Global Currency War Could Get Nastier, Brazil Warns
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Global Currency War Could Get Nastier, Brazil Warns

Global Currency War Could Get Nastier, Brazil Warns

Monday, 11 Feb 2013

The global currency war could get even worse if Europe joins the fray, says the man widely credited with coining the term.

English: one hundred doller bill colection

English: one hundred doller bill colection (Photo credit: Wikipedia)

Brazilian Finance Minister Guido Mantega told Reuters European countries should focus on reviving their economies with more investments, rather than trying to weaken the euro to protects jobs as France has suggested ahead of next week’s meeting of G-20 economic powers.

“We will continue to have this currency problem unless the global economy takes off,” Mantega said in an interview. “The solution here is to make their economies more dynamic and jolt them out of stagnation.”

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More than two years ago Mantega used the term “currency wars” to describe the series of competitive devaluations adopted by rich nations to bolster their exports amid the global slowdown to the detriment of emerging market nations.

Since then Brazil has actively sought to depreciate its currency, the real, to protect local manufacturers of everything from shoes to suits and make its exports more competitive. It has taken bold action to curb speculative capital inflows with higher taxes.

Mantega said that approach was not right for everyone — especially for heavily industrialized nations.

“It is useless for the European Union to try to get out of the crisis by exporting more to the United States, Asia or even Brazil,” Mantega said. “We are battling over the scraps. We are elbowing each other to compete in a very restrictive market.”

“I think the most important discussion at the G-20 will be the return of stimulus policies.”

France plans to take its concerns over the euro to the G-20 meeting in Moscow, warning that a stronger euro may hinder Europe’s painfully slow recovery and ultimately the world’s.

French President Francois Hollande added to fears of a renewed global currency war on Feb. 5 when he called for a weaker euro and urged the euro zone to set a mid-term target for its exchange rate.

The euro has strengthened more than 8 percent against the U.S. dollar in the last six months, according to Thomson Reuters data. It is trading close to its strongest level in 15 months against the dollar due to improved sentiment about the eurozone bloc that has led investors to flood back in.

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