The future of the Euro as a global currency

Paul De Grauwe and Yuemei Ji

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: global currency; international payment systems; euro; capital markets union; rule of law (search for similar items in EconPapers)
JEL-codes: F3 G3 J1 (search for similar items in EconPapers)
Date: 2026-10-26
References: Add references at CitEc
Citations:

Published in The Economists' Voice, 26, October, 2026. ISSN: 1553-3832

Downloads: (external link)
https://researchonline.lse.ac.uk/id/eprint/141657/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:141657

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().