Annexes to COM(2018)796 - Towards a stronger international role of the euro

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dossier COM(2018)796 - Towards a stronger international role of the euro.
document COM(2018)796 EN
date December  5, 2018
agreements and transactions. The Commission recommends that the euro should be used for contracts concluded within the framework of intergovernmental energy agreements between Member States and third countries. A wider use of the euro in energy-related transactions by European market participants and companies providing financial services is also recommended. In addition, the Commission will launch a consultation and invite stakeholders to express their views on the market potential for a broader use of euro-denominated transactions in the areas of oil, refined products and gas. In particular, the consultation will gather feedback on the need to set-up euro-denominated crude oil reference contracts and reinforce contracts on refined products. The consultation will also gather stakeholders’ views on the expansion of the use of euro-denominated gas contracts.

·In the sector of raw materials (metals and minerals) and food commodities, the Commission will engage in a broad consultation with stakeholders in order to identify ways of increasing trading in euro, especially in the context of transactions at exchanges located in Europe and direct transactions between European companies. A general European Commodities Summit is planned for 2020 to continue the discussions with all main actors. In addition, the Commission will continue with a market-oriented Common Agricultural Policy, allowing the development of international trade in agricultural commodities to develop further. The Commission will also favour the recourse to futures markets and contracts in euro (e.g. through awareness raising and training) and increased market transparency for agricultural and food commodities in euro 39 .

·A consultation will be launched to investigate possible actions to promote the use of the euro by transport sector manufacturers (aircraft, maritime and railways). The consultation will explore in a more detail the reasons why the euro is not used for many of the most relevant international transactions and will help identifying conditions that would enable the promotion of the euro in transactions with European businesses.

The Commission will carry out these different work streams in parallel and report on progress by summer 2019.


5.Conclusion

Building on the Roadmap for the completion of Europe's Economic and Monetary Union, there is scope for the euro to develop further its global role, so that it is more commensurate to the euro area’s political, economic and financial weight. This will allow the EU to better protect its citizens and businesses, uphold its values and promote its interests. It will also make the international economy less vulnerable to shocks linked to a single dominant currency and support a balanced, rules-based international political and economic order.

The Commission invites EU Leaders to discuss the international role of the euro at the December European Council and the Euro Summit, as part of their discussion on the completion of Europe's Economic and Monetary Union. Strengthening the international role of the euro will require the further strengthening of the structures of the Economic and Monetary Union, including through the adoption of all pending proposals for completion of the Banking Union and decisive progress on the Capital Markets Union.

In addition, the Commission will pursue the targeted initiatives set out above and encourages all relevant actors and stakeholders to take an active role in this process.

