Frustrated by US unilateral sanctions under the Trump administration, the European Commission is reportedly working on a plan to assert its financial and economic autonomy and limit the bloc’s reliance on the greenback.
In a policy paper set to be adopted as soon as next week, the European officials highlighted that “global financial markets are too reliant on the US dollar,” the Financial Times reported on Saturday citing the document.
Given the lessons of the pandemic, Brussels is looking for ways to strengthen global positions of the euro instead. The broader use of the single European currency in financial markets may “shield the economy from foreign exchange shocks,” secure the resilience of the international monetary system and make the global economy less vulnerable, according to the draft. The measures to promote the euro could include a review of EU regulation of financial benchmarks, encouraging them to be denominated in euros instead of the dollar basis, among other measures.
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The rule can be still amended before its official release scheduled for Tuesday, just one day before US President-elect Joe Biden’s inauguration. While European officials earlier said they hope for cooperation with the new US administration, the plan signals that they were at least getting ready for the worst.
The paper highlights that Brussels is concerned about its “vulnerability” to the US extraterritorial economic restrictions, as was seen in the situation with Iran after Washington abandoned the multilateral nuclear deal and reimposed sanctions against the Islamic republic. In an attempt to save the accord, officially known as the Joint Comprehensive Plan of Action (JCPOA), the EU had to come up with a special financial mechanism to facilitate trade with Tehran.
“The EU should develop measures to shield EU operators in the event a third country compels EU-based financial-market infrastructures to comply with its unilaterally adopted sanctions,” the policy paper says.
Other proposed measures include boosting the bloc’s self-reliance in a number of sectors, including in finance, and tightening policy on foreign takeovers.