The decline in the dollar revives the hopes of the rise of the euro in the global markets

With the suffering of the American dollar, will this be the moment of the euro? The European Central Bank President, Christine Lagarde, and the head of the euro Group, Pascal Donuho, in the “Eurogroub”, a forum for the eurozone financial ministers, spoke about ways to enhance the international role of the European currency.

According to analysts, the answer is: the euro will not replace the dollar, but it may perform an increasingly important job and revive its hopes of ascending to global markets, and if policy makers take advantage of this opportunity, potential historical transformations may be in the global financial system in the interest of Europe.

Since its inception in 1999, the euro has been a strong competitor for its global position, and in the period before the financial crisis between 2007 and 2009, European officials have hoped to compete with the euro, the American currency over time.

Then the euro crisis came in the second decade of the 21st century, and the European Central Bank was not prepared to be the last resort, which made government bonds at risk of raging withdrawals.

Sovereign

The European banking system was divided on national foundations, and exposed to devastating circles linking the destroyed sovereign debt to the most fragile financial institutions, and the capital markets were smaller than to compensate for such risks, and the euro area provided only a few safe assets for those wishing to deposit their money, as the exporters of bonds were either very sowing (in the case of Germany) or lacking to Credibility (in the case of Italy and Spain).

The common debt, supported by the entire European bloc, was almost present, and then forced the pessimistic economic growth prospects short and long -term returns to decline below zero, and with the low returns of European assets, there was little demand for the euro, and the currency had no global role.

Today, the euro occupies a strong position, although far, in second place after the dollar, as it constitutes the fifth international central bank reserves for three fifths of the dollar, with numbers similar to the issuance of bonds in foreign currencies.

Safety financial structure

Over the course of the past decade, and with the world gradually diversifying away from the dollar, the euro faced difficulty in gaining momentum, yet some European officials now believe that this situation may change, for four reasons.

The first reason is that the financial structure of the eurozone has become safer, as the European Central Bank has emerged as a last lender in everything, except for the name, a process that began in response to the euro crisis during the time of the Central Bank President, Mario Draghi, and during the Kofid-19 pandemic, the bank established a program to buy budgets with a budget in excess of 1.8 trillion euros (about $ 2.1 trillion).

When the revenues on sovereign bonds expanded at an uncomfortable speed amid inflation in 2022, policy makers created an unlimited plan to buy bonds to prevent such differences from the explosion in the future.

Investors also noted that the European Union will support the troubled governments, and it will generously, and during the pandemic, the Union has developed a resuscitation plan of 807 billion euros, funded by the European Union’s joint debts, to help the backward countries to pay.

The European Central Bank is now the supervisor of the 114 largest banks in Europe, which collectively owns 82% of the total bank assets on the continent.

Ease of investment

Moreover, investment in Europe has become easier and easier, and it is a second reason for optimism. GDP in the coming years.

More attractive institutions

The third reason is that Europe institutions now seem more attractive, at least compared to American institutions. The militant right -wing parties are strong and gaining ground in countries such as Germany and France, one of which is power in Italy. Meanwhile, the euro is the unified currency of 20 sovereign countries, and is supervised by a completely independent central bank.

Members will find it difficult to agree on any change in how to manage the currency, as well as the necessary change to exploit it to achieve geopolitical gains.

The sanctions imposed on European countries also require the approval of all 27 members of the European Union. The law is essential in each aspect of the European Union, and the controls and balances of the bloc are not suspicious. Also, the wide consensus, which has been formed over decades of settlements and reconciliation, provided that the European Union is as open as possible to foreign trade and investment, is not in doubt. The European Central Bank has established a framework for providing the liquidity of the euro to non -member states in the eurozone, which may be more attractive to countries affected by crises than the exchange lines offered by the Federal Reserve, if US President Donald Trump continues his current approach.

International trade case

Then there is the last reason for optimism, which is in the case of international trade. With America’s arrest of its contributions to the World Trade Organization, Europe will play a more important role, as goods and services restricted to the euro will be established by sub -markets in the currency, including in financing trade, insurance, and hedge derivatives for interest and currencies. Although the dollar is still dominating the derivatives of the currencies circulating outside the stock exchange, the interest rates in the euro have finally exceeded its counterparts in the American currency. The new commercial links will also create credit accounts and deposit in the euro around the world, which in turn will create a request for the euro assets, and ultimately, the precautions of the central banks in the euro, as any lender, as a last resort, must store currencies that local financial institutions keep. About: «Economist»

. In the period before the financial crisis, European officials hoped that the euro would compete with the US currency over time.

. With America’s arrest of its contributions to the World Trade Organization, Europe will play a more important role.