A weak currency boosts exports.

That's what it says in economics textbooks.

Businesses can export more goods as foreign countries get a lot for their more valuable money.

The German economy breathed life into this theory for decades.

The economically weaker south of Europe pulled the value of the common currency down - and Germany has meanwhile risen to become the world export champion.

Three years ago, China even accepted an intensification of the trade conflict with the United States in exchange for the depreciation of its own currency.

The Chinese central bank responded to the US government's tariffs by devaluing the yuan.

The then President Donald Trump accused the People's Republic of manipulating its own currency in order to flood the world markets with cheap exports and thus gain an unfair advantage.

The euro is now at a historically low level.

On Monday it reached parity with the dollar, one euro is worth one dollar these days – and the trend is falling.

As a reminder: At the beginning of the year, one euro could still be exchanged for 1.14 dollars.

Monetary policy naturally has an important influence on exchange rates.

While the currency watchdogs in Washington have raised interest rates several times as a result of the rise in inflation, the management of the European Central Bank is proceeding more hesitantly;

the interest rate differential between America and Europe has widened.

Experts and investors are now eagerly awaiting what US Federal Reserve Chairman Jerome Powell will say at the central bank meeting in Jackson Hole that begins this Thursday.

Fears of recession in Europe

In and of itself, the weak euro is supporting German exports.

Despite the supply chain problems and the tense global situation, exports increased by 13.4 percent in the first half of the year compared to the previous year, the Federal Statistical Office recently announced.

Contrary to what the weak euro would suggest, imports grew much more strongly, by 26.5 percent.

This was mainly due to the expensive raw material prices.

The surplus in foreign trade shrank accordingly in the first half of the year from more than 96 billion euros in the previous year to just around 34 billion euros.

“The weak euro tends to benefit export-oriented companies.

However, the current weakness of the euro is largely due to fears of a recession and is therefore no cause for celebration,” says Guido Baldi from the German Institute for Economic Research.

These fears of an economic downturn are mainly due to the shortage of skilled workers, disrupted supply chains, high inflation and the war in Ukraine.

While companies in the USA are also struggling with vacancies and have to wait a long time for preliminary products, they are less affected by the war in Europe.

"The recovery from the pandemic was also slower in the euro area than in America," adds Baldi.

On the other hand, the euro has not lost all that much in value from a global perspective.

Rather, the dollar has strengthened.

The euro has remained stable against other currencies such as the British pound or the Japanese yen.

However, since the dollar is the international reserve currency, the euro has depreciated overall.

More harm than good

Due to the broad headwind for the German export economy, the weakness of the euro is not paying off as expected this time.

The macroeconomist Baldi even assumes that there will be a slump in orders for the German export economy in the long term due to the global economic slowdown.

In addition, according to Carsten Brzeski, chief economist at ING, trade in goods is playing an increasingly minor role on the world market compared to services.

"Although Germany has many employees in the tertiary sector, they rarely work in an export-oriented manner." An example of this are software specialists, who are more likely to be based in India than in Germany.

According to Brzeski, the weak euro can still benefit exporting companies today.

However, to a much lesser extent than it does damage by further fueling inflation.

One euro can buy less and less on the world markets, which means that goods in this country are becoming more expensive.

"We're getting poorer," summarizes his colleague from Commerzbank, Jörg Krämer.

A weak euro could only do more good than harm again, according to Brzeski.

A weak currency creates an incentive to export more and import less.

In times of bad economic data, could such an impulse not be exactly what the EU and Germany need at the moment?

Deka chief economist Ulrich Kater does not think much of such ideas.

Currently, the most important task of the European Central Bank is to curb inflation and thus stabilize the value of the euro.

"Being able to do stimulus policy was a paradise for the ECB, which it was driven out of because of high inflation."