Coface: Review of the euro, 20 years later

To mark the 20e anniversary of the introduction of the euro into European portfolios, Coface’s economic research team examined the effects of this change in macroeconomic terms.

When the euro was introduced, expectations were very high, especially with the elimination of currency risk and transaction costs. However, there is little evidence that the euro has boosted trade Intra-zone trade was already significant at the launch of the euro (50% of total trade in the 12 members of the euro zone), and this proportion has increased. even slightly decreased since then. This is attributable to the emergence of China in world trade during the period, and later, the rise of the German-European supply chain.


In the 1990s, nominal interest rates had converged and spreads were very low when the euro was launched. After a decade of stability, spreads vis-à-vis Germany exploded after the 2008-2009 financial crisis and the European sovereign crisis, when markets again began to differentiate credit risk between European countries and fell apart. realized that some of them could be lacking. Spreads against the Bund thus increased until the President of the European Central Bank pledged to “do whatever it takes” to preserve the euro. It is important to note that many countries now enjoy much more favorable financing conditions than if they were not in Economic and Monetary Union.


Inflation rates in the euro area have been lower over the past decade in an overall deflationary environment. While inflation rates converged strongly – towards the rates of low-inflation countries – during the euro qualification period (1990s), their dispersion remained relatively stable over the next 20 years.


In fgeneral, real convergence – in terms of productive structures and per capita income – did not take place among the first countries to adopt the euro. Most high-income countries thus recorded higher GDP per capita growth over the period.

While Greece and Spain converged before the financial crisis, Portugal and Italy did not, which significantly underperformed over the entire period.

After the introduction of the euro, the significant financial flows that went to low-income countries did not generate convergence in terms of productivity as they went to low-productivity sectors, such as services or construction.

The international role of the euro

The international role of the euro has remained broadly stable since the global financial crisis and the sovereign debt crisis in the euro area. The euro remains the second most important currency in the world, but is far from competing with the US dollar.

The share of the euro in foreign exchange reserves, debt securities, loans or deposits is roughly the same as when it was introduced, with an increase in the first years and a sharp decline after the sovereign debt crisis . Around 70% of debt securities issues were denominated in US dollars in 2020, compared to 20% in euros (a level comparable to that of 1999


The record of the first two decades of monetary union is far from perfect – even if, given its incompleteness and initial criticism, EMU has beaten even the most pessimistic forecasts.

In recent years, its architecture has been strengthened, in particular with the Banking Union and the European Stability Mechanism, and the whole is more resilient. But there is still a lot to do in terms of governance to make this union more efficient and more resistant to external and / or idiosyncratic shocks – especially as labor mobility remains low and real convergence, in large part, a myth. . In particular, fiscal federalism (fiscal union) remains an objective (beyond the European Recovery Plan and considerations on budgetary rules), but its short-term realization unfortunately still seems out of reach.


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