The D-mark walks a tightrope

Article Abstract:

The German economy has been affected by a drop in output and order, and unemployment is increasing. A drop in the value of the German mark should benefit exporting companies. There is a division of opinion as to how long the mark will continue to fall. The mark could rise if the economy recovers and interest rates are raised, but it may also rise if the economy stays weak. Tax revenues would drop with lower growth, and Germany's budget deficit would not easily be brought in line with criteria needed for monetary union, which could in turn lead to a rise in the value of the mark.

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D-mark trouble

Article Abstract:

The German mark has dropped in value and this fall has helped European stock markets. Infaltionary pressures do not appear a problem since domestic demand has increased by less than the long term average. The fall in value of the mark could be structural, and it has brought lower interest rates. The high interest rates and high value of the German mark led to an exchange rate crisis in Europe in 1992. The low interest rates in Germany in 1997 may not be apropriate for the rest of Europe.

Administration of General Economic Programs, Currency Stabilization Programs, Western Europe, Currency stabilization

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Sterling: rare strength

Article Abstract:

Pound sterling has risen in relation to the German mark but has weakened in relations to the Swedish krona and Italian lira from Feb 1996 to Jun 1996. Germany is maintaining low interest rates to counter recession, and this partly explains why the mark has dropped in value. The pound may still be undervalued in relation to the mark. This could change later in 1996 as the German economy recovers and the pound is affected by political uncertainty in the UK.

Pound (United Kingdom)

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