BERLIN (MNI) – German Finance Minister Wolfgang Schaeuble on Friday
criticized the US Federal Reserve for its new round of quantitative
easing, arguing it has the same effect on the dollar as the Chinese
government’s currency policy has on the yuan.

“At the moment, from a European viewpoint, one could get the
impression that the U.S. is doing through other means what it is
reproaching China for,” Schaeuble said at a conference in Berlin.

“One could get the idea that the instruments are different but the
goal is the same, and the one who suffers are clearly…to a certain
degree the Europeans,” the minister argued.

The euro’s foreign exchange rate has risen markedly against the
dollar due to the Fed’s policy of pumping massive liquidity into market.
After gaining two cents on the initial announcement Wednesday, the
single currency has remained firm.

“With all due respect, my impression is that the US is helpless,”
Schaeuble said. “The problem of the US is not a lack of liquidity and
the decision by the Fed to add some $600 billion will not solve the
problem,” he reckoned.

The current economic problems of the US is no reason for
“Schadenfreude,” the minister stressed. “We rather have reason to be
worried because we have profited more from a strong US than most
others,” he reasoned. “Thus, it is in our interest that they solve their
problems,” he said.

Turning to the Eurozone, Schaeuble said he did not share the
worries of European Central Bank President Jean-Claude Trichet regarding
the EU’s plans for a new permanent crisis mechanism.

EU heads of state and government in Brussels agreed last month to
establish a permanent mechanism to aid Eurozone states that fall into
financial difficulty. Germany has made clear that it insists on having
private creditors shoulder part of the financial burden in future crises
through some kind of “orderly default” mechanism.

“I don’t believe the argument which is attributed to Mr.
Trichet…that Europe’s position in wooing investors will worsen” if
they face the risk of losing some of their investments in government
bonds of Eurozone member states, Schaeuble said.

“My argument against that is that markets have already digested
that and expected it,” Schaeuble said. “I don’t share the argument that
markets will be unsettled.”

Schauble again underlined that there has to be the possibility of
debt restructuring under a new EU crisis mechanism. Yet, he reminded
that this would become effective only after the current rescue funds for
Greece and the Eurozone run out in 2013.

“It is clear that applies only for the future, not for the current”
rescue funds, he underlined.

Commenting on the domestic economy, Schaueble reckoned that “in
Germany the crisis has more or less been overcome.”

Thus, now is the right moment to tackle elevated public deficits,
he said, reaffirming that federal net new borrowing will likely amount
to around E50 billion this year, markedly below the initially expected
E80.2 billion.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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