International Role of Euro and European Integration

DOI: 10.20542/0131-2227-2020-64-5-33-41
A. Polivach (,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation

Abstract. The euro was introduced 20 years ago and then quickly and confidently took the place of the second important global currency. In that times there were a number of works forecasting that the euro in the next 10–15 years may surpass the US dollar as the dominant global currency. By now, usage of the euro in the world is significantly wider than the next currencies, the pound and the yen. However, the US dollar is still much more popular. Moreover, in the last decade we noticed a slowdown in the usage of the euro worldwide and even a decrease in some segments in favour of the dollar. Therefore, this article investigates factors that may be causes of this slowdown. The most popular factors determining prospects of currency internationalization are the market share of an exporting country and differentiation of its export goods. As differentiation of the goods exported from the USA and from the euro zone is in general similar, so the author first checks their market shares dynamics. Despite both economies were losing their market shares in the last 20 years still volumes of the exports from the euro zone was always much bigger than from the USA. The ratio even increased from 1.28 in 1999 to 1.67 in 2017 in favour of the euro zone. However, the usage of the euro slightly declined in the last decade. Therefore, new factors should be taken into consideration. They include volume of imports (as we consider this is a natural and easiest way for a currency to migrate into international usage), size of GDP (as it influences on the size of imports), cumulative total sales of the largest transnational corporations (TNCs) and cumulative total assets of the largest transnational financial institutions (TNF). Given their exceptional size and global operations, the last two can seriously increase or decrease usage of particular currencies worldwide. We found that the dynamics of all four new factors were quite in line with the progress of the international role of the euro. During the 13 years of 20, the imports to the euro zone were smaller than to the USA, including the last five years. The GDP of the euro zone was always smaller than the USA’s one. Though its dynamics in 2000–2008 gave a chance and the euro zone was about to catch the level of the USA, but then the US GDP more and more surpassing it. In addition, the cumulative sales of the largest TNCs headquartered in the euro zone surpassed their competitors headquartered in the USA in 2005–2013 and then the US TNCs took the lead. Cumulative assets of the largest TNFs from the euro zone were always larger than the US TNFs. However, from 2010 the latter were narrowing the gap. Additional factor emerged in the last decade was a quick growth of Chinese TNFs, which became the largest in the world. As Chinese corporations prefer to work with the dollar, so this was a negative factor for the euro. Also, statistics show that possible participation of the UK in the euro zone might have reverted all the above factors in favour of the euro zone. As there is no evidence that considered factors will change, so it looks that now the euro is near its maximum playing the international role. Unless unprecedented actions will be taken by the European Union, there are no chances for the euro to surpass the US Dollar in the foreseeable future.

Keywords: euro, dollar, global currency, export, import, transnational corporations


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For citation:
Polivach A. International Role of Euro and European Integration. World Eonomy and International Relations, 2020, vol. 64, no. 5, pp. 33-41.

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