Feb. 26 (Bloomberg) -- The European Central Bank should weaken the euro, confronting the new “currency war” head on to help address economic stagnation in the region, French Industry Minister Arnaud Montebourg said today.
Calling for a more activist and “political” management of the currency shared by 17 European nations, Montebourg said at a press conference in Paris that he wants “the European Central Bank to do its job.”
“The euro is too strong and doesn’t correspond to economic fundamentals,” he said. The ECB “should prepare to confront a new currency war in which the weakening of currencies becomes a political tool.”
Montebourg’s recommendations run contrary to a pledge this month by finance ministers and central bankers from G-20 nations that they won’t target exchange rates for competitive purposes. The group refrained from singling out Japan for weakening its currency, after the Asian nation came under fire ahead of the meeting for a drop in the yen.
With his latest comments, Montebourg is courting controversy again. He sparked a furor in November by threatening to nationalize an ArcelorMittal steel plant to block its shuttering. He has crusaded to save other factories slated for shutdown such as the Petit-Couronne refinery in Normandy.
Most recently, he got into a war of words with Titan International Inc. Chairman Maurice Taylor after the U.S. company walked away from taking over a French plant of Goodyear Tire & Rubber Co., blaming the country’s high wages and short work hours.
Montebourg today called for the euro to be “more politicized.”
“The European Central Bank should manage the exchange rate,” based on the euro-group’s preferred exchange rates against the dollar and the yen, he said.
The euro’s strength hurts exporters at a time when countries like France are working to improve their competitiveness, Montebourg said. An appreciation by 10 percent of the common currency shaves 1 billion euros from revenue at Airbus parent European Aeronautic, Defence & Space Co., he said.
“We are very happy with the weakening of the euro,” he said today. “This must continue.”
The euro, which dropped today to $1.3018, the weakest level since Jan. 7, on concern that inconclusive Italian elections will deepen Europe’s debt crisis, has since recovered to trade at $1.3080 at 12:47 p.m. in Paris.
The minister also took aim at the ECB for not doing enough to ease the debt burden of the region’s struggling economies.
“The moment has come to move to another level,” he said.
A move by the ECB to monetize debt to help member countries shore up their balance sheets would be “a pragmatic approach rather than dogmatic” and would follow what was done in the U.K. and U.S, he said.
“There are efforts to be made in cleaning up public finances but believing that all the effort has to be done through taxes and lowering public spending is excessive,” Montebourg said.
The ECB should be doing more on this front, he said, adding that measures can be taken under the central bank’s “current mandate.”
“It has already started to do this timidly because it has put 1 trillion euros into the hands of the banks at zero percent,” he said. “I would have preferred it to have put 1 trillion euros in the hands of the state.”
The French minister has gained a reputation for putting forward ideas that are later rejected by President Francois Hollande and the government of Prime Minister Jean-Marc Ayrault.
“I am expressing personal sentiments here but the debate has started within the euro group on the euro being too strong and the role of the ECB,” he said. “We have to look at what’s going on the world. All central banks that are doing their job are doing it this way.”
--Editors: Vidya Root, Steve Rhinds