Benoît Coeuré: Interview in L'Orient-Le Jour
Interview with Mr Benoît Coeuré, Member of the Executive Board of the European Central
Bank, in L'Orient-Le Jour, conducted by Ms Cyrille Nême and published on 6 October 2015.
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Has the crisis that the euro area has experienced over the last five years damaged its
international status?
Paradoxically, while the euro area has been hit by two successive extremely serious crises -
first the sub-prime crisis which brought to light serious flaws in the European banking system,
and then the so-called "sovereign debt crisis" which revealed weaknesses in economic
governance within the euro area - these have not in any way reduced the attractiveness of the
euro. On the contrary, the different dimensions of its international use - as a reserve currency,
an invoicing currency or a financing currency - have demonstrated a notable stability. At
constant exchange rates, the share of the euro in global reserves has thus remained broadly
stable since 2007-08. Its use as an invoicing currency or settlement currency for extra-euro
area trade has not changed significantly either. Above all, also owing to extremely low interest
rates this year, international borrowers have increasingly used the euro as a financing
currency: for example, one-quarter of the debt securities issued in foreign currency this year
in Lebanon has been in euro and, in April, Mexico became the first State to issue a bond in
euro with a one-hundred-year maturity.
In fact, and this is another paradox, while many analysts foresee a more multi-polar
international monetary system, the euro continues to be used in 20-25% of international trade,
firmly in second place behind the dollar (50-60%). All the other currencies remain far behind,
despite the marked progress of the renminbi in the invoicing of international trade, thanks to
China's leading role in the latter.
Unlike most other currencies, the euro encompasses nineteen heterogeneous
economies and national interests which are sometimes very divergent, as for example
the debates surrounding the Greek debt crisis reminded us. Does this remain a
disadvantage as far as international investors are concerned?
The fact that the euro has maintained its international status over this period seems to signal
confidence among investors about the ability of the euro area to overcome its crises. In forcing
the euro area to strengthen its governance, this "trial by fire" might even have contributed to
improving the prospects of the euro as an international currency.
Furthermore, with regard to the Greek issue, there was genuine consensus within the
Eurogroup that Greece had to respect the rules of the game of Economic and Monetary Union
(EMU). The crux of the debate chiefly concerned the tension between the democratic
legitimacy of an elected government and that of its European creditors, which also need to be
accountable to their citizens regarding the fate of their loans or in granting a new support
package. An agreement was signed in August and it is important for the new Greek
government to implement it in a forceful way with a view to quickly re-establishing confidence
and enabling the Greek economy to recover.
That said, the Greek crisis also highlighted the need to simplify the governance of the euro
area. This experience demonstrated, for example, that decision-making by simple majority
within a common institution such as the ECB is more efficient and faster than
intergovernmental decision-making and that it is necessary to strengthen the convergence of
the euro area economies and facilitate the completion of Economic and Monetary Union in the
spirit of the "Five Presidents' Report" published in June this year - editor's note: composed of
Donald Tusk (European Council), Martin Schulz (European Parliament), Jean-Claude Juncker
(European Commission), Jeroen Dijsselbloem (Eurogroup) and Mario Draghi (ECB).
To what extent can the ECB contribute to strengthening the international status of the
euro?
While the prospect of seeing the euro play a substantial international role alongside the dollar
may have been considered by some as a motivation for its creation, its promotion does not
feature anywhere in the Treaty. Likewise, on monetary issues, the ECB's primary mandate is
to maintain price stability. We neither encourage nor discourage the international role for the
euro, which continues to be essentially determined by the markets.
That said, progress towards a genuine financial union, with better connected capital markets,
could indirectly support their depth and liquidity and, in doing so, the international role of the
euro. Even if this strengthening of the euro were not an aim in itself, it would attest to the
continued confidence of the rest of the world in the single currency, but also to the success of
the European Union in completing EMU.