Merkel coalition partner warns against euro weakening

Published March 09, 2013

| Reuters

German Chancellor Angela Merkel's junior coalition partner warned on Saturday against efforts to talk down the euro, saying a weaker currency would stoke inflation and hurt ordinary Europeans.

"There is a new danger in Europe - that is the discussion about whether it would be better to weaken the currency instead of strengthening competitiveness," Philipp Roesler, leader of the pro-business Free Democrats (FDP), told his party.

"We believe that trying to exert political pressure on the European Central Bank (ECB) is disastrous," he said.

France and some other euro zone states fear that a strong euro will hurt their exporters and snuff out the growth they need to create jobs and restore their public finances.

French President Francois Hollande called last month for a mid-term target for the euro exchange rate but ran into immediate opposition from Berlin.

The euro has been relatively firm since the ECB vowed last summer to do whatever is necessary to save the currency, despite persistent concerns among investors over Europe's stagnant economy and political challenges such as the rise of populist, anti-austerity parties, most recently seen in Italy's election.

Some countries such as the United States and Japan have been accused of using monetary policy to shape currency movements.

Addressing a congress of his party ahead of Germany's federal elections in September, Roesler said a looser monetary policy from the ECB would harm European wage-earners, pensioners and savers, not the wealthy.

The congress is expected to approve a motion backing the ECB's independence and ruling out mutualisation of debt within the euro zone, another idea canvassed in the past by France.

Merkel hopes to renew her coalition with the FDP if, as expected, her party again emerges as the largest after the election. But support for the FDP has weakened sharply and it is not sure that they will clear the 5 percent threshold for entering parliament.

(Reporting by Andreas Rinke, writing by Gareth Jones; Editing by Ruth Pitchford)

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