Debate: Strengthening the international role of the euro
Date: WEDNESDAY, 24 MARCH 2021
Speaker: Danuta Maria Hübner
Country: Germany
Language: EN

For far too long, the use of the position of the euro internationally was entirely left to market forces. Recently we have realised that with supportive policies the euro can become a currency that is widely welcomed, used and trusted all over the world. Geopolitical shifts and international trade challenges, including the disruption of value chains, technological developments, digital transformation, the rise of China’s economic power, geopolitical challenges to multilateralism, and last but not least the pandemic and its consequences, have triggered reflection and action on building the necessary resilience of our economy. The President of the European Commission in his State of the Union address at the end of 2018 highlighted the strategic importance of the euro, and the need to ensure that the single currency plays its full role on the international stage. After the elections in 2019, the European Parliament accepted my proposal to start working on our position on this issue. The Commission, in its communication issued on 19 January 2021, encourages wider use of the euro as part of a broader strategy to enhance the Union’s leading role in the global economy and its governance.  Parliament’s report comes just before the euro summit on Friday 26 March, set to discuss how to enhance the euro’s weight as an international reference currency. In preparation for the summit, the Eurogroup contemplated last week how the international role of the euro can contribute to the EU’s open strategic autonomy and resilience, while boosting the EU’s openness and global engagement. The ECB too has departed from its historically neutral stance regarding promotion of the euro. Beyond its active contributions to the discussions in preparation to launch the digital euro, the ECB has taken actions attesting its support for the euro currency’s international role. An example here can be the extension of swap lines to a number of central banks outside the euro area. The global nature and severity of the pandemic have highlighted the world’s interdependence, bringing new impetus to the project. The push for action towards a stronger international role of the euro comes in the moment of high relevance of policies enhancing the EU’s geopolitical resilience and its new trade agenda. But a stronger role for the euro internationally will also provide additional choice to market operators globally, contributing to the stability of international finance and trade. It will lead to deeper and more liquid European financial markets, providing for more reliable access to finance for European businesses and governments. It will make the world economy less vulnerable to monetary shocks. As mentioned, the European currency can facilitate building a multipolar, international monetary system. However, the decision to use a currency is ultimately determined by market participants’ preferences. Our policies should be supporting market-driven shifts in this direction. The report proposes, in this context, focusing on a number of particularly relevant policies governing areas of international trade, financial services, capital markets and payment systems, but also climate change, the digital transformation, energy, and foreign and security policies.  The report leaves no doubt: the euro is irreversible as a European currency and a strengthened international role will allow the EU to improve the well-being of citizens and promote an international system based on multilateral cooperation and good global governance.