The Euro Victimizes Member States with Punitive Devaluation

May 2, 2019 (EIRNS)— The monetary expansionist policies of the European Central Bank aimed at keeping alive the bankrupt financial system, are provoking imbalances globally and inside the EU by depreciating the euro. A look in the books of the Bank of Italy shows that the devaluation of the euro vis-á-vis the yen and the dollar has resulted in a punitive devaluation regime for countries such as Italy. And this, while pursuing the public narrative that the euro has prevented “bad” national competitive devaluations.

Bank of Italy dollar and yen reserves have increased last year by 10% and 20% respectively, reflecting the depreciation of the euro against those currencies. This means that Italy pays 10% more for imports which are paid in dollars—such as hydrocarbons (its top import item), while at the same time, two-thirds of Italy’s exports are denominated in the devalued euros.

Had Italy had its own national currency, trade balances and productivity levels would set the value of the currency lower than the German currency and probably at the same level as the dollar. Under the Bretton Woods system, it was the case that parities were adjusted when necessary in order to prevent countries from going bankrupt through artificially high national currencies. This cannot happen inside the euro system and its 19 member states, which is working like a British-style gold standard, in which gold is replaced by the euro as a foreign currency which member countries must borrow from a monopolistic agency, the ECB.

So, while blaming “competitive devaluations” as the devil’s work, the euro pursues a “punitive devaluation” against some member countries.