The euro in the world
As well as serving as the currency of the euro area, the euro has a strong international presence. Currencies are the means by which wealth is stored, protected and exchanged between countries, organisations and individuals. A global currency, such as the euro, does this on a global scale. Since its introduction in 1999, it has firmly established itself as a major international currency, second only to the US dollar.
Within the euro area, the single currency, the euro, is the means by which governments, companies and individuals make and receive payments for goods and services. It is also used to store and create wealth for the future as savings and investments. However, the size, stability and strength of the euro-area economy – the world's second largest after the United States – make the euro increasingly attractive beyond its borders, too. Public and private sectors in third countries acquire and use the euro for many purposes, including for trade or as currency reserves. For this reason, today, the euro is the second most important international currency behind the US dollar. The widespread use of the euro in the international financial and monetary system demonstrates its global presence:
The euro is increasingly used to issue government and corporate debt worldwide. At the end of 2006, the share of the euro in international debt markets was around one-third, while the US dollar accounted for 44%.
Global banks make significant loans denominated in euro around the world.
The euro is the second most actively traded currency in foreign exchange markets; it is a counterpart in around 40% of the daily transactions.
The euro is extensively used for invoicing and paying in international trade, not only between the euro area and third countries but also, to a lesser extent, between third countries.
The euro is widely used, alongside the US dollar, as an important reserve currency to hold for monetary emergencies. At the end of 2006, more than one-quarter of the global foreign exchange holdings were being held in euros, compared to 18% in 1999. Developing countries are among those which have increased their reserves in euro the most, from 18% in 1999 to around 30% in 2006.
Several countries manage their currencies by linking them to the euro, which acts as an anchor or reference currency.
The status of the euro as a global currency, combined with the size and economic weight of the euro area, is leading international economic organisations, such as the IMF and the G8, increasingly to view the euro-area economy as one entity. This gives the European Union a stronger voice in the world.
To benefit from this stronger position, and to contribute effectively to international financial stability, the euro area is speaking with one voice more and more in important economic fora. This is done through close coordination between the euro-area Member States, as well as the European Central Bank and the European Commission during international economic meetings.
A number of third countries and regions are even more closely linked to the euro. The stable monetary system behind the euro makes it an attractive 'anchor' currency for them, particularly for those that have special institutional arrangements with the EU, such as preferential trade agreements. By linking their currency to the euro they bring more certainty and stability to their national economies.
The euro is also widely used in third countries and regions neighbouring the euro area, for example in South-eastern Europe, while some other countries – Andorra, Monaco, San Marino and the Vatican City – use the euro as their official currency by virtue of specific monetary agreements with the EU, and may issue their own euro coins within certain quantitative limits.