Challenging the Dollar in International Monetary Relations? The Lost Opportunities of the Euro

As is often claimed, the European Union (EU) remains a huge economic entity in the global political economy but yet has problems in or is incapable of transforming its economic potentials into political influence or power. In terms of its external policies the EU disposes of several instruments — political as well as economical. Monetary policies — and in particular the euro — in this regard remain an interesting case. Money is intrinsically a social and political as well as an economic device and with the euro the EU has created a potentially powerful instrument for shaping and influencing the global political economy, as well as for strengthening the autonomy of Europe in global political and economical affairs. The domestic and the international side of the euro are interlinked. Yet the focus of the present contribution will be limited to the external role of the euro while the domestic side of the euro will only be touched upon when relevant for the external side. In more precise terms we shall deal with the question of whether the euro is increasingly becoming an international currency, that is, a currency increasingly used in international transactions not only between Europe and the rest of the world but also in transactions between third-countries. This inevitably also raises the question of whether the euro may challenge the role of the dollar as the present main reserve currency in the international monetary system.