Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
There's a fairly commonly-stated German opinion that it doesn't matter if the euro rises, Germany will still be an export champion (one economist or whatever said that a euro at 1.45 USD would not be a problem). And that view is supported by Artus's price elasticity numbers, since German exports are at 0.3, very inelastic (meaning they don't have to reduce their prices to clinch deals).

However, the ROEZ as a whole tends to moderate the position of the euro wrt other major currencies. The view often stated here is that, if Germany still had the DM, it would be considerably stronger than the euro. In fact, it would strengthen as a function of German export volumes. That would crimp Germany's style. So it is reasonable to think that Germany gets an advantage from the euro.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 28th, 2013 at 05:41:19 AM EST
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I'd really question the price-elasticity numbers because there doesn't seem to be enough comparative data to generate them accurately.

As such, a lot of the talk about Germany's ability to remain an export champion at higher exchange rates is largely either:

  • naive extrapolation from a simpler time (W. Germany)

  • macho myth making rooted in a belief that price doesn't matter if quality is high enough. That's true for some sectors and segments of other sectors, but when you add all that up, it's a smaller market than people think.

  • ignorance of the new world of global trade. The key point here is that to remain competitive companies (e.g. Mercedes Benz) have developed factories in other parts of the world (e.g. USA, China) and the profits from those factories may stay constant, but their value on the company balance sheet changes if the exchange rate moves up. Nobody I know of has written about this regarding Germany, but there are some commentaries on Japan (particularly Sony) that highlight how this causes problems.
by Metatone (metatone [a|t] gmail (dot) com) on Sun Dec 1st, 2013 at 05:46:34 AM EST
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It's true the elasticity figures are Natixis' own calculations, based on what is not specified.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Dec 1st, 2013 at 06:01:28 AM EST
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