The Internationalisation of the Euro: State of Affairs and Critical Issues

The most recently available data suggests that the international role of the euro has grown since its inception as the European Union’s single currency.Nevertheless, for a variety of reasons, progress towards a more prominent international role has been only gradual. No significant changes have yet been documented (although anecdotal evidence is beginning to become more common) with respect to the euro’s presence within official reserves or its use in foreign exchange markets. On the other hand, use of the euro appears to have increased noticeably in trade transactions and significantly in global debt securities markets.

The latest evidence also suggests that the international role of the euro retains a strong regional focus. Internationalisation of the euro has been most significant in countries neighbouring the Euro zone. This phenomenon suggests that the international role of the euro may be complementary to other phenomena for which distance matters, such a trade and institutional linkages with the European Union.