The value of the euro is a topic of constant debate in European policy circles. The debate follows a regular pattern: French or Italian policy-makers bemoan the strength of the euro because it hurts their exports; German policy-makers rebuff such claims; the European Central Bank (ECB) claims it is not aiming for a particular value of the euro as its mandate is focused on price stability only; and international commentators point out that the eurozone is simply too large to pursue a purely export-oriented strategy anyway. All sides have a point. But more expansionary monetary policy is necessary to kick-start a broader eurozone recovery, in part via a boost to exports from a lower exchange rate. This is not a mercantilist strategy as imports are likely to grow, too, when incomes recover. The recent fall from $1.37 in early July to $1.27 at the time of writing is a good start but the ECB needs to be innovative and drastic to lower it further and start a proper recovery.
