Policy brief

Is the COVID-19 crisis an opportunity to boost the euro as a global currency?

The euro never challenged the US dollar, and its international status declined with the euro crisis. Faced with a US administration willing to use its

Publishing date
05 June 2020

This note was prepared at the request and with the financial support of the Croatian Presidency of the Council of the European Union, as a background paper for discussion at the informal ECOFIN in Zagreb, which was cancelled because of the COVID-19 outbreak and implementation of containment measures.

• The euro became an international currency when it was created two decades ago. However, the euro's internationalisation peaked as early as 2005 and it was never comparable to the US dollar. Its international status declined with the euro crisis. Faced with a US administration willing to use its hegemonic currency to extend its domestic policies beyond its borders, Europe is reflecting on how to promote actively the internationalisation of the euro, to help ensure its autonomy. But promoting a more prominent role for the euro is difficult and would involve far-reaching changes to the fabric of the monetary union.

• Historically, countries issuing dominant currencies have been characterised by: a large and growing economy, free movement of capital, a willingness to play an international role, stability, an ability to provide a large and elastic supply of safe assets, developed financial markets, and significant geopolitical and/or military power. The monetary union does not meet all these criteria.

• The only way for the euro to play a major international role is to improve the institutional setup of the monetary union. First, the supply of euro-denominated safe assets from the monetary union should be increased. To avoid a COVID-19 depression, euro-area countries have increased massively the supply of their debt securities in the last two months. With its new purchase programme, the European Central Bank has ensured that euro-area sovereign bonds retain their safe asset status. Decisions by the Eurogroup also increase the supply of common European safe assets. The European Commission’s proposal to issue up to €750 billion in EU debt to finance its recovery plan is a step in the right direction.

• In federations, joint issuance typically goes hand-in-hand with federal and central control of spending and a strong grip on revenues. To be politically sustainable, similar central control would be needed in the EU. The treaty-based EU framework is the closest to fulfilling these criteria with political accountability through the European Parliament, political control via the Commission, and a court of auditors and an anti-fraud office, but ultimately the treaty base is insufficient for a true quantum leap.

• It is essential to ensure a strong recovery for all countries and thus make the euro area an attractive destination for investment. A strong recovery will also be fundamental to preserve or even improve the supply of safe assets, as growth is crucial for debt sustainability.

Recommended citation
Claeys, G. and G.B. Wolff (2020) 'Is the COVID-19 crisis an opportunity to boost the euro as a global currency?' Policy Contribution 11/2020, Bruegel

About the authors

  • Guntram B. Wolff

    Guntram Wolff was the Director of Bruegel. Over his career, he has contributed to research on European political economy and governance, fiscal, monetary and financial policy, climate change and geoeconomics. Under his leadership, Bruegel has been regularly ranked among the top global think tanks and has grown in influence and impact with a team of now almost 40 recognized scholars and around 65 total staff. Bruegel is also recognized for its outstanding transparency.

    A recognized thought leader and academic, he regularly testifies at the European Finance Ministers' ECOFIN meeting, the European Parliament, the German Parliament (Bundestag) and the French Parliament (Assemblée Nationale). From 2012-16, he was a member of the French prime minister's Conseil d'Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed to the G20 high level independent panel on pandemic prevention, preparedness and response. He is also a professor (part-time) at the Solvay Brussels School of Université Libre de Bruxelles, where he teaches economics of European integration.

    He joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he was coordinating the research team on fiscal policy at Deutsche Bundesbank. He also worked as an external adviser to the International Monetary Fund.

    He holds a PhD in economics from the University of Bonn and studied in Bonn, Toulouse, Pittsburgh and Passau. He taught economics at the University of Pittsburgh and at Université libre de Bruxelles. He has published numerous papers in leading academic journals. His columns and policy work are published and cited in leading international media and policy outlets. Guntram is fluent in German, English, French and has good notions of Bulgarian and Spanish.

  • Grégory Claeys

    Grégory Claeys, a French and Spanish citizen, joined Bruegel as a research fellow in February 2014, before being appointed senior fellow in April 2020.

    Grégory Claeys is currently on leave for public service, serving as Director of the Economics Department of France Stratégie, the think tank and policy planning institution of the French government, since November 2023.

    Grégory’s research interests include international macroeconomics and finance, central banking and European governance. From 2006 to 2009 Grégory worked as a macroeconomist in the Economic Research Department of the French bank Crédit Agricole. Prior to joining Bruegel he also conducted research in several capacities, including as a visiting researcher in the Financial Research Department of the Central Bank of Chile in Santiago, and in the Economic Department of the French Embassy in Chicago. Grégory is also an Associate Professor at the Conservatoire National des Arts et Métiers in Paris where he is teaching macroeconomics in the Master of Finance. He previously taught undergraduate macroeconomics at Sciences Po in Paris.

    He holds a PhD in Economics from the European University Institute (Florence), an MSc in economics from Paris X University and an MSc in management from HEC (Paris).

    Grégory is fluent in English, French and Spanish.


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