Stronger mark worries German exporters

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FRANKFURT - German industry federations yesterday gave vent to their fears about the immediate impact of a stronger mark on German exports. France is Germany's biggest trading partner, taking 17 per cent of its exports, writes John Eisenhammer.

The federation of plant machinery builders described the semi- floating exchange rate mechanism as 'a decision taken at the wrong time'. Business in France, which takes 10 per cent of German plant machinery exports, was likely to become much tougher.

The automobile manufacturers' federation said it expected 'considerable handicaps' in the French market. A spokesman for the federation of electrical goods manufacturers said member firms would have to squeeze profits if they wanted to hold on to market share.

German business confidence had been picking up slightly in recent months, largely on the back of improved expectations about exports. Stefan Schneider, chief economist at Nomura Research in Frankfurt, said hopes for a recovery had been 'considerably dampened'.

However, the Federation of German Industry (BDI) and the Chambers of Commerce (DIHT) said they did not expect any strong currency drift to last and that the impact on exports would be relatively limited.

Rheinhard Kudiss, senior economist at the BDI, was sceptical about the likelihood of a much stronger mark. Once the initial turbulence was over Germany's poor economic fundamentals would produce a correction of the speculative overvaluation of the mark, he said.

While emphasising that life for German exporters could be made harder in the short term, most economists said this would be more than balanced out in the medium term by the improved prospects for growth among Germany's neighbours.