(1) Rome Declaration of the Leaders of 27 Member States and of the European Council, the European Parliament and the European Commission.
(2) Standard Eurobarometer 89: http://ec.europa.eu/commfrontoffice/publicopinion/index.cfm/Survey/getSurveyDetail/instruments/STANDARD/surveyKy/2180  
(3) Flash Eurobarometer 473: Overall support for our single currency has returned to its highest level. 74 % of citizens across the euro area say that the euro is good for the EU, according to the latest Eurobarometer survey. https://ec.europa.eu/info/news/eurobarometer-2018-nov-20_en
(4) http://ec.europa.eu/economy_finance/publications/pages/publication6142_en.pdf  
(5) For the history of the euro (including the 'snake-in-the-tunnel' and the Exchange Rate Mechanism ERM) see: https://ec.europa.eu/info/about-european-commission/euro/history-euro/history-euro_en
(6) Including dependent territories.
(7) CFA franc is the name of two currencies used in parts of West and Central African countries which are guaranteed by the French treasury and pegged to the euro.
(8) European Central Bank – The international role of the euro, June 2018. https://www.ecb.europa.eu/pub/pdf/ire/ecb.ire201806.en.pdf
(9) https://ec.europa.eu/commission/publications/five-presidents-report-completing-europes-economic-and-monetary-union_en  
(10) https://ec.europa.eu/commission/publications/reflection-paper-deepening-economic-and-monetary-union_en  
(11) https://ec.europa.eu/commission/publications/reflection-paper-future-eu-finances_en  
(12) https://ec.europa.eu/commission/publications/completing-europes-economic-and-monetary-union-factsheets_en  
(13) On 8 May 2018, the United States decided to withdraw from the Joint Comprehensive Plan of Action and unilaterally reinstate all previously lifted sanctions against Iran, which entered into force in two stages, on 7 August and 5 November. The European Union has reaffirmed its commitment to the nuclear deal and taken forward a number of measures to maintain economic links with Iran, including the activation of the Blocking Statute, which seeks to mitigate the extraterritorial effects of U.S. sanctions on EU businesses.
(14) Financial instruments whose value depends on the value of other underlying variables.
(15) Increased means to conduct transactions due to a larger market.
(16) Markets where financial instruments with high liquidity and very short maturities are traded.
(17) Third Progress Report on the reduction of non-performing loans and further risk reduction in the Banking Union – COM (2018) 766 final of 28 November 2018.
(18) COM(2018) 767 final of 28 November 2018.
(19) COM(2018) 339 final of 24 May 2018.
(20) COM(2018) 322 final of 2 May 2018.
(21) COM(2018) 387 final of 31 May 2018.
(22) COM(2018) 391 final of 31 May 2018.
(23) COM(2015) 602 final of 21 October 2015.
(24) COM(2018) 645 final of 12 September 2018.
(25) COM(2018) 640 final of 12 September 2018.
(26) Regulation (EU) 2012/648, OJ L 201, 27.7.2012, p.1.
(27) Matching buy and sell orders.
(28) Central clearing counterparties.
(29) Reference rates are provided in many financial contracts, for instance those indexed to variable interest rates, to value balance sheet items and to price derivatives such as forward contracts, options and swaps.
(30) Regulation (EU) 2016/1011, OJL 171, 29.6.2016 p.1.
(31) In particular this would apply to money markets (markets where financial instruments with high liquidity and very short maturities are traded). Market participants use the money market for borrowing and lending in the short term, i.e. up to one year. 
(32) A company always ready to buy or sell a financial asset at an openly quoted price on a long-term basis.
(33) A currency swap line is an agreement between two central banks to exchange their respective currencies. By preserving access to foreign liquidity in adverse circumstances, swap lines make it safer to do business with other parts of the world. In 2011, the ECB, along with the Bank of England, the Bank of Canada, the Bank of Japan, the Federal Reserve and the Swiss National Bank, set up a network of swap lines enabling the participating central banks to obtain currency from each other. In 2013 the ECB established a currency swap agreement with China.
(34) As an example, the European Union and its Member States continue to be the world’s leading provider of Official Development Assistance with an overall amount of EUR 75.7 billion in 2017..In the context of the External Investment Plan, an initial EU input of EUR 4.1 billion is expected to leverage EUR 44 billion of investment. In the next programming period the EU could provide financial support to third countries for a total of EUR 123 billion in third countries, if the Commission proposals are adopted.
(35) https://ec.europa.eu/commission/eu-external-investment-plan/what-eus-external-investment-plan_en  
(36) JRC study: http://publications.jrc.ec.europa.eu/repository/bitstream/JRC96913/lbna27754enn.pdf
(37) A natural hedge is the reduction in risk by institutions that are exposed to large swings in exchange rates by exploiting their normal operating procedures. This can include receiving income in another country and currency while incurring expenses in that same currency.
(38) In the oil sector, the first price benchmarks for the physical market were developed in the late 1980s by major oil companies and price reporting agencies using US dollar to facilitate global transactions and comparisons across different crude grades.
(39) An increasing number of price references expressed in euro are now published through the EU market observatories since they were established in 2014 (while in the past, most information available to traders was expressed in US dollars). This will be further consolidated with the proposal ensuring more market transparency, planned for adoption in 2019.