Heiner Flassbeck is the former Director of UNCTAD, Geneva
German economists accuse France of mercantilism, just because French President Hollande called for a weaker euro. Is it a joke?
Unfortunately not. No doubt, the country that has engaged in aggressive mercantilism for more than ten years now is Germany, not France. However, beyond that there is a real danger of competitive depreciation in the world at this moment of time as everybody tries to improve competitiveness, something that is impossible for the world as a whole. But logic is not a category that would impress our policy makers or mainstream economists.
What do you think of the proposal of a coalition party of the German government, to include the protection against inflation in the constitution?
They should include protection against deflation. That is the real danger for the Eurozone as everybody tries to improve competitiveness by cutting wages and unit labor costs. Overall, this “putting something into the constitution” to secure it forever will never work if it is against the macroeconomic logic. If you don’t include the behavior of everyone in the constitution, it is useless to constrain the government and take the necessary flexibility out of the system.
What is your take on assessment of some economists who see the determination of the minimum exchange rate (of 1.20 CHF per EUR) by the SNB as a “currency war”?
There are many forms of currency wars, and clearly, the intervention of the SNB is part of it. However, the intervention was justified for a time as the markets tend to overshoot and destroy economies in a couple of months if not stopped. Nevertheless, the Swiss government should engage in pushing more countries of the world to take up in the inevitable task of creating a new global monetary System sooner or later. Unilateral measures are no solution as well as it is no solution at all to leave the determination of the exchange rates to the financial markets.
Thank you very much
Heiner Flassbeck has served since 2006 as Director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD). He worked 1998-1999 as state secretary in the Federal Ministry of Finance in Germany. He is the author of numerous books and articles on macroeconomic issues, particular on the current financial crisis and its impact on the real economy.
Here are some books by Prof. Flassbeck, which have been reviewed in this blog: