The French industry minister, Arnaud Montebourg, appears to have taken a break from writing rambling, factless letters [7]to US CEOs who have in the past week openly snubbed and ridiculed [8]his demands to provide jobs to the French labor unions, and instead has focused his brilliant socialist mind on something far more appropriate of its unique polymathness: currency wars, and specifically demands that the ECB finally "get involved." Why? Because if it has not been made clear in the past month, France now blames its lack of expert competitiveness not on the same issues previously highlighted by Maurice Taylor such as disintegrating work ethic and a complete lack of competitive productivity, but on the soaring EURUSD - the same soaring EURUSD (well, not soaring so much in the past few weeks) which is also crushing German exports, but because it is crushing France even more, both Merkel and Weidmann are delighted to put up with it. As a result, Montebourg will have no more of it.
As Dow Jones reports "Mr. Montebourg said that within the current European treaties the ECB can be more pragmatic and less dogmatic. It should act more like other major central banks, which Mr. Montebourg said had monetized debt...There are efforts to be made to bring order to public finances, but thinking that the entire effort should come from taxes and spending cuts is excessive. We should share part of the effort with the monetization of debt." And so a French industry minister, who has already been humiliated once on the international arena in the current month, is about to get his second stern talkdown, this time over what happens when you try to "teach" Merkel and the Bundesbank a lesson. Expect more inbound letters into Arnaud's inbox, which we expect will be even more amusing than those penned by Taylor.
From the WSJ [9]:
France's industry minister Tuesday called for a lower euro and said the European Central Bank's role should be reinterpreted, wading back into a currency debate that had been calmed by an agreement between the world's top finance ministers earlier in the month to refrain from competitive devaluations of their currencies.
"I am for a less-strong euro," Arnaud Montebourg said at a meeting with journalists in Paris, adding that it is "good news" the euro has recently declined against other currencies.
The single currency has fallen around 4.6% against the U.S. dollar since the beginning of February.
"I am very happy, [the decline] should continue," Mr. Montebourg added.
Earlier this year, French officials complained about the euro being too strong and making the country's exports less competitive. In a speech to the EU parliament in early February, French President Francois Hollande said the euro shouldn't be left to fluctuate according to the mood of the markets and warned that a strong euro wipes out efforts to make economies more competitive.
However, later in February, finance ministers and central bankers from the Group of 20 industrial and emerging countries agreed they would refrain from competitive devaluation and would not target exchange rates for competitive purposes. That commitment has reduced the number of comments from European politicians on the euro and the ECB.
Still, the industry minister also said Tuesday the role of the European Central Bank should be reinterpreted. The Frankfurt based institution's primary mandate is to fight inflation, but Mr. Montebourg said that within the current European treaties the ECB can be more pragmatic and less dogmatic. It should act more like other major central banks, which Mr. Montebourg said had monetized debt.
"There are efforts to be made to bring order to public finances, but thinking that the entire effort should come from taxes and spending cuts is excessive. We should share part of the effort with the monetization of debt, which is natural because it is directly linked to the errors of the banking industry which the central bank did not sufficiently monitor in the past," Mr. Montebourg said.
Perhaps most importantly, the cracks within the European facade are now appearing, as more and more demand that Draghi throw in the towel and proceed to enact the OMT debt monetization, instead of just talking about it: something we predicted would happen some time ago, and as we said, all that was needed was a crisis to allow the ECB to go ahead and monetize debt outright now that it is rapidly falling behind the globla race to debase, and as the market no longer gives it credit for unlimited "off-balance sheet" liabilities.
Sure enough Italy was just that "crisis" that will not be allowed to go to waste.