Digital euro a 'safeguard' for continent
More than 60 economists have written an open letter to members of the European Parliament urging them to back the proposed digital European currency, on which they are due to vote later this year, saying that if the plan championed by the European Central Bank, or ECB, fails, the eurozone would "lose control" of the currency used by 21 of the European Union's 27 member states.
The idea was first put forward in 2020, and in a blog post, Fabio Panetta, a member of the ECB's executive board, said "the euro has done well so far, providing a currency that Europeans trust. We need to make sure that our currency is fit for the future. Inaction is not an option."
In an October 2023 piece explaining the thinking behind the project, the EU highlighted security as one of the motivations for the digital currency that will run alongside physical currency, rather than replace it.
"A digital euro would also address risks stemming from geopolitical tensions," it said, adding the fragility of global supply chains exposed by the COVID-19 pandemic and Russia's conflict with Ukraine has "painfully demonstrated the risks of relying exclusively on external suppliers for basic needs."
The latest letter to parliamentarians called a digital euro, which is envisaged as being operational by 2029, "not a nice-to-have, (but) it is an essential safeguard of European sovereignty, stability, and resilience".
Although the government of the United States was not mentioned, the letter comes at a time of particularly strained relations between Brussels and Washington, and increasing concern about the dependability of international security guarantees that for many years have been taken as a given.
Currently, US-based digital payment systems such as Mastercard, PayPal and Visa hold huge market dominance, and the letter said that by being reliant on such a small number of suppliers, the eurozone was potentially vulnerable to "geopolitical leverage, foreign commercial interests, and systemic risks beyond Europe's control", adding that "recent developments" made such risks "more than a hypothetical".
Writing in the Financial Times in January 2025, ECB President Christine Lagarde and European Commission President Ursula von der Leyen said the digital euro was part of a wider program of making the EU ready for the challenges of a changing world.
"While a global revolution in artificial intelligence unfolds, the EU could find itself on the sidelines," they wrote. "Our traditional manufacturing champions are losing global market share. Geopolitical shifts are turning dependencies into vulnerabilities and burdening our companies with high energy prices … Europe must and will find its place in this new world."
But significant voices in European finance have questioned the plans. In November, 14 major lenders, including BNP Paribas and Deutsche Bank, said the digital euro may obstruct private sector efforts to take on US payment systems, with Germany's main banking industry lobby group, the Banking Industry Committee, calling the plans "too complex" and "too expensive" and querying their benefits for customers.
julian@mail.chinadailyuk.com
