Is the Euro a “Big Deutsche Mark”? US Treasury Points Finger at Germany
Is the Euro the real currency of the European Union or, even for foreigners, is it nothing more than a kind of big, fat German Mark?
The recent report by the US Treasury Department, dated June 2025, on the macroeconomic and currency policies of major trading partners has once again put the spotlight on Germany's position .
Long included in the “ Monitoring List” , that is the list of economies to be carefully monitored, Germany now finds itself in the company of new weighty entries such as Ireland and Switzerland. The control involves countries that have significant trade surpluses with the USA and considered excessive, with the possibility that they are generated by the manipulation of exchange rates.
Its presence raises a fundamental and complex question: why is a country that uses a common currency like the Euro being monitored for issues that, at least in part, concern the exchange rate?
The answer, as emerges from the document, does not lie in the accusation of active manipulation, but in the analysis of the deep structural imbalances that German national economic policy generates, amplified by the context of the single currency.
The Technical Reasons for German Inclusion
To be included in the “Monitoring List”, a country must meet two of the three criteria established by the Trade Facilitation and Trade Enforcement Act of 2015. Germany, according to the report, fully meets two of these criteria:
- A significant bilateral trade surplus with the United States: In 2024, this surplus exceeded $89 billion, well above the $15 billion threshold.
- A material current account surplus: In 2024, Germany’s surplus rose to 5.7% of GDP, well above the 3% threshold considered “material” by the Treasury.
The criterion that Germany does not meet is that of "persistent and unilateral intervention in the foreign exchange market". Or at least this is not officially stated. At the same time, the fact that Germany is present in this list, and with a significant surplus, shows that even the USA considers the Euro something that can be manipulated by Germany.
One-year change in the Real Effective Exchange Rate, which in Italian translates as Real Effective Exchange Rate (a weighted average of bilateral exchange rates, expressed in price-adjusted terms corrected for the effects of inflation in the countries concerned) on the ordinates and the Current Account Budget surplus-deficit, on the abscissas. So the USA is in deficit and has revalued. Germany and Ireland are devalued and in surplus.
Is the Euro a “Big Mark”? Implicit Treasury Analysis
If the Euro were a purely technical and neutral issue, it should not be considered a specific advantage for Germany, and other large Eurozone countries such as Italy and France should be on the list. It must be said that these countries are not on it also for a technical reason: they do not meet the threshold of current account surplus (Italy stands at 1.2% and France at 0.4%).
Here the implicit analysis of the US Treasury emerges. The problem is not the Euro per se, but the interaction between a “one size fits all” exchange rate and an economy, the German one, with fundamentals radically different from the eurozone average. The report identifies the causes of German imbalances as “persistently weak domestic demand and excess savings”. For years, German fiscal policy, anchored to the rigid constitutional “debt brake”, has limited domestic spending and investment, favoring a hyper-exporting economic model.
In this context, a Euro managed by the ECB to accommodate the needs of the entire, heterogeneous, Eurozone is structurally undervalued for the German productive machine. If Germany still had the Mark, it would have appreciated enormously in the face of such surpluses, acting as a natural brake on exports and incentivizing imports and domestic demand.
The euro, in effect, deprives the system of this automatic rebalancing mechanism. Although the report does not use the term “gross mark,” its analysis leads to a functionally identical conclusion: the single currency provides Germany with a lasting competitive advantage that it would not have with its own sovereign currency, and its domestic policies do nothing to compensate for this imbalance, but rather exacerbate it.
Thoughts on Japan: A Different but Similar Problem
The case of Japan, also firmly on the Monitoring List, offers a useful comparison. Unlike Germany, Japan has its own currency and intervenes in markets. However, the Treasury’s concerns are similar in effect. The report notes that the yen has depreciated by about 10% against the dollar in 2024 and, even more alarmingly, that its real effective exchange rate (REER) is at a “50-year low.”
This points to a currency that is extremely undervalued in terms of real competitiveness. Although Japan has recently stepped in to strengthen the yen, the Treasury is concerned about the currency’s structural weakness, which is fueling a current account surplus of 4.8% of GDP. The Treasury even goes so far as to issue a veiled warning, stressing that government investment funds, such as large public pension funds, should not be used to “target the exchange rate for competitive purposes.” For Japan, as for Germany, Washington’s demand is a structural rebalancing that reduces dependence on exports and stimulates domestic demand.
The hunt for bad guys who manipulate the exchange rate to gain a competitive advantage over the AU will continue in the future, and someone will have to be very careful not to provoke the tariff ire of Donald Trump.
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The article Is the Euro a “Big Deutsche Mark”? The US Treasury points the finger at Germany comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/euro-marco-tedesco-tesoro-usa-germania/ on Sat, 07 Jun 2025 15:24:28 +0000.