The Economists Voice· 2026Q2
The Future of the Euro as a Global Currency
- 0citations
- Q2SCImago
- 2026year
Short summary
The dollar's global dominance will decline, but the euro will not replace it due to the euro area's diminishing economic importance and the lack of a safe asset benchmark, leading to a multi-polar currency system.
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Key points
- The dollar's global currency dominance is expected to decline.
- No single currency is currently capable of replacing the dollar.
- The euro's potential is hindered by the euro area's declining global economic importance.
- A Capital Markets Union alone cannot create the necessary safe asset benchmark.
- A multi-polar currency system with several regionally strong currencies is the likely future.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract We show first that the dominance of the dollar as the world currency is bound to decline. Second, there is no other currency today capable of taking over the dollar. The euro is handicapped by a fast decline of the economic importance of the euro area countries in the world. Even a Capital Markets Union will not compensate this, because a Capital Markets Union by itself does not create a safe asset. The latter is necessary as a benchmark to price the myriad of financial assets that make capital markets interesting for investors. Only a political union in which a federal European government has the authority to issue a common debt can achieve this. The most likely scenario, therefore, is that the world monetary system develops into a multi-polar currency system, where a limited number of currencies achieve a strong regional importance without any of them achieving the status of the dominant currency, in a way that the dollar has done in the post-war period. That seems to be the future for the euro, a future that can become a reality faster by developing a euro payment system alternative to the dollar and by creating a full-fledged digital euro.
The authors' abstract, as published at the source. The Economists Voice, 2026 · DOI ↗
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Field: Finance
FinanceEconomics, Econometrics and Finance