23/04/08-The Euro rose above $1.60 the first time ever in late April. After setting a record of 1.6019 it has settled just under that amount. The British Pound continues to hover around two dollars, which is still high, but not as high as late in 2007.
The strong Euro has increased calls from European countries for the European Central Bank (ECB) to relax monetary policy and pursue a more growth oriented strategy. Germany, however, has resisted such calls, which have come primarily from newly elected Italian Prime Minister Silvio Berlusconi and French President Nicolas Sarcozy.
“The German standpoint has been very clear, is clear and, dare I say, will remain clear,” said Thomas Mirow, the deputy finance minister of Germany. Speaking to European journalists in Berlin, Mirow was quoted in several European media outlets, including Reuters.
He noted that the Maastricht treaty, which established the Euro, “to a large degree was inspired by the experience” of the German central bank, the Bundesbank, which had price stability at the core of its mission.
“We stick to the Maastricht Treaty,” Mirow said. “I cannot imagine any German government will change from that stance.”
The high value of the Euro, along with increasing commodity prices, has caused prices to increase in Europe for domestically produced goods, while imports and overseas purchases have decreased in price. One company that has been particularly impacted is Airbus. The giant European airplane manufacturer sells its planes in dollars, and recently announced that it was increasing the price of its planes due to the lower dollar value.
The price for the super jumbo A380 will increase by as much as $4 million per airplane and other models will see increases as well. Over the past 12 months, the dollar has lost about 15% of its value against the Euro, which has hurt European manufacturers such as Airbus.
While prices in Europe are higher, imports and overseas purchases are a bargain. This includes international real estate particularly in the United States where the market is also down. More about foreign currency services here
