Germany's Weidmann rejects calls for euro devaluation - magazine

BERLIN Sun Jun 15, 2014 3:04pm BST

File photo of Germany's federal reserve Bundesbank President Jens Weidmann in front of the Bundesbank headquarters during a photo shoot with Reuters in Frankfurt May 17, 2013.  REUTERS/Kai Pfaffenbach/Files

File photo of Germany's federal reserve Bundesbank President Jens Weidmann in front of the Bundesbank headquarters during a photo shoot with Reuters in Frankfurt May 17, 2013.

Credit: Reuters/Kai Pfaffenbach/Files

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BERLIN (Reuters) - The head of Germany's Bundesbank rejected calls from some European countries for the euro to be devalued to help exporters in a magazine interview published on Sunday.

In a pre-publication release, Germany's Focus magazine reported Jens Weidmann as saying any move to weaken the currency could lead other central banks to follow suit, prompting a "devaluation race" that would only have losers.

"Competitiveness cannot be brought about through a devaluation. It is generated (by) companies with attractive products that stand their ground on the markets," Weidmann, seen as the most hawkish European Central Bank policymaker, said.

"A strong economy can also tolerate a strong currency."

Euro zone states including France have called for talks to address what they consider the excessive strength of the euro once a new European Parliament is in place later this year.

The ECB does not target the euro's exchange rate but the strength of the currency has been seen as contributing to inflation that has fallen far short of the central bank's target of just below 2 percent.

The euro is currently trading at around $1.35 (1.08 pounds), having fallen from $1.40 at the start of last month as markets anticipated moves made early in June by the central bank to loosen policy to spur growth and avert the threat of deflation.

A strong currency makes exports more expensive.

Weidmann, who on Thursday emphasised his opposition to the ECB buying government bonds, also appeared to dismiss potential purchases of other assets by the euro zone central bank.

"In some countries - including in Germany - we see the danger of a real estate bubble. And then we as the euro system should buy Dutch real estate loans?" he said.

The ECB decided unanimously this month to cut interest rates to record lows - taking the rate on overnight deposits below zero - and to launch measures to stimulate lending to small and medium-sized companies, the backbone of the euro zone economy.

Weidmann said he had misgivings about the package but had agreed to it because it was justifiable given low inflation.

He did not expect the negative deposit rate would do much to boost loans in the euro zone, however, arguing that banks provided few loans in southern regions because "many firms (there) hardly demand fresh money due to the weak economy".

(Reporting by Annika Breidthardt; Editing by Catherine Evans)

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