The euro is not – and never will be – a lead currency

The US dollar is the world’s leading currency, a fact that serves to cement the economic dominance of the US. The US administration is increasingly exploiting this dominance. One reason why the US sanctions against Iran are so successful is the ability of the US to control international payments processing via Swift. This means that the sanctions policy adopted by the United States can also be imposed on companies from countries with no real interest in enacting this type of policy, such as Europe in the case of the Iran sanctions. For sovereignty over payment transactions entitles the US government not only to control access to the important US market but also to assert the US dollar as internationally recognized means of payment.

There are of course good reasons for the dominance of the US dollar. The US is the world’s largest economy and the most important export market for almost all countries in the world. This also enables the country to enforce its domestic currency as the means of payment. At the same time, with its Treasury bonds the US has a safe capital market of almost infinite depth that is able to serve as a location for transactions of no matter what size or relevance as well as function as a safe haven. There is virtually no danger of the United States being unable to service its debt given that the government’s debt is denominated almost exclusively in US dollars.

For the ECB and governments of the eurozone, this predominant position of the US dollar naturally represents a strategic disadvantage. Even so, there is still nothing to suggest that the significance of the euro will grow in the years ahead. The very fact that – for good reasons – there are no eurozone bonds clearly caps any possibility of the euro becoming a reserve and lead currency. The situation is also not helped by the eurozone’s status as net exporter on the global market.

Even if many market players in the eurozone would prefer things to be different: the fact is – and will remain so in the years ahead – that no fundamental and systemic preconditions for establishing the euro as a lead currency exist. The US will continue strategically using this situation to their advantage, and the rest of the world – as has been the case in past years – will have to succumb to this fact.


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