The Euro International Currency Status Factors

Since the birth of the euro, scholars have paid much attention to the position of theeuro in the international monetary system. It is expected the euro will be a “starcurrency”, which will challenge the US dollar’s global dominant status. However,through thirteen years’ development, the use of the euro hasn’t enlarged as rapidly asexpected. Especially since the European debt crisis occurred, the market has graduallylost its confidence in the euro and many commentators even predict the euro willdisappear soon. So what were the factors that affect the development of the euro as aninternational currency? And what was the reason for the euro to fall into such atrouble? Based on these questions, the author gave a deep research on the evolutionof the euro in international currency status and the main factors affecting the role of theeuro.Firstly, supported by lots of facts and data, this paper analyzed the role of the euro inthe international settlement, international exchange market, international securitiesmarket and international foreign exchange reserve. And the results showed the statusof the euro started was rising, which firmly occupied the world’s second largestinternational currency status, but the use of the euro was largely limited within theEuropean Union(EU) and it acted as a risky currency in the global market.Then considering the characteristics of the euro’s status in the international system,this paper gave a in-depth analysis of the factors which will affect the internationalcurrency status and came to a conclusion that most of the economic activities were usedlimitedly within EU and the defects in the institution of EU resulted in the risk feature ofthe euro.Based on these analyses, this paper discussed the future of the euro as aninternational currency, and predicted that the development of the international role of theeuro depended on the effect of the institutional innovation in the euro area.