If you thought that we in the Netherlands and Belgium are already dealing with sky-high inflation, then you have not yet seen countries such as Sri Lanka, Pakistan and many places in Africa. But the European Central Bank (ECB) has great confidence in the euro. It even thinks the currency could become popular outside the eurozone.
Euro use outside the euro zone
ECB Director Christine Lagarde said this at the Atlantic Council’s Frankfurt Forum on US-European GeoEconomics. When asked, Lagarde stated that the digital version of the euro should be borderless. She believes that proper supervision is required. “[Een digitale euro kan] facilitate overseas payments, so authorities in the United States and in Europe need to compare notes,” Lagarde said.
By this she means that Europe could learn something from the US. The US dollar has had a well-developed overseas market for years. The euro is the most used currency after the dollar. According to the Bank for International Settlements (BIS) In 2019, the euro played a role in more than 30% of all currencies traded. That is relatively much, but the dollar plays a much larger role with almost 90%.
Isn’t the euro so bad after all?
The ECB has been working on the CBDC project for the eurozone for two years now, but this fully digital euro has not yet been rolled out. If the euro were to be used as much as the dollar, foreigners would come to see the euro as their primary currency for everyday use. Think, for example, of North Africa, European countries outside the Eurozone and perhaps islands in the Caribbean or off the coast of Africa.
For the backyard of the United States, something similar to the US dollar is already quite normal. In El Salvador and Ecuador, the USD is legal money, despite the fact that the US central bank has virtually nothing to do with these countries.
Earlier this summer, we described that the euro could depreciate significantly, and that the eurozone is in a relatively weak position. You may wonder how successful such an international euro would be. However, we must remember that there are currencies that are much weaker. Sri Lanka, for example, is struggling with hyperinflation. Then that 12% of us is not too bad.
