February 6, 2013 / 2:06 PM / in 5 years

Germany cool on French proposals for euro

BERLIN (Reuters) - The euro is not overvalued if long-term trends are taken into account, German Chancellor Angela Merkel’s spokesman said on Wednesday, sounding cool on a French proposal to agree on a mid-term rate for the common currency.

“If you look at the historic context, the German government is of the view that the euro is not overvalued at the moment,” Steffen Seibert told a regular government news conference, in unusual comments on exchange rates.

The euro firmed to $1.3535 after Seibert’s comments, from around $1.3506.

France has expressed concern about the strength of the euro. On Tuesday French President Francois Hollande proposed that the euro zone should agree on a “medium-term” exchange rate and act on global markets to protect its interests.

Finance Minister Pierre Moscovici said on Wednesday that France would raise concerns about the euro’s strength at talks among euro zone finance ministers next Monday and at a mid-February meeting of G20 economic powers.

“There will certainly be a conversation about that ... but the view of the German government is that exchange rate policy is not a suitable instrument to increase competitiveness,” Seibert said.

“You only achieve short-term impulses through targeted devaluation. A long-term strengthening of competitiveness is not achieved in that way.”

Seibert added that the recent rise in the euro followed a “massive” depreciation during the euro zone crisis and that it was a sign that investor confidence was returning.

“Our basic conviction is that exchange rates should reflect economic fundamental data,” said Seibert, adding that the G8 and G20 had agreed it was sensible for markets to determine exchange rates.

It is unusual for Merkel’s spokesman to be so outspoken about the euro exchange rate.

Reporting by Madeline Chambers and Gareth Jones; Editing by Susan Fenton

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