Trichet on the Euro as Reserve Currency
Q: Is the euro set to replace the dollar as a reserve currency?
A: The euro was not created to compete with the US dollar or to replace the dollar as international reserve currency. It was created in order to complete the single European market and to bring stability and prosperity to Europe. The success of the euro in deepening the single market for the past 11 years has been remarkable. Imagine what the single market of the United States would be like if there were different currencies in California, Florida and New York State. The ECB does not campaign for the international use of the euro. We let economic agents and investors make their own decisions.
November 17th, 2009 at 6:01 pm
True enough. Being the reserve currency means having enough safe and generic debt to reinvest their proceeds from export transactions, and liquidate easily for import transactions. The Eurozone has some strong governments — but the debts of any one government are not generic. Perhaps it would make sense to create some sort of exchange traded fund that contains fixed proportions of Eurozone debt, with standardized maturities. I would ladder it like a stable value fund over 5 years.
Enough dreaming… the Euro experiment continues. But then, so does the American experiment.
November 17th, 2009 at 6:37 pm
Unless they are willing to run large semi-permanent current account deficits, it will never reach reserve status.
November 18th, 2009 at 3:09 pm
If Euro becomes the reserve currency, Euro-zone growth will be in serious trouble.
November 18th, 2009 at 6:13 pm
LOL who the hell would ever think the Euro is on the stage of reserve currency contenders? Folly to look at sterling, euro. Sould suggest looking at SDRs or something new but similar