The European Union wants to challenge the position of the US dollar as the go-to global currency. The bloc seeks to strengthen the role of the euro and make it more independent from the US dollar amidst growing tensions between both sides of the Atlantic. The EU will unveil plans on how it plans to achieve this goal. Brussels said that Europe must develop “a full range of trustworthy interest rate benchmarks” in financial markets as well as a fully integrated instant payment system.
The EU Commission wants to explore the possibility of further developing the role of the euro in foreign markets. The goal is to mitigate the so-called “exorbitant privilege” of the US dollar, which allows the United States to force global compliance with its foreign policy goals. “There is scope for the euro to develop further its global role and achieve its full potential, reflecting the euro area’s political, economic and financial weight,” the EU executive commented. Brussels would ultimately like to see the euro being used as a default currency in energy contracts agreed between EU member states and third countries as well as the creation of euro-dominated price benchmarks for crude oil.
While the proposals are not legally binding, if successfully implemented, the change could have a major impact on the global energy market. The Commission says that the shift to the euro would reduce the risk of “disruption of energy supplies” due to the actions of “third countries.” Other measures included in the Commission’s recommendations seek to make hedging transactions more attractive and increase the share of euro-denominated debt and providing technical assistance to companies in the EU’s neighbourhood and Africa.