November 9, 2007 (LPAC)--Already, in spring, industrial exporters in Germany said that once the dollar dropped to 1.40 against the euro, businesses with clients outside the euro-zone would run into deficits. Now, as the dollar has dropped to almost 1.50, there are warnings that this would imply disaster for exports, and experts are already forecasting a dollar-euro ratio of 1.60 to 1.00, by the end of the year.

A standard argument brought up by many un-informed politicians, especially in Germany, has been that the industry was also benefiting from the dollar fall, namely because it made imports of raw materials cheaper. What politicians have not paid attention to, is the fact that expenses for raw materials only make a small portion of the value-added product that comes out of the industrial process. Therefore, fulfilling a contract signed months before the actual delivery of the ordered product, turns into a loss for exporters.

In the case of EADS (European Aircraft and Defense Systems), continental Europe's leading aerospace conglomerate, this problem was made public quite drastically, yesterday, when the management announced deep cuts in the budget for the Airbus section of the firm, to compensate for net losses of 1 billion euros in the recent period. That corresponds to a drop of the dollar by 10 cents against the euro. The EADS case may also have inspired remarks made in front of US Congress, yesterday, by French President Nicolas Sarkozy, who spoke of the weak dollar policy as an "act of economic warfare against Europe." What Sarkozy did not say, is that the dollar collapse is steered from London.