The currency war, which the countries that are devaluating their currencies don’t seem to acknowledge, while the countries who are slipping as their competitive advantage erodes due to a strong currency are speaking out.
Such is the case of Brazil, where Finance Minister Guido Mantega told reporters earlier that France’s comments to the ECB will not help. In that he shares a point of view with German Chancellor Angela Merkel, who is in favour of letting the market set the value of the currency. Paradoxically Francois Holland the French President got elected in a platform that pushed stimulus spending to achieve growth, rather than austerity and market intervention.
Brazilian Finance Minister Guido Mantega told Reuters European countries should focus on reviving their economies with more investments, rather than trying to weaken the euro to protects jobs as France has suggested ahead of next week’s meeting of G20 economic powers.
“We will continue to have this currency problem unless the global economy takes off,” Mantega said in an interview late Thursday. “The solution here is to make their economies more dynamic and jolt them out of stagnation.”
More than two years ago Mantega used the term “currency wars” to describe the series of competitive devaluations adopted by rich nations to bolster their exports amid the global slowdown to the detriment of emerging market nations.
It seems that although Brazil condones the actions of Central Banks it is not above trying the same tactics. It will be interesting to see how the topic of currency manipulation is addressed during the upcoming G20 meeting in Russia.
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