In its annual report on the international role of the euro, the European Central Bank (ECB) said on Wednesday 12 June that in 2023 the euro had maintained its position as the second most important currency in the international system, after the US dollar. The international use of the euro remains stable at current exchange rates, at over 19%, according to a composite index calculated as the arithmetic average across a series of indicators on euro use.
At constant exchange rates, this composite index of the euro’s international role fell by 0.7 percentage points up to the fourth quarter of 2023.
The ECB points out that the share of the euro in outstanding international debt securities and in the invoicing of goods traded between the euro area and countries outside the euro area has increased.
However, in 2023, the share of the euro in global foreign exchange reserves fell by one percentage point to 20%.
The ECB also notes a decline, albeit limited, in other indicators of the euro’s international role, such as outstanding international deposits, outstanding international loans and global foreign exchange settlements.
ECB President Christine Lagarde and Executive Board member Piero Cipollone stressed that this status should not be taken for granted against a backdrop of geopolitical tensions where the risks of fragmentation of international payment systems are intensifying.
The ECB points out that several States are considering further promoting the use of their own currencies in commercial transactions or are looking for alternatives to traditional cross-border payment services. Piero Cipollone notes that the renminbi’s share of China’s trade invoicing has increased.
In addition, the diversification of global reserve portfolios into non-traditional reserve units continued.
For Piero Cipollone, the euro’s international status must be preserved. To this end, he calls for progress to be made in financial and monetary integration, in particular towards the capital markets union. In particular, he calls for the creation of a stable and more integrated market for internationally accepted euro-denominated debt securities and support for the availability of more euro-denominated safe assets.
Externally, Piero Cipollone believes that Europe must support the development of infrastructures to facilitate cross-border payments in euros, particularly with its main partners.
Link to the report: https://aeur.eu/f/cmf
Link to the blog post: https://aeur.eu/f/cmc (Original version in French by Émilie Vanderhulst)