Germany has replaced China as public enemy number one for the US treasury after it criticised the European nation’s chronic trade surplus in its latest report on worldwide exchange rate abuse.
Treasury officials reported to congress that the internal balances within the Eurozone are disrupting global trade with nothing being done by Northern Europe to address the issue or curb their enormous surpluses.
The report goes on to say “The EU’s new tool for cracking down on intra-EMU imbalances is “asymmetric” and does not give “sufficient attention to countries with large and sustained external surpluses like Germany. While the Eurozone as a whole is roughly in trade balance, the EMU regime of austerity in the South without offsetting stimulus in the North is creating a contractionary bias, holding back global recovery.
The Treasury went onto blame the Eurozone for not acting on granting fiscal stimulus to the regions struggling nations sooner. The report said, ‘The Eurozone surplus states have available room for fiscal stimulus but refuse to act, despite repeated pledges by EU leaders that more must be done to promote growth. They have not made any concrete proposals capable of yielding meaningful near-term results.”
The High German permanent surplus has caused Germany to replace China as top offender although the Treasury stopped short of labelling the nation as a currency manipulator. China has come a long way in recent months and has succeeded in shifting away from its reliance on exports for growth. It has slashed its surplus from 10.1% in 2007 to 2.6% today.
A chart published in the report shows that Germany has overtaken China to become the biggest single source of global trade imbalance, alone accounting for a large chunk of the US deficit.
Switzerland is top sinner with a surplus of 13pc GDP, though the report says the country faces unique circumstances as a safe-haven battling deflation.
The US Treasury’s shift in focus away from China highlights just how irritated the United States has become with the inaction and dithering in Europe to get its house in order. Europe’s so called ‘free-rider’ strategy, which relies on exploiting global demand rather than generating it at home was the main focus of their anger.
During trading the Euro took heavy losses against the safe-haven currencies of the Japanese Yen and US Dollar as uncertainties over the recent Greek bailout agreement and the worries over the ‘fiscal cliff’ negotiations led to risk aversion amongst traders. The losses against the Yen led to a one-week low.
The Pound to Euro exchange rate is currently trading at 1.2326
The Pound to US Dollar exchange rate is currently trading at 1.6012
The Pound to Australian Dollar exchange rate is currently trading at 1.5303
The Euro to US Dollar exchange rate is currently trading at 1.2984
The Euro to Pound exchange rate is currently trading at 0.8108
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