Euro vs. dollar: will the leader in the global economy change?
20 June 23:00
For decades, the US dollar has remained the undisputed leader in the global monetary system. But now, according to Kenneth Rogoff, a Harvard University professor and keynote speaker at the IX Annual Research Conference, this dominance no longer looks so obvious, "Komersant Ukrainian" reports.
Rogoff emphasizes that the world is moving towards a new financial architecture, where, instead of a unipolar system, multipolarity will be established. In particular, we are talking about the formation of a tripolar system, in which the euro and the Chinese yuan will play a more important role alongside the dollar, and potentially cryptocurrencies or instruments of the shadow economy.
I am not saying that the dollar will disappear. It will remain the main reserve currency, but its influence will gradually diminish,” the economist said.
“This, in turn, opens up opportunities for the European currency.
At the same time, to take advantage of this window of opportunity, the European Union must take several decisive steps:
1. Deepening the capital markets union. The EU needs to unify its rules – in particular on bankruptcy – to create a fully-fledged common bond market.
2. Provide more liquidity. European financial markets are still limited by the lack of a common fiscal policy. Without unifying the budgetary system, the euro will have a hard time competing with the dollar.
3. Enhancing Europe’s defense capabilities. Reliability in the security sector directly affects investor confidence. A stronger Europe means a stronger euro.
Kenneth Rogoff also drew attention to the ambivalence of the reserve currency status. On the one hand, it provides the economy with significant advantages: cheap government financing, lower debt rates, and the ability to apply effective economic sanctions. On the other hand, such a role imposes responsibilities, primarily the cost of military power necessary to maintain global influence.
The United States clearly recognizes this connection. Military power is seen as a guarantee of economic confidence. American senators and congressmen openly recognize that a strong army means lower borrowing costs,” Rogoff emphasized.
In general, a change in the world’s currency configuration seems inevitable. For the United States, this means a gradual loss of monopoly, for the EU it is a chance to strengthen the euro, and for the global economy it is a transition to a new equilibrium where not only national currencies but also digital assets, stablecoins, or even centralized digital currencies (CBDCs) may become an important component.
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