Rising tensions between United States and Germany
Peter Navarro, the leader of US President Donald Trump’s National Trade Council, has referred to the Euro as an “implicit Deutsche Mark,” which gives Germany an advantage over other European nations.
Navarro’s comments came in a discussion of the Transatlantic Trade and Investment Partnership (TTIP).
“A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the U.S. with an ‘implicit Deutsche Mark’ that is grossly undervalued,” Navarro said.
Navarro made his comments in an interview with the Financial Times.
Navarro is correct in this assessment, as Germany’s manufacturing sector benefits dramatically from the Euro.
If individual countries were using their own currencies, Germany’s currency would be highly valued. This would make their exports more expensive, which would benefit the manufacturing sectors of lower cost producers in Europe. However, because Germany is a part of the Euro, they benefit both from their highly efficient manufacturing base, and their currency-parity with their fellow Euro zone members.
As a result, Germany exports far more to the rest of the EU than they import. This trade imbalance helps make Germany wealthier, while hurting the economies and personal finances of other European member states and their citizens.
Said Navarro, “The German structural imbalance in trade with the rest of the EU and the U.S. underscores the economic heterogeneity within the EU — ergo, this is a multilateral deal in bilateral dress.”
As expected, Germany has pushed back against Navarro’s comments. In a press conference, German Chancellor Angel Merkel said, “Germany is a country that has always called for the European Central Bank to pursue an independent policy, just as the Bundesbank did that before the euro existed. “Because of that we will not influence the behaviour of the ECB. And as a result, I cannot and do not want to change the situation as it is.”
Merkel is correct that Germany does not have implicit structural control over the European Central Bank, but it is well-known that Germany exercises massive influence within the European Union.
The harsh terms on bailouts to Greece, and the strict limits on deficit spending which have infuriated much of Europe, are pushed most strongly by Germany. As the largest economy and the most populous Euro zone country, Germany clearly dominates.
The tension between the US and Germany over the Euro adds to already increasing divisions between the two nations over immigration and refugee policy. Angela Merkel has criticized Donald Trump for limiting immigration from some majority-Muslim countries, while Trump has countered by pointing out the increase in terrorism in Germany since Merkel opened the borders and let 1 million refugees enter the country.