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12 March 2019

Fondation Robert Schuman: For a geopolitics of the euro

Promoting the internationalisation of the euro would also strengthen the influence and security of Europe. In virtue of this it must be a diplomatic goal of the institutions and the Member States, write Cyprien Batut and Olivier Lenoir.


Of course there is a wealth of specific technical and institutional measures that would help to spread the euro beyond the Mediterranean and the Urals , which form the heart of joint action on the part of the Commission and the ECB today and which include, according to degrees of progress and the courage of the leaders, the strengthening of banking and financial union, the dissemination of secure European assets or even the improvement of a payment system in euro (the new TargetII system). Slight changes in the ECB’s attitude that we have seen in support of the issue will also foster a role like this, aiming firstly to reassure and host investors mobilising the single currency.

But above all, there are political measures that might be used to strengthen the euro’s internationalisation, which are mainly independent of developments in the European financial architecture and which involve Europe and its relations with the outside world.

Firstly, trade agreements signed between the EU and regions or third States would benefit from the inclusion of  clauses fostering and even imposing the use of the euro in relations that govern them. These major agreements, for example the one signed with Japan in December, define trade and also strategic relations if necessary, between the Union and other States, and not specifically between businesses. Hence these are mainly agreements that cannot be replaced – since the State that wants to trade with the EU for certain reasons is not in the same situation as a business, which faces many potentially competing trade partners. It is therefore possible to include terms that favour the EU’s position, with a reduced risk of a more accommodating competitor winning the contract. The European Parliament notably has its word to say during negotiations of this type. From this point of view, the Commission drew up similar ideas in December, but did not mention bilateral relations between Member States and third countries. More generally it is therefore the entire EU which would benefit from the inclusion of the requirement to use the euro in these agreements.

But there is more. In the light of recent economic work that we have quoted, it seems primordial to include in European democracy as it stands today, the goal of spreading the world use of the euro, whilst working to increase diplomatic positions themselves. Indeed, the EU has 139 relays comprising the European External Action Service (EEAS), which aim to promote European values and interests. Amongst these the promotion of the use of the euro might become an inescapable factor. On the one hand, it might mean drafting a communication strategy to show organisations and third States the advantages of that they might have in using the euro rather than the dollar within the multipolar monetary system: lesser dependence on the American monetary policy, reduced submission to decisions taken by the American government (particularly sanctions), the possibility of arbitration between two monetary zones (Europe and the USA) in the event of tension, reduced financing of the American policy in virtue of a reduced potential of the “exorbitant privilege”. On the other hand, it would mean including the defence of transactions in euros, in the goals of the partnership instrument (P I), an EEAS tool, which enables the EU to cooperate with international partners. 

These two factors might comprise the first foundation stones of a European diplomacy that is ready to spread the euro beyond Europe. These measures are obviously indissociable from the strengthening of the stability and the credibility of the European financial system, but they operate from another much more (geo) political perspective. The strengthening of European geopolitical power would therefore be an effective, vigorous means to provide Europe with the confidence it needs in the face of foreign stakeholders, in its stability and its durability. Beyond these first steps, it is consequently the promise of greater European diplomacy, of Europe’s ability to guarantee its own security and that of other regional or State players, of its determination to coordinate different visions to speak with one voice, which would be the main catalyst in the development of the euro’s international role. Hence it is indeed a question of sovereignty, which calls for both the will of political actors and the strengthening of the institutions. 

Full paper

© Fondation Robert Schuman

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