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Dollar’s value not up to EU’s liking

Sam Eaton Oct 8, 2007
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Dollar’s value not up to EU’s liking

Sam Eaton Oct 8, 2007
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TEXT OF STORY

KAI RYSSDAL: The dollar’s problems of late might be good for American exporters. But for European finance ministers meeting this week in Germany, it’s become a major headache. Marketplace’s Sam Eaton reports.


SAM EATON: The meeting of European finance ministers will test whether a united front could force international action to tame the Euro and boost the dollar. European exports have taken a toll as they become too costly for America and other countries.

The European central bank is famed for its independence and refusal to lower interest rates — so political pressure, however united, may not be enough to reverse the trend.

ASHRAF LAIDI: They will not get anything done — it’s basically as simple as that.

Ashraf Laidi is chief currency analyst for CMC Markets. He says the falling dollar is a new economic reality, and any political meddling in Europe isn’t going to change that. Currency expert Axel Merk says that leaves European businesses with one choice: adapt or die.

AXEL MERK: If one assumes that this strong Euro is going to be there for a while, well you have to change your business model. And these things take time, especially in Europe where corporations tend to be a bit more rigid. So they slowly and grindingly will have to cope with their new environment.

Merk says high-end consumers in the U.S. continue to covet some European products like Mercedes and BMW cars. But other products facing stiffer competition, like say beer, may not fare as well, since shifting production to cheaper markets could hurt the brand.

MERK: If you have an Oktoberfest beer, it has to be brewed in Munich. You can’t brew it in China — the market doesn’t accept that.

But Merk says beer may be the least of Europe’s worries. European banks are heavily invested in the U.S. subprime mortgage market. Getting out of that mess, he says, should be the top priority.

I’m Sam Eaton for Marketplace.

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