FRANKFURT (Reuters) - The global use of the euro was broadly stable last year after a steady decline in the aftermath of the bloc’s debt crisis but hopes for increased demand failed to materialize, a European Central Bank (ECB) report indicated on Tuesday.
Launched over 20 years ago, the euro has always played second fiddle to the U.S. dollar, even as the European Commission has made it a goal to boost its global role, in part to reduce the bloc’s reliance on the greenback during a period of growing global trade tensions.
The euro zone’s financial architecture remains incomplete, however, as it lacks a common safe asset or a deposit insurance scheme, its bank sector is fragmented and the capital markets union is unfinished.
The euro accounted for 20.5% of global foreign exchange reserves at the end of last year, up from 20.3% a year earlier, while its share in outstanding international debt securities declined to 22.1% from 22.4%, the ECB said in an annual assessment on the currency.
In international deposits outside the bloc, the euro’s role remained broadly unchanged while its share in outstanding international loans rose one percentage point.
“The recent COVID-19 pandemic underlines the urgency of these policies and reform efforts, which are paramount to raising the attractiveness of the euro globally,” ECB President Christine Lagarde said.
Much like the euro, the dollar has also lost market share over the past decade to other currencies, such as the Japanese yen and the British pound, but the two still account for over 80% of global foreign exchange reserves.
“The share of the US dollar, the leading global reserve currency, declined further to a two-decade low, suggesting that the trend towards gradual diversification of global reserve portfolios continued,” the ECB said.
Reporting by Balazs Koranyi, editing by Ed Osmond