After Russia’s attack on Ukraine, an unprecedented series of sanctions was imposed on the aggressor. For example, around half of the Russian Central Bank’s foreign exchange reserves were frozen and Russian banks were excluded from the global banking communication system SWIFT. Many experts warned that the use of financial sanctions as a weapon would have a negative impact on the position of Western currencies in the international monetary system and lead to its rapid regionalisation and fragmentation. However, the latest figures published by the European Central Bank (ECB) in this year’s report on the international role of the euro show that nothing of the sort is happening. This is good news for Europe, because the impact of sanctions – including on the countries that impose them – is closely being watched by other potential aggressors, including China. However, the role of the single currency in the international financial system needs more attention.
The creation of the common currency was not geopolitically motivated, but mainly by the desire to eliminate exchange rate fluctuations in an increasingly integrated single market. Currently, more than 500 million people live in countries where the euro or currencies pegged …read more
Source:: German Institute for International and Security Affairs