Ein exchange rate of only one dollar for one euro was last observed in 2002. The noticeable devaluation of the euro in the recent past comes at an inopportune time because, from a European perspective, it also makes those raw materials that are settled in dollars on the international markets more expensive. It would be good to have a strong euro right now, but there are several reasons for its weakness.
First of all, the dollar has proven itself as a crisis currency, which is very popular in uncertain times. American government bonds have been a refuge for shy investors from almost every country for decades. As a leading economic and military power, America continues to benefit from what the French dubbed “exorbitant privilege.” The dollar is therefore currently strong against many currencies – and by no means only against the euro.
But the assessment of the common currency has also contributed to its weakness against the dollar. A European Central Bank, which has long underestimated inflation and is now proceeding too cautiously with interest rate increases, is just as much a cause as latent doubts on the part of international investors about the cohesion of the monetary union in difficult times. Therefore, there is a tendency in Germany to perceive the weakness of the euro as an undeserved fate inflicted on the Germans.
It is not that simple. The euro was only weaker than it is today in the years 2000 to 2002, when the European Central Bank was still following the tradition of the Bundesbank. But at the time, Germany was considered “the sick man of Europe”. Today there are concerns of renewed German weakness as a result of failed energy policies and highly uncertain prospects for industry. Germany is also contributing to the current weakness of the euro.
