A rivalry in the making? The Euro and international monetary power

Abstract

ABSTRACT Over the past few years, the dollar has been trading at historically low values against the Euro. Does the current trend indicate that the Euro is poised to challenge the long global supremacy of the American greenback? And how might currency rivalry reflect and shape the broader balance of power between the United States and the EU? The approach to the general relationship between power and currency is discussed, the determinants and characteristics of a key currency assessed, and the advantages and disadvantages that accrue to a key currency nation briefly reviewed. The current, and likely future, state of play in the global usage of the dollar, the Euro, and other major currencies are sketched out, stressing the interaction of material factors and the role of ideas and social processes in determining key currency status. On balance, the essay concludes that the Euro has many of the underlying economic factors that would make it a peer competitor to the dollar, but that the necessary political power and social requirements are missing to make it the focal point of the global economy. Nonetheless, observers of the transatlantic relationship should be on watch for indicators of a possible transformation in the Euro–dollar relationship.