The US dollar remains the most important currency worldwide. For example, the prices of many commodities are in dollars. The strength of the dollar also ensures that the United States has power in the world.
This became evident when the United States unilaterally imposed sanctions on Iran under President Trump. These have had consequences for Europe’s financial infrastructure, such as the Swift payment system, which regulates international financial transactions.
In order to be able to trade with Iran, the European Union had to create a separate system to continue making payments possible.
The weakness of Europe
The draft policy document for the European Commission states that the European Union should protect European companies and institutions from such situations as a result of actions taken by “third countries,” according to the Financial Times, which says it has seen the plan.
“The Trump years have exposed our weaknesses and we need to address them even after his departure,” a committee official told the newspaper. “It is about the European Union’s place in the world, as an economic and financial powerhouse with an effect appropriate to our size.”
The plans come at a wonderful time: In four days, the new President of the United States, Joe Biden, will be inaugurated. He is expected to want to increase cooperation with allies, such as the European Union.
Use the euro often
The European Union also wants to use the euro more often in the financial markets. As a result, European markets and companies are less vulnerable to dollar exchange fluctuations. It would also make the international monetary system “more flexible and stable”.
Since the end of World War II, the US dollar has been the most important currency in the world. In 2018, more than half of the goods imported by the European Union were accounted for in dollars.
The policy document, which will be adopted next week, also states that the European Union should become less dependent on the UK’s financial infrastructure. The commission mainly refers to the clearing houses, which settle transactions on the stock exchange.
Now that Brexit is a reality, the EU should also become independent on the matter, the commission believes.