The European Economic and Social Committee (EESC) has called on EU leaders in a recently adopted opinion to step up efforts to strengthen the international role of the euro, on the eve of the Euro Summit taking place on Friday, 21 June in Brussels. It underlines that this would be desirable, but also necessary, as a strong euro would contribute to the wellbeing of EU citizens and businesses, uphold common values and promote common interests.
According to the Committee, further measures to enhance economic growth and resilience and the adjustment capacities of the euro area economies would eventually lead to a stronger international role for the euro. In its opinion, the EESC puts forward recommendations to this end, which go beyond the European Commission proposals.
Philip von Brockdorff, the rapporteur for the opinion, said:
Enhanced social cohesion, economic convergence, competitiveness and innovation should be the basis for a stronger euro area economy that supports the euro. We need to do more in these fields and reduce divergences among and within Member States, which limit our economic performance.
Particularly in times of increased protectionism and almost stagnation of multilateral trade negotiations, the euro needs to play a more prominent role at international level. This is
strategically significant and, from a trade perspective, vital for the future of the EU, he said.
Dimitris Dimitriadis, co-rapporteur for the opinion, added that an EU speaking with one voice could further contribute to this.
A more unified approach in international diplomacy and a more pro-active stance to promote our common interest could result in more trade opportunities, he explained.
The completion of the Economic and Monetary Union (EMU) and the Banking Union is another clear priority for the EESC. In this context, the Committee recommends investigating options for creating more liquid and safer euro assets. These could counter the current fragmentation of the euro area's sovereign bond market, which harms market confidence in the single currency. Some degree of fiscal union would be needed, as coordination between fiscal and monetary policy across the euro area is crucial for macroeconomic stability and therefore market credibility.
Further requirements for enhancing the international role of the euro are, in the EESC's view:
- an ECB that maintains price stability in accordance with its mandate and supports a deeper EMU and Capital Markets Union;
- a stronger financial market infrastructure and solid interest rate benchmarks;
- promoting a wider use of the euro in strategic sectors, such as energy and transport;
- other measures to support SMEs and increase productivity as a means to enhance the euro area's competitiveness in international markets.
The Committee urges EU leaders to work towards enhanced international use of the euro within the ongoing debate on deepening the EMU because of the numerous benefits this will bring to EU citizens and businesses.
Lower exchange rate risk and associated costs for businesses, increased price transparency – which will allow firms to source cheaper raw material and consumers to buy cheaper goods – and more favourable financial borrowing conditions for businesses and governments are only some of these benefits. At international level, it would provide market participants with an additional choice, thereby reducing their exposure to currency-related shocks and contributing to economic and political stability.
The EESC has been urging EU leaders to strengthen the architecture of the EMU for a long time, including in its recent opinions on Euro area economic policy (2019) and Economic and Monetary Union Package.
The newly adopted opinion on "Towards a stronger international role of the euro" comes as a response to a specific Commission initiative in this field launched in December 2018. In July 2019, the EESC views expressed in this opinion will be complemented by two own-initiative opinions – one on Towards a more resilient and sustainable European economy and another one on A new vision for completing the Economic and Monetary Union. All three opinions have been drawn up in a bid to outline a comprehensive vision for the European economic agenda over the next EU legislative term and to feed into the forthcoming EU leaders' discussions on this.