International role of the euro: The euro in the world

The euro is the official currency for 19 of the 27 EU member states, however its influence reaches far beyond the EUʼs borders. Sixty countries and territories outside the EU use the euro as their currency or have pegged their currency to it. This stabilises the exchange rates between countries, providing long-term predictability for businesses. The euro is the second most important currency at international level in terms of global payments. Its role as a reserve and investment currency could however still be strengthened.

European Council President Charles Michel (pictured) said: "A stronger international euro would certainly give us more latitude in our geopolitical decision-making. An attractive currency also offers a broader access to international financial markets. And this facilitates the funding of the massive investments needed for our digital and ecological transitions. These investments are the key to unlocking the full potential of the two transitions: sustainable development, quality jobs and innovation."

In November 2020, the share of the euro in global payments stood at 38%, on a par with the dollar. The share of the euro in foreign exchange reserves holdings amounted to around 20% in June 2020, while the US dollar stood at around 60%.

Increasing the euro's weight as an international reference currency could benefit both EU businesses and citizens and help increase the EUʼs strategic autonomy and influence in the world.

A globally preeminent euro would:

• increase the resilience of the international monetary system
• reduce dependence on other currencies, especially the US dollar
• open up more choices for market operators across the globe

As a result, the world trade system would become less vulnerable to asymmetric shocks. A stronger international role for the euro would ensure lower transaction, financing and risk management costs.

Strengthening the international role of the euro

On 19 January 2021, the European Commission presented a strategy to prepare the EU's economic and financial system better for the future. With its communication ʻThe European economic and financial systems: fostering openness, strength and resilienceʼ, the Commission built upon its communication of 2018, which focused on the deepening of the Economic and Monetary Union.

• The European economic and financial systems: fostering openness, strength and resilience (European Commission)
• Towards a stronger international role of the euro (European Commission)
• The Economic and Monetary Union (background information)

Did you know that the euro is the champion of green loans?

The new strategy identifies the strengthening of the international role of the euro as one of its three main pillars, in addition to the development of more resilient financial market infrastructures and an improved implementation of EU sanctions' regimes.

The Commission lists a set of measures to promote the use of the euro in the world:

• Fostering euro-denominated commodity derivatives for energy and raw materials;
• facilitating the development of euro-denominated benchmark indices and trading venues in important markets, such as emergent energy carriers like hydrogen;
• reaching out to investors and issuers in third countries to promote the use of the euro and make it more attractive for investments;
• promoting green bonds as instruments for financing sustainable investments for achieving the goals of the European Green Deal;
• upgrading the EU Emissions Trading System (ETS), and;
• looking into the possibility of introducing a digital euro.

Furthermore, the volume of EU bonds issued in the framework of the ʻNext Generation EUʼ recovery plan, a third of which will take the form of green bonds, is set to add depth and liquidity to the European capital markets and make them more attractive for investors.

• A recovery plan for Europe (background information)
• European Green Deal (background information)
• Financing the climate transition (background information)

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