Internationalisation of the euro has for decades eluded EU policymakers. In this article, we develop a novel explanation of the subordinate position of the single currency. To this end, we build on the state of the art in International Political Economy (IPE) scholarship and develop a new conceptual framework for currency internationalisation. 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 neglected offshore monetary governance. This has discouraged rather than incentivised the expansion of offshore euro creation and thereby undermined the objective of euro internationalisation. We use our conceptual framework to study 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 undersupply of euro-denominated safe assets. Our new account of currency internationalisation emphasizes the crucial role of the state in successful internationalisation, in particular for fostering the offshore creation of private credit money denominated in its currency.
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
Working paper version:
OBFA-TRANSFORM Working Paper No. 4-EN
Journal article:
Journal of European Public Policy
