The Euro struggles to impose itself at the international level
(B2) The implementation of American sanctions on Iran, from November 5, with an extraterritorial aim, brings back to the fore the weight of the Euro on the international scene. B2 looked at where the single currency is. The result is not famous.
A return below the level of the introduction of the Euro
A simple graph bears witness to this... According to the latest statistics from the European Central Bank, the weight of the Euro has now reached a level nearly two points lower at constant exchange rates than it was during the introduction of the single currency as bank money. It is still half a point lower at current exchange rates.
The weight of the Euro on the international scene rapidly increased, going from almost 24% to more than 27% until 2003 before stabilizing at less than 26%. It was the financial crisis of 2006-2007 that led to a rapid and steady fall until leveling off - with a mini-recovery in 2018.
A historically low level
Economists at the European Central Bank (ECB) have no shadow of a doubt about this fall. " The share of the euro in a wide range of indicators - remained close to historically low levels in the reporting period. [This] despite signs of general stabilization notes the ECB in its investigation report of June 2018. And the lift is not there. " Improved sentiment towards the euro and stronger growth in the euro area, which largely contributed to the strengthening of the euro exchange rate in 2017, have not yet translated to this day in all indicators of the international use of money. »
The second currency in the world
Admittedly, the Euro remains the second currency in the world (see box), but often far behind the USA. It does not manage to constitute the quarter in the plan of the international reserves (20,2%), of the debt (23,4%) like the obligations (23,2% respectively) of the international expression, where the dollar exceeds 50% (56,3% of bonds) or even two-thirds (62,2% of debt and 62,7% of foreign exchange reserves). For foreign exchange transactions, it is only a small sixth (15,7%) where the dollar is almost triple (43,8%). It is only for payments made on a global scale that it trails the dollar (35,7% against 39,9%).
Using the dollar: an aberration of power?
During his speech on the State of the Union on September 12 in Strasbourg, the President of the European Commission Jean-Claude Junker recognized that we must " do more to allow our single currency to fully play its role on the international scene ". And to give some examples of economic aberrations: It is absurd that Europe pays 80% of its energy import bill – which amounts to 300 billion euros per year – in American dollars while only 2% of our energy imports come from UNITED STATES. It is absurd that European companies buy European planes in dollars and not in euros. »
An instrument of European sovereignty
« The euro must become the active instrument of the new European sovereignty” said Jean-Claude Juncker again “This is why the Commission will present, before the end of the current year, initiatives to strengthen the international role of the euro. »
Lesson: the weight of the Euro in the world, a necessity for European independence
It is a partial failure (1) for the single currency which aimed, among other things, to enable the countries that were members of it to strengthen their weight on the international scene.
This weakness of the European currency makes all the more effective the extra-territoriality of the American sanctions which aim to sanction the European companies which would trade with Iran, as with other countries which would decide to banish Washington.
The weight of the Euro at the international level is essential for Europe to be able to affirm its power and its independence. If it remains weak, other diplomatic or defense projects could remain in vain.
(Nicolas Gros-Verheyde)
On the same subject, read:
Who uses the Euro as currency?
« The euro has become the second most widely used currency in the world. 60 countries somehow link their own currencies to the euro said Jean-Claude Juncker on September 12. A figure that should not deceive because it mainly includes European countries. It thus includes the 19 countries of the Euro Zone, certain EU countries which are not members of the Euro Zone which peg their currency to the Euro (Bulgaria, Denmark, etc.), the French overseas territories using the Pacific franc (New Caledonia, French Polynesia, Wallis and Futuna), the eight countries of the CFA Franc zone and a few other African countries, a few European micro-states (Andorra, Monaco, San Marino, Vatican) or the Balkans (Montenegro, Kosovo and Bosnia and Herzegovina).
(1) A partial failure because it is difficult to assess whether the currencies that remained national would not have experienced a similar, or even greater, decline in an identical situation (financial crisis + rise of emerging markets and China as a global competitor ).
NB: this element is part of a broader presentation devoted to European defense today at the Entretiens de la Citadelle in Lille on October 25, 2018.
