BERLIN (Reuters) - European Central Bank Executive board member Joerg Asmussen has said France’s economic problems are not a function of the euro exchange rate but lie within the country, rejecting calls from France for a medium-term target for the euro.
France is set to raise concerns about the euro’s strength at talks among euro zone finance ministers on Monday and at a mid-February meeting of G20 economic powers, but other governments are more concerned about the health of the euro zone’s second largest economy.
“The core of the problem lies inside the country and not in the foreign exchange rate,” Asmussen told the Handelsblatt newspaper, according to excerpts released on Sunday of an interview appearing in Monday’s edition.
“I am glad that the French government has made increasing competitiveness into its central topic.”
Calls by French President Francois Hollande on Tuesday for the euro zone to set a medium-term target for the euro got a frosty response from Berlin, which opposes intervening on currency markets.
ECB President Mario Draghi said on Thursday that the central bank would monitor the economic impact of a strengthening euro, feeding expectations that a climbing currency could open the door to an interest rate cut, and sending the euro lower.
Asmussen said it was “extremely important” that France meet its public deficit target this year. The EU has a structural deficit ceiling of 3 percent of gross domestic product.
“If forecasts point to the target being missed, it is in the Paris government’s own interest to take additional measures,” Asmussen was quoted as saying.
Concerned that weakness in the French economy could hurt Germany and the zone as a whole, German Finance Minister Wolfgang Schaeuble last year asked a panel of advisers to look into reform proposals for France.
A foreign exchange target would be a bigger help for France than Germany, a study by Deutsche Bank last month suggested.
It said France’s exporters start being priced out of world markets when the euro rises above $1.22-$1.24 - a level it has already long left behind, to trade around $1.33 now.
Germany’s higher value-added exports only start to be disadvantaged when the exchange rate is above $1.54. Until that point, there is little damage to the German economy, and indeed some benefit from a strong euro because it keeps the prices of imported goods and hence inflation in check.
Reporting by Annika Breidthardt; Editing by Kevin Liffey