Brussels seeks stronger global role for euro
Pierre Moscovici - Photo EC
(BRUSSELS) - The EU Commission put forward a number of initiatives Wednesday to boost the global role of the single currency, seeking to challenge the dollar's global dominance, particularly in the energy sector.
In a Communication, the Commission outlined the benefits of a strengthened international role of the euro for the EU and the international financial system. As part of this effort, the Commission adopted a Recommendation on the international role of the euro in the field of energy, promoting a wider use of the euro in this strategic sector.
The EU is the world's largest energy importer with an average import bill of EUR 300 billion. Strengthening the international role of the euro in the field of energy investment and trade would help 'reduce the risk of supply disruptions and promote the autonomy of European businesses', says the EU executive.
Commissioner for Economic and Financial Affairs Pierre Moscovici: "A wider use of the euro in the global economy yields important potential for better protecting European citizens and companies against external shocks and making the international finance and monetary system more resilient."
Promoting the euro's international role is part of a European commitment to an open, multilateral and rules-based global economy and trade. It comes at a time when recent global trends, the emergence of new economic powers along with the development of new technologies support a potential shift towards a more diversified and multipolar system of several global currencies.
The Commission acknowledges that the decision to use a currency is ultimately made by market participants and it s objective is not to interfere in commercial freedom or limit choice. However, it says a strengthened role for the euro would help improve the resilience of the international financial system, providing market operators across the globe with additional choice and making the international economy less vulnerable to shocks.
"At home", it would also allow the European Union to enhance the protection of its citizens and businesses, to uphold its values and to promote its interests in shaping global affairs according to rules-based multilateralism. A wider global use of the euro would lower costs and risks for European businesses, as well as lower interest rates paid by households.
The Commission's initiatives to boost the role of the euro include:
- completing Europe's Economic and Monetary Union, Banking Union and Capital Markets Union. Only seven of the Commission's 40 key proposals to the co-legislators in these areas have been adopted.
- additional measures to foster a deep European financial sector, including stronger European financial market infrastructures; solid interest rate benchmarks and an integrated instant payment system in the EU.
- initiatives linked to the international financial sector: ongoing cooperation between central banks to safeguard financial stability; increasing the share of euro denominated debt issued by European entities; fostering economic diplomacy to promote the use of the euro and providing technical assistance to improve access to the euro payment system by foreign entities, notably in the context of the European External Investment Plan.
The Commission is also calling on Member States to promote the wider use of the euro in strategic sectors. In spite of their position as large buyers as well as major producers, European businesses still trade in US dollar in key strategic markets, often even between themselves. This exposes businesses to currency risks and political risks, such as unilateral decisions that directly affect dollar denominated transactions. In this context, the Commission has adopted a Recommendation to promote the wider use of the euro in international energy agreements and transactions. This it says will allow European businesses to benefit from stronger autonomy and finance themselves with reduced exposure to legal actions taken by third country jurisdictions. This will support the EU's objective to build an Energy Union that ensures safe, viable and accessible energy supply.
The Commission will also launch a series of targeted consultations with stakeholders and report on the results in the summer of 2019.
- The Commission will start a consultation on the market potential for a broader use of euro-denominated transactions in oil, refined products and gas.
- On raw materials (metals and minerals) and agri-food commodities, the Commission will consult with stakeholders to identify ways of increasing euro-denominated trade.
- A consultation will also be launched to investigate possible actions to promote the use of the euro in the transport-manufacturing sector.
The Commission invites the Leaders to discuss the international role of the euro during the December European Council and Euro Summit.
The euro is the second most important international currency. Some 340 million European citizens use euro banknotes and coins every day across the euro area's 19 Member States. Around 60 countries in the world use, will use or link their currency to the euro. It is a widely accepted currency for international payments, and a significant share of international reserves of foreign central banks and debt issuance on international markets are in euros.
Memo: Towards a Stronger International Role of the Euro
Factsheet: Commission presents ways to further strengthen the euro's global role
Communication: Towards a stronger international role of the euro
Recommendation on the international role of the euro in the field of energy