THE global economy is undergoing a significant transformation, marked by a shift away from the rules-based international system that has underpinned global trade and finance for decades.
The dominance of the US dollar as the world’s reserve currency is being challenged, and the world is witnessing a rise in protectionism, bilateral power plays, and uncertainty about the future of global economic governance.
Amidst this changing landscape, Europe has a prime opportunity to take greater control of its own destiny and increase the euro’s global role.
The Euro has the potential to become a major player in the global economy, given its current status as the second most-used currency. However, its share in foreign exchange reserves remains far below that of the US dollar.
Central banks worldwide are instead turning to gold in record volumes, exposing Europe’s lost opportunity. To close this gap, Europe must strengthen three key pillars: geopolitical credibility, economic foundations, legal and institutional stability.
Geopolitical credibility
Geopolitical credibility requires strong trade ties and serious defense capabilities. Europe must invest in its security and strategic industries to assert its influence on the global stage. This can be achieved through joint investment in defense and security, as well as the development of a more robust and integrated European defense policy.
Furthermore, Europe must strengthen its trade relationships with other regions, particularly in the context of the Belt and Road Initiative, to increase its economic influence. By doing so, Europe can reduce its dependence on the US dollar and increase its economic resilience.
Economic foundations are also crucial to the euro’s success. Europe needs to develop deeper capital markets, increase innovation, and create safe assets. The completion of the EU’s Single Market and the harmonization of industrial policies are essential steps towards achieving this goal.
Additionally, Europe must prioritize integrated public investment, particularly in areas such as green technology and digital infrastructure, to drive economic growth and increase the euro’s attractiveness.
By investing in these areas, Europe can create new opportunities for economic growth and increase its competitiveness in the global economy.
Legal and institutional stability are also vital to the euro’s success. Europe must prioritize the rule of law, independent institutions, and political unity to increase confidence in the euro and attract foreign investment. This requires a commitment to upholding the principles of democracy and the rule of law, as well as strengthening the institutions that underpin the eurozone.
By doing so, Europe can create a stable and predictable economic environment that is attractive to investors and businesses. The changing landscape poses risks for Europe, but it also presents opportunities for the euro to play a greater international role. A stronger euro would certainly benefit the European economy.
