dust off Plan Z

williambanzai7's picture

Fuck you you commie bag of shit.

AlaricBalth's picture

Don't hold back, WB. Tell us what you really think.

eekastar's picture

now watch out for false positives here, it's election time.

Soul Glow's picture

Only after Germany gets ditched by France will they say they never wanted a weak euro, and they should go back to a strong Duetchmark.  Only after the EU crumbles will they blame the other Nation-States for being fiscally irresponsible, even though they ran the same debt induced NIRP programs and had the biggest of the baddest failed banks.  

Only after.

Stan522's picture

Problem with the Euro.....?

Yes, just another fiat currency backed by the Liberal insane policies that are doomed to fail.....

RagaMuffin's picture

Foot race to oblivion - who gets there first, Merkel or Draghi? And no you can't say bet on spanx 'cause they both probably wear 'em   ;-)

rocknrollinhoneybadger's picture

Well flooding Europe with throwbacks from the 14th century hasn't helped has it?

GRDguy's picture

The cost of something for nothing is exceedingly high.

Yes We Can. But Lets Not.'s picture

Keeping a bunch of states together in a union is tough.  See 1861.

Keeping a bunch of countries together in a union is prolly not going to happen, especially in the absence of military power.

Vageling's picture

Yeah... This one trick pony again. Everybody is pointing at everyone for blame. Meanwhile nothing gets fixed. On purpuse. Never let a good crisis go to waste to force the creation of the EU Collective. The Soviet states of Europe.

Mario will have his finger ready as well. Trust me. 

SpanishGoop's picture

And down goes the euro even more.

It's all a game called race to the bottom.



ReignDeer's picture



CandleStick's picture

GREENSPAN: The only solution, as I've put it in the book originally, is actually a full political integration of Europe, because if that occurs, then the currency problem disappears.

TETT: And if it doesn't occur, you think it breaks up?

GREENSPAN: I'm sorry?

TETT: If it doesn't occur, if political integration doesn't occur, do you think the euro breaks up eventually?


flaminratzazz's picture

Dumcunt, Greece is already down, Kick em.

IT HAS to be all their fault.

androkles's picture

mhm, but what is really going on? Most of the EU and ECB (and my) money for "Greek bailouts" was perhaps in Greece for 1 millisecond and then went to Deutsche Bank.

SpanishGoop's picture

"and instead piggybacks on the weakness of other European nations,"

No that should read "leeching off".


New_Meat's picture

Hmmm, it wasn't the Germans who stopped the Moors.  It was the French and the Spaniards.