German Chancellor Friedrich Merz. — Bloomberg
BERLIN: German Chancellor Friedrich Merz says he’s been closely watching the weakening dollar and is concerned about the burden it will place on Germany’s export-oriented economy.
“We will have to assert ourselves globally against a weak dollar and a strong euro,” Merz told reporters in Berlin.
“We simply have to become more competitive and stronger, especially given the currency exchange rates.”
The common currency pushed through the closely watched US$1.20 level this week, driven largely by dollar weakness.
President Donald Trump told reporters in Iowa on Tuesday he’s comfortable with the dollar’s recent decline, helping send the currency to its lowest level since early 2022.
His remarks added fuel to what was already the dollar’s deepest drop since his tariff rollout sent markets into a tailspin last year, fanning fears that his erratic policy shifts would drive overseas investors to pull back from the United States.
Treasury Secretary Scott Bessent attempted to assuage concerns on Wednesday, touting a strong-dollar policy and sparking a broad rebound in the greenback.
The euro has gained more than 2% against the dollar over the past two weeks.
The rally has caught the attention of policymakers at the European Central Bank (ECB), who are concerned that a stronger currency will weigh on growth and damp inflation already set to undershoot the 2% target this year.
“I’ve been watching the development of the dollar exchange rate with concern for quite some time,” Merz said. “The dollar exchange rate is a considerable additional burden for the German export industry.”
Governing Council member Francois Villeroy de Galhau said earlier that the ECB will consider the impact of the appreciating euro when setting monetary policy.
Speaking on Tuesday to Bloomberg Television, Austrian central-bank governor Martin Kocher said the ECB must monitor whether the euro makes more gains.
Economy Minister Katherina Reiche, who like Merz is a member of the conservative CDU party, warned that the strong euro could have a negative impact on the German economy.
“The greater the divergence between the euro and the dollar, the greater the pressure on our export industry,” Reiche told reporters in Berlin earlier on Wednesday. “It’s fair to say that every increase amounts to a kind of additional customs duty.”
Earlier on Wednesday, Merz warned the Trump administration not to raise further doubts about the European Union’s (EU) trade agreement struck with the United States last year, which still hasn’t been fully implemented.
“This uncertainty about tariffs is not only hurting transatlantic trade it’s also hurting investment in America,” Merz said.
“That’s why the American government should also have an interest in ensuring that the agreements we reached last summer are honoured and not jeopardised by daily announcements that things might be changed.”
The EU Parliament put the ratification of the tariff agreement on hold in reaction to Trump’s threat last week to impose additional duties on eight European countries that pushed back against Washington’s threat to annex Greenland. — Bloomberg
