Commissioner Gentiloni on the fostering the openness, strength and resilience of Europe’s eco-nomic and financial system

Commissioner Gentiloni on the fostering the openness, strength and resilience of Europe’s eco-nomic and financial system

Good afternoon. What we are presenting this afternoon has a clear and ambitious goal. We are working for more balanced cooperation with all global partners – which will be beneficial for all concerned. And that reflects the fact that we are more and more in a multipolar currency system.

In that context, let me say a few words on two of the priorities we set out today: deepening the Economic and Monetary Union and strengthening the international role of the euro.

The last crisis showed us the implications of an incomplete currency union. And that’s why the first key action that we commit to today is to complete the Banking Union and make further significant progress on the Capital Markets Union – the latter being even more important post-Brexit.

We took a further important step forward last November with the agreement in the Eurogroup on the common backstop for the Single Resolution Fund. Now we must build on that.

We need to do more to simplify access to equity markets for SMEs and to facilitate long-term investments and the convergence of insolvency frameworks in the EU.

And we must all work with renewed determination towards perhaps the biggest prize of all: a European Deposit Insurance Scheme.

On the international role of the euro, a few figures:

The euro is the second most widely used currency in terms of its share of global payments.

The share of the euro in global payments amounted to around 38% in November 2020.

The share of the euro in global holdings of foreign exchange reserves currently stands at a little over 20%. This level didn’t change significantly since the beginning of the euro twenty years ago. In the same period the dollar’s share has fallen from around 70% to around 60%, while the share of other currencies, the Chinese in the first place, has risen from around 10% to around 18%.

And in absolute terms, in 2019 the volume of euro-denominated loans by banks outside the euro area to non-euro area borrowers was around double what it had been a decade earlier, a trend supported by the ECB’s accommodative monetary policy stance.

We need to build on that strong basis. Because a stronger international role of the euro would shield our economy from foreign exchange shocks and reduce reliance on other currencies. It would ensure lower costs of transaction, financing and for managing risk. And it would lead to a more stable and diversified global currency system, and a broader choice for market operators, all making the global economy less vulnerable.

Since the adoption of the 2018 Commission Recommendation on the international role of the euro in the field of energy, there has been significant progress in the use of the euro in the EU gas markets. The share of natural gas contracts signed in euros increased from 38% in 2018 to 64% in 2020.

To build on this progress, the Commission will further support the development of euro-denominated commodity derivatives for energy and raw materials.

We will also facilitate the emergence of euro-denominated benchmark indices and trading venues covering core sectors, including nascent energy markets such as hydrogen.

With ‘Next Generation EU’, the EU will become one of the major debt issuers worldwide. The striking success of the first SURE issuances last year already demonstrated the demand of international investors for the bonds issued by the EU – and that was just the appetiser.

We will be issuing close to one trillion euros in new debt by 2026, providing an opportunity to establish a global reference point for international investors seeking to invest in euro-denominated assets.

The Commission will promote the use of green bonds as tools for financing the massive investments needed to achieve the EU’s 2030 energy and climate targets, and to become climateneutral by 2050.

Together with the recovery plan, promoting sustainable finance is an opportunity to develop EU financial markets into a global ‘green finance’ hub, bolstering the euro as the default currency for the denomination of sustainable financial products. And this is not an abstract concept.

According to the ECB, already in 2019, almost half of all global green bond issuances were denominated in euro, and 30% of this amount came from issuers outside the euro area. The global prominence of euro-denominated green bond issuance can be expected to expected to grow significantly, given the objective of having 30% of Next Generation EU issuance as green bonds.

So we have already hit the green ground running: now we need to capitalise on this momentum. Thank you.

Source: “Not Check against delivery” Remarks by Commissioner Gentiloni (europa.eu)

Photo Credit : https://pixabay.com/illustrations/monitor-binary-binary-system-1356058/

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