EU Finance Chiefs to Discuss Lifting Use of Euro in Transactions

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(Bloomberg) — Euro-area finance ministers will discuss options to promote the use of the common currency in issuance and transactions, part of the bloc’s push to strengthen the euro’s global role and assert Europe’s financial independence.

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“It would be useful to reopen a dialogue with key industry players — such as the energy, critical raw materials, air transport and defense sectors — to reassess invoicing practices, price quoting practices, public procurement practices and payment preferences towards using the euro,” according to a European Commission paper prepared for Monday’s meeting of the bloc’ finance chiefs. 

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EU policymakers have repeatedly urged Europe to reduce its reliance on the dollar by expanding the euro’s international role, amid intensifying competition with the US and China, its largest trading partners. More transactions in euros are also seen as a way to limit fallout from currency turbulence.

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European Central Bank President Christine Lagarde said last autumn that “greater use of the euro in trade invoicing would reduce transaction costs for exporters and shield prices in the euro area from exchange rate volatility.”

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On invoicing, the Commission paper — seen by Bloomberg — said the bloc should target its largest energy exporters. The document also highlighted the benefits of engaging third countries and companies to encourage issuance of euro-denominated debt by sovereign and corporate issuers.

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EU leaders will meet on Thursday to discuss ways to reduce vulnerabilities in critical sectors and boost autonomy by lowering national barriers within the single market, including in financial services.

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French President Emmanuel Macron plans to raise the euro’s appreciation against the dollar during the retreat as one of several items to boost the economy and reduce vulnerabilities, people familiar with the matter told Bloomberg last week.

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As part of efforts to bolster the currency’s international role, the Commission document called for reinforcing euro diplomacy by reassuring partner countries about access to euro liquidity.

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“With the United States potentially less inclined to supply dollar liquidity during periods of stress, offering euro-denominated liquidity to partner countries could serve as a valuable complement to the EU trading strategy and boost the international role of the euro,” according to the document.

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Lagarde has already hinted that something is in the works in this regard, saying last week that the ECB is in the process of reframing its liquidity framework to open up access and make repo lines “more attractive” to central banks outside the euro area and outside Europe.

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—With assistance from Mark Schroers and Jana Randow.

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