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International role of the euro

In value terms, approximately 25% of all euro banknotes are estimated to be held outside the euro area. The euro can be used as a reserve currency (as part of a country’s foreign exchange reserves), for saving purposes (hoarding of hard currency, especially during crises), as a means of payment in trade (for exports or imports) or for exchange rate anchoring (some countries peg their currencies to the euro).

The euro was introduced in 1999. Over the years it has become the single currency of 19 out of 28 Member States making up the European Union. This currency area is known as the euro area. Within the Eurosystem, over 340 million citizens use the euro on a daily basis to make or receive payments in exchange for goods and services or as a store for savings purposes or to invest. However, the use of the euro is not limited to the euro area and extends beyond its borders.
The European Central Bank estimates that around 25% of the value of euro banknotes is currently held outside the euro area.  In this respect, at end-December 2015, the value of banknotes in circulation outside the euro area was at least € 177 billion (see chart below), representing 16% of the total value of euro banknotes in circulation in the euro area. Net outflows of banknotes to outside the euro area by major international banks operating on currency markets represent the low end of the estimate of euro in circulation outside its borders. Indeed, they do not include the other channels of net outflows, such as tourism, migrant workers' remittances or the informal economy.

 

Chart : Regional breakdown of euro banknote purchases from and sales to locations outside the euro area (monthly cumulative basis) [Source: European Central Bank]

 

The main international uses of the euro are :

  • The euro : a reserve currency – At end-2015, almost one-fifth of global foreign exchange reserves was held in euro, with a value of EUR 10,924 billion. Despite the increased uncertainty surrounding the global economic outlook in 2015, resulting in a slight weakening of its international role, the euro remained the second most widely-used currency behind the US dollar.
     
  • The euro : a hoarding currency outside the euro area – non-residents use euro banknotes, in particular high denominations, as a store of value. In times of economic or political stress, they even constitute a last-resort means of hoarding, and thus contribute to safeguarding financial stability. For instance, the demand for euro banknotes rose significantly in 2008 following the collapse of Lehman Brothers and in 2014 during the Ukrainian crisis.
     
  • The euro : a currency for trade – The euro is used as a currency for invoicing in 58.2% of exports and in 48.1% of imports in the euro area.
     
  • The euro : a reference or anchor currency - Some foreign countries use the stability of the euro's monetary system to strengthen their domestic economy by pegging their currencies to the euro. In general, these are European Union Member States that do not belong to the euro area but with which the euro area maintains economic and monetary relations. Other countries such as Andorra, Monaco, San Marino and the Vatican City, use the euro as an official currency by virtue of specific monetary agreements with the euro area.
     

Each year, the European Central Bank publishes a report on the international role of the euro. The latest version, published online in June 2016 provides statistics for 2015 and early 2016 :

Updated on: 01/10/2017 11:54