Successful internationalisation of the euro has eluded EU policymakers since its introduction. This article provides a novel explanation for the puzzling subordinate position of the single currency. Drawing on the most recent International Political Economy scholarship on money and finance, we develop a conceptual framework for currency internationalisation that acknowledges the credit nature of money while emphasizing the crucial role of the politics of international monetary governance. We argue that internationalising a currency requires actively fostering the offshore creation of private credit money denominated in the currency. By approaching internationalisation as an entirely market-driven process, EU policymakers have discouraged rather than incentivised the expansion of offshore euro creation and thus undermined the objective of euro internationalisation. This concerns the failure to recognize the importance of offshore euro creation in fostering cross-border value chains, the prohibitive provision of international lender of last resort facilities for offshore euros, as well as the constant undersupply of euro-denominated safe assets.
Presentations at the Annual Convention of the International Studies Association (ISA) in Montreal (03/2023), the Annual Conference of the Political Economy Section of the German Association for Political Science in Witten (09/2023), and the symposium ‘The Political Economy of International Money’ in Berlin (01/2024).
Co-author:
Jens van ‘t Klooster, University of Amsterdam
