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The international role of the euro: a status report

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  • Elias Papaioannou
  • Richard Portes

Abstract

We survey the evidence on the international role of the euro a decade after its introduction. In the early nineties during the initial stages of Economic and Monetary Union, sceptics raised concerns that the single currency would lead to political disintegration and economic divergence. In contrast, some argued that the euro could become a major international currency within a relatively short time. In fact, the international importance of the single European currency is rising incrementally among a number of dimensions, and a ‘middle-euro' scenario is emerging from the ‘quasi-status-quo'. The share of the euro in foreign exchange reserves is rising, as is its usage in international trade. An increasing number of countries use the euro to anchor their currencies and issue their debt. The current global economic configuration of rising US inflation, a depreciating dollar, and the American trade and fiscal deficits reinforce the middle-euro scenario, in which the dollar and the euro share central roles in the international markets. Yet in the absence of a powerful shock, the ongoing adjustment is likely to occur gradually, rather than abruptly, and only if European policy makers continue financial market reforms and the European Central Bank maintains low inflation expectations.

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  • Elias Papaioannou & Richard Portes, 2008. "The international role of the euro: a status report," European Economy - Economic Papers 2008 - 2015 317, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0317
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    2. Christoph Fischer, 2011. "Currency blocs in the 21st century," Globalization Institute Working Papers 87, Federal Reserve Bank of Dallas.
    3. Christian Noyer, 2010. "L’euro 2009-2019 : de l’adolescence à l’âge adulte," Revue d'Économie Financière, Programme National Persée, vol. 96(1), pages 45-58.
    4. Benjamin J. Cohen & Tabitha M. Benney, 2014. "What does the international currency system really look like?," Review of International Political Economy, Taylor & Francis Journals, vol. 21(5), pages 1017-1041, October.
    5. Ignazio Angeloni & Agnès Bénassy-Quéré & Benjamin Carton & Christophe Destais & Zsolt Darvas & Jean Pisani-Ferry & André Sapir & Shahin Vallée, . "Global currencies for tomorrow- a European perspective," Blueprints, Bruegel, number 592, November.
    6. Klaus Regling & Servaas Deroose & Reinhard Felke & Paul Kutos, 2010. "The Euro After Its First Decade : Weathering the Financial Storm and Enlarging the Euro Area," Governance Working Papers 22817, East Asian Bureau of Economic Research.
    7. Chiţu, Livia & Eichengreen, Barry & Mehl, Arnaud, 2014. "When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets," Journal of Development Economics, Elsevier, vol. 111(C), pages 225-245.
    8. Fritz Breuss & Werner Roeger & Jan in’t Veld, 2009. "Global impact of a shift in foreign reserves to euros," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 36(1), pages 101-122, February.
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    14. Christian Noyer, 2010. "The Euro 2009-2019 : From Teenager to Adulthood," Revue d'Économie Financière, Programme National Persée, vol. 96(1), pages 41-53.

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