The international role of the euro

WHEN THEEUNGEU European Union launched the euro two decades ago, economists wondered if the new currency might pull off a feat no other had managed in the post-war period: to challenge the mighty American dollar. However, reserve managers at the world’s central banks, as well as businesses around the world, largely stuck with the greenback. Now Europe is having another go at establishing the bona fides of the euro beyond its borders. A significant step was taken on June 15th when €20bn-worth ($24.3bn) of bonds was issued as part of the scheme to boost European economies. Those bonds could yet rival American Treasury bonds as a safe asset of choice.Currencies exist mainly to facilitate the transactions of people and businesses within the borders of the places that issue them. But having an international presence helps in many ways. For firms, having imports and exports denominated in their local currency rather than, say, the dollar, means less disruption when exchange rates inevitably see-saw. Issuing a currency that foreigners want to hold can make it easier for governments to raise money from them at cheap rates. That in turn drives down the cost of borrowing for firms and banks.