Increasing the International Role of the Euro: A Long Way to Go

Abstract

The euro is the second most important global currency after the US dollar. However, its inter-national role has not increased since its inception in 1999. The private sector prefers using the US dollar rather than the euro because the financial market for US dollar-denominated assets is larger and deeper; network externalities and inertia also play a role. Increasing the attractive-ness of the euro outside the euro area requires, among others, a proactive role for the European Central Bank and completing the Banking Union and Capital Market Union.