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European Commission - Speech - [Check Against Delivery]

Vice-President Valdis Dombrovskis: College read-out and remarks on the international role of the euro

Brussels, 5 December 2018

Good afternoon everybody. We are here to provide today's College read-out. So I will present together with my colleagues Commissioners Cañete and Moscovici our communication on the international role of the euro, which we have adopted today.

Afterward Vice-President Ansip and Commissioners Jourova and Gabriel will talk to you about the action plan to counter disinformation and progress achieved so far. We also adopted the Artificial Intelligence coordination plan and Vice-President Ansip will present it in the press room on Friday.

And as you already know, the Romanian government visited College today. So we are looking forward, together with all colleagues, to discuss priorities and agenda ahead of the Presidency in the Council of the EU.

And let me remind you that the press point with President Juncker and Prime Minister Dăncilă will start at 14.30.

This leaves me with the following review. The Commission adopted today two proposals for a Council decision, for the signature and the conclusion of the agreement on the withdrawal of the United Kingdom from the European Union. This follows the European Council in Article 50 format on 25th of November, where the Commission was invited to take necessary steps to ensure that the agreement can enter into force on the 30th of March next year.

Commissioner Moscovici and myself also debriefed the College on the Eurogroup meeting, where we made important progress on the deepening of our Economic and Monetary Union, as well as yesterday's ECOFIN meeting, which endorsed the political agreement on the Banking Package and discussed taxation in the digital economy.

And now let me move to the international role of euro.

Since its launch, the euro has become more than just a means of exchange between euro area countries.It is a symbol of Europe's economic strength.

Although only 20 years young, the euro is the second most important currency in the world, accounting for 20% of international foreign reserves. The euro is held by central bankers from Seoul to Sydney, from Dakar to Djibouti.

The euro has been tested by the crisis. We have learned important lessons, substantially reinforced our institutional framework and the euro is stronger today than ever before.

But the world is changing. We are witnessing the weakening of multilateralism, as well as challenges to international rules-based governance and trade. Market participants see unilateral actions as an increased political risk.

Moving now to reinforce further the global role of the euro is part of the response to these challenges. This will support a more diversified and resilient international financial system based on the principles of a multilateral economic order. And it brings benefits at home, such as lower currency conversion costs, lower interest rates and lower exchange risk for European businesses who trade internationally.

Of course, achieving a greater global role for the euro depends ultimately on the choices of market participants.

They decide which currency they will use to trade and to store value.

But I believe that policymakers can do a number of things to make the euro more attractive to market participants.

The first thing is to do our homework and to complete the architecture of Economic and Monetary Union. A currency needs to be built on strong foundations. A global currency needs to be backed by a full range of stable financial services and infrastructures.

At the same time, deeper and more integrated capital markets will provide businesses with a greater choice of funding at lower costs. This is why completing the Banking Union and the Capital Markets Unions matter so much. They will also make the financial system more resilient, and more liquid.

The Euro Summit next week marks a decisive moment for making progress on many key aspects of EMU. It will build on the agreement reached at the Eurogroup on Tuesday morning.

On that basis we are setting out a number of actions necessary for facilitating the euro's use in financial transactions. Our objective here is that international market participants can tap deep and liquid markets for all products they need to do their business transactions in Euro.

We want to promote deep and liquid markets for clearing derivatives denominated in Euro. Such markets are used by participants to insure against interest rate or currency risk.

We are also creating a reliable framework for Euro interest rate benchmarks.

And we want to promote liquid and well-functioning markets for bonds, whether for national bonds or for sovereign bond backed securities, which we proposed this Spring.

One element towards a deeper and more resilient European financial sector is developing a fully integrated instant payment system for cross border payments in Euro. This will allow diversifying the operations of such systems in the EU, instead of relying on a handful of international card schemes, as we do now.

This would reduce the risk of disruptions including those coming from outside our borders. Just last week, the European Central Bank launched its system for cross-border instant payments in the EU, so called TIPS. And we will follow this up by working to make current payment systems more inter-operable across Member States.

In parallel, we want to develop the role of the euro on foreign exchange markets. To do this, we need to know what are the obstacles blocking the euro on these markets. And we need to create the right incentives for market makers to choose the euro to broker their trades.

Supporting a stronger role for our currency also means encouraging European-level entities to increase their share of euro-denominated debt, – for example the European Investment Bank or the European Stability Mechanism. And it means using our diplomatic capital to promote the euro, whether on high-level trade missions or in global partnerships.

Finally, there are a number of key strategic sectors where the euro can play a bigger international role, such as energy, raw materials agricultural commodities or aircraft manufacturing.

Today we are taking the first step, by asking market players their views on how to increase the use of the euro in these fields. We expect results and we will present a report by the summer of 2019.

Perhaps most important is the energy sector. At present over 80% of Europe's energy imports are priced and paid for in US dollars. Miguel will present our recommendation on how we can promote the wider use of the euro in international energy agreements and in trades.

To conclude the Euro is an asset for Europe. It is a currency that supports a multilateral and rules-based global economy to the benefit of all players. And it is a currency that supports financial stability at home and abroad. We should encourage market participants across the globe to make very good use of it.

Thank you very much and now I pass the floor to Pierre.


